Medicinal cannabis is legal in fifty countries worldwide and others are set to follow. As the industry matures, there are efforts to improve supply chains and reduce production costs.
Colombia is well-placed to become one of the leading growers globally. The country moved early to formalise the sector by implementing the necessary legal and regulatory frameworks. Furthermore, growing conditions in the country are ideal: the soil is fertile, there is 12 hours of sun per day and the climate is constant, meaning the plants are not stressed. As a result, production costs are 50% – 75% lower in Colombia than in Canada or the US.
Despite the above, the industry has not yet taken off due to a combination of technical and regulatory issues. The founder of a cannabis business operating in Colombia recalled, “There was a speculative boom in interest 20 months ago but as the reality of the business becomes clear everything is in decline.”
“There was a speculative boom in interest 20 months ago but as the reality of the business becomes clear everything is in decline.”
Founder, Cannabis business operating in Colombia
The reality our source refers to is that there are significant political, regulatory, chemical and financial barriers that have scared off many entrepreneurs.
Politically, the state retains tight control of the industry, which is understandable given the historical context of drug trafficking and armed conflict. The Ministry of Health, Ministry of Justice, Ministry of Defence, Ministry of Commerce, Industry and Tourism and the Instituto Colombiano Agropecuario (ICA) are all involved at various stages.
Today, more than 830 licenses have been granted but 1,500 are still pending as the granting of licenses is a very bureaucratic process, the founder observes, “We presented papers in 2018, the licensing process was meant to take 6 months, it has only just finished!”
The law in Colombia requires 99% purity for cannabis to reach medicinal specifications. Tetrahydrocannabinol (THC), the principal psychoactive constituent of cannabis, must be less than 1%. A scientist in the field comments, “There are very few non-psychoactive varieties of cannabis and in these varieties the CBD level is low, making it poor for medicinal uses. It is not easy to reach the required purity, there needs to be significant investment in R&D, genetics and environment are critical, if the plants are stressed or if there are significant changes in conditions they produce more THC.”
Finally, the location must be taken into account, an investor in a Colombian cannabis producer explains, “You can’t just grow it anywhere, you need the right conditions. The areas where it grows best are Boyacá (Oicata, Villa de Leyva), Antioquia (Envigado), Santander (San Gil, Barbosa), Magdalena (Bonda) and Cauca.
“It is a high-cost crop and transformation is even more costly but the business case is sound.”
Investor in a Colombia cannabis producer
Despite these challenges, industry executives and investors remain bullish, “It is a high-cost crop and transformation is even more costly but the business case is sound. You just have to understand that the returns are long-term, not immediate.”