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- Author, Luis Fajardo
- Scroll BBC News World
2 hours ago
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Several countries in Latin America have made progress towards the partial legalization of cultivation
Clandestinely grown marijuana fueled one of the most profitable industries in Latin America in the 20th century. However, with legalization in some countries in recent years, the product has become a much less attractive business in the region.
Mexico, Colombia, and years later countries like Paraguay were home to vast illegal marijuana manufacturing industries that were widely known for both their violence and their profits.
In this 21st century, following the first example of Uruguay, which legalized cultivation in 2013, several Latin American nations have taken steps to encourage gradual legalization of the sector.
Today, medical marijuana is legal in countries like Argentina, Chile, Colombia, Mexico and Peru. According to estimates by the consulting firm Euromonitor, this sector moves more than 170 million US dollars in the region every year.
What hasn’t been seen, however, are the big gains some expected from legalization.
A “critical care” industry
“Colombia’s cannabis industry is focused on the critical care sector,” Miguel Samper told BBC News Mundo, the BBC’s Spanishlanguage service.
He is the chairman of the national association of legal marijuana growers, Asolcolcanna.
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It is said that legalizing recreational use would boost the industry
Colombia was one of the largest clandestine marijuana producers after Mexico in the 20th century, during a period known in the South American country as the “marimbera bonanza.”
This phase preceded the rise of the major cocaine cartels that gave the country a dismal reputation in later decades.
The winds of legalization hit Colombia in 2016 when then Deputy Attorney General Miguel Samper saw the country become the fifth in the world to legalize and regulate marijuana for medical use.
But once at the top, “Colombia has been sidelined in the development of the industry,” says Samper, who is now the union leader.
The country has 57,000 hectares approved by the government for the legal cultivation of cannabis, more than any other country in Latin America. According to Samper, however, only around 520 hectares or around 1% of this is actually farmed.
He also estimates that by 2022, about one in three of the 1,300 companies officially licensed to cultivate will have effectively gone out of business.
According to him, one of the problems in the industry is that there is no market for local production in the pharmaceutical industry. The government hasn’t authorized the industrial manufacture of drugs made from Colombian cannabis, he says.
Industry Myths
Colombia isn’t the only case of disappointed expectations for the region’s cannabis industry.
The partial legalization, says Erwin Henriquez, a senior analyst at consulting firm Euromonitor, does not mean the imminent end of criminal activity surrounding the illicit cultivation of marijuana.
“The illegal cannabis market is still significantly larger than any legal market,” he points out.
“Our estimate is that it will continue to grow.”
In Latin America, per capita marijuana use is barely $1 a year, compared to $88 in the United States, says Henriquez.
Speaking to BBC News Mundo, he also spoke about what he thinks are false ideas being created around the new industry around legalisation.
Over time, he argues, the clandestine aspect may fade, pointing to the fact that Canada’s legal industry has surpassed illegal marijuana cultivation for the first time.
“Legalizing cannabis is not an instant cure for the existence of the illicit market,” he says.
Others believed that legalizing marijuana would open up great opportunities for export to the United States.
Again, Henriquez says, this doesn’t necessarily happen in reality.
“The United States is not a big export market for cannabis to Latin America.”
One of the reasons, he says, is that the country’s legal industry “has the capacity to serve the domestic market.”
Markets like the Middle East and Asia, on the other hand, could be more attractive, he adds.
Betting on the recreational market
The picture that experts have drawn of this industry in Latin America is a collection of unfulfilled expectations.
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The legal cannabis industry already moves millions of dollars annually
However, the same specialists estimate that these frustrations could soon change.
“Latin America is projected to be the fastest growing region in the cannabis industry in five years. In real terms, growth will be very similar to that in Western Europe,” says Erwin Henriquez.
Many Latin American countries have natural competitive advantages for the product. Due to the lack of distinct seasons, they can produce up to three harvests per year. Land, labor and electricity are generally cheaper than other regions in Europe or North America.
Researchers point out that much of the development of this industry will depend on how the debate on the future regulation of the industry, and specifically of recreational marijuana, unfolds in the parliaments of Latin American nations.
Mexico and Colombia, two of the largest potential markets, are discussing legislative projects that would legalize and regulate “adult use” of marijuana. Only two countries in the world have taken the full step towards legalizing and regulating recreational cannabis: Canada and Uruguay.
Colombia is certainly one of the countries where it is expected how this discussion will develop, especially with the arrival in power of Gustavo Petro in 2022 at the head of a new government that, unlike its predecessor, seems welcome to be decriminalizing and regulating recreational marijuana.
Samper told BBC News Mundo that there is now “an air of optimism” in the Colombian marijuana industry given the “political will expressed by Petro” to pursue “a new approach in drug policy”.
The Colombian President has said he wants a less repressive approach to antidrug action and has guaranteed he is trying to protect small producers.
“Cannabis will be the perfect chassis for the new drug policies that run counter to the prohibitionist approach that has left only waves of violence and decades of suffering in the country,” says Samper.
Multinational companies have a strong presence
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The Colombian President said in his inaugural address that he would not allow multinationals to take control of the cannabis industry
The Colombian President says that although Colombian legislation requires all companies participating in the market to be legally incorporated in the country, to date some of the most important companies have had foreign equity participation.
Petro referred to this situation just four days into his tenure when he said in a speech on August 11, 2022: “Will it be the Canadian multinational that takes the dollars and plant the cannabis plantations? Or will it be the cannabis producers (from the Colombian region) of Cauca? Why can’t they?”
For Miguel Samper, the involvement of multinational companies in the medical cannabis market is the result of the high investments required to meet the very high quality standards of the global pharmaceutical industry.
He argues that without neglecting public health, an eventual recreational marijuana market might not have such high barriers to entry, and therefore more local farmers would share in the gains, especially if the government relaxes existing requirements for obtaining a license.
Samper estimates that every hectare of legal marijuana grown in production in Colombia creates 20 direct jobs and nearly 18 indirect jobs.
If we take into account that the South American country has already approved but not yet cultivated over 56,000 hectares, the potential for job creation would also be quite large.
The political debate continues
Despite what Petro proposes, the proposal to deepen legalization of marijuana to include recreational use has strong political opponents in Colombia and many other countries in the region.
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Some are hoping that legalizing recreational marijuana could be the final push for this industry.
“Progressives should understand that Colombia opposes the legalization of recreational cannabis, which is not recreational cannabis at all but only causes destruction of the person,” Senator and leader of the Colombian right, María Fernanda Cabal, wrote on Twitter last November .
In his tweet, Cabal quoted a poll by Colombian company Invamer as saying that 57% of their countrymen oppose the legalization of recreational marijuana.
In Mexico, another major potential expansion market, the final decision to legalize “adult use,” already approved by the Chamber of Deputies, rests with the country’s Senate.
On January 19, the head of the Mexican Senate Finance Committee, Alejandro Armenta, said the discussion would resume in February.
Announcements about the promulgation of marijuana laws in Latin America over the past decade have raised more expectations than results.
It remains to be seen whether deeper legalization will result in a new economic bonanza in the region.