Complexities in the Brazilian Cannabis Market: “Descascar O Abacaxi”

By Esteban Rossi I., Ph.D., Analyst, New Frontier Data 

Despite its recent woes, Brazil represents South America’s leading economy. With a population of more than 213 million and a 2020 GDP of $1.43 billion USD, the Brazilian market has captured the interest of numerous companies since the early days of the legal cannabis industry.

Official sources and local surveys indicate that 4.8 million Brazilians consume cannabis recreationally, and that 12 million chronic patients medically require it to manage complex conditions. Moreover, due to the nation’s large population, its projected potential markets for cosmetic, medical, or adult uses are considerable. Since none of that is new information, and the size of Brazil’s markets are well known, why has the country’s industry not evolved more quickly?

New Frontier Data broadly summarizes three main barriers hindering the advance of the regulated Brazilian cannabis industry: 1) an overly restrictive regulatory framework, 2) exorbitant prices of medical products, and 3) a large illicit market fueled by cannabis cultivated in Paraguay and sold in Brazil. Those barriers deserve scrutiny since they reduce or even prevent patients from safely obtaining high-quality medical cannabis, and conflict with patients’ rights to health care. Cannabis entrepreneurs would do well to understand the complexity of the market, or in the local vernacular, “descascar o abacaxi”: i.e., slowly peel the pineapple.

Overly restrictive regulatory framework

Brazil’s current framework remains highly restrictive for the cultivation, manufacture, and distribution of imported medicinal cannabis products at pharmacies. Though cannabis cultivation and possession for personal use is no longer considered a crime, individuals carrying any for personal use are subject to receive a warning or render community services. Moreover, it is subjectively up to the judiciary to determine whether seized cannabis was intended for personal use, with judgement depending on circumstances and the quantity. This situation leaves users legally exposed, and is particularly troublesome for racial or ethnic minorities.

Moreover, large-scale cultivation activities remain forbidden. In December 2019, the Brazil’s health and sanitary agency, Agência Nacional de Vigilância Sanitária (ANVISA), rejected an initiative to regulate cultivation. Consequently, neither users nor companies are authorized to cultivate cannabis for medical or adult uses. On the other hand, in 2019 ANVISA did authorize imports of medical products: Resolution 327 outlines the requirements for the manufacture, importation, prescription, and monitoring of registered cannabis products for medicinal uses. Though ANVISA thoroughly described the requirements for imports, the process remains cumbersome. To obtain an authorization to manufacture medicinal products, facilities must obtain the GMPP certification, and subsequently comply with an 0.2% THC limit.

In addition, cannabis products cannot be advertised, and may only be acquired in pharmacies with a medical prescription once all therapeutic alternatives have been exhausted. The first product was authorized in April 2020, and this year two new CBD products, manufactured in the USA, received authorization. Lastly, compounding pharmacies are not allowed to manufacture cannabis-based products, which is unfortunate considering that in other South American countries, compounded medications (i.e., generic formulations) are considered essential to ensure that patients have safe and affordable access to cannabis products.

Expensive medical products

Under current Brazilian law, medical products often remain prohibitively expensive. GW Pharmaceuticals’ Mevatyl (Sativex) was approved by ANVISA in 2017, and is distributed by Ipsen as an oral spray costing around $645 USD for three 10-ml bottles. Meanwhile, a cannabidiol solution manufactured by Prati-Donaduzzi costs approximately $472 USD). Conversely, in Argentina a similar product marketed as Convupidiol (with a CBD content of 100mg/ml), costs $70 USD for a 35-ml bottle. For context, Brazil’s minimum wage is about $212 USD a month, meaning that the products are unaffordable among a segment of 49 million.

Large-scale illicit cultivation in Paraguay for consumption in Brazil

For nearly two decades, Paraguay has been the breadbasket of illicit cannabis for the Southern Cone. According to a report from the Transnational Institute and data from the Paraguayan Anti-Drug Secretariat (SENAD), Paraguay produces 70%-80% of Brazil’s illicit cannabis (for both its medical and adult-use markets). Paraguay annually cultivates about 6,000-7,000 hectares, with more than 20,000 people involved in the production of an estimated 16,500 tons harvested. In 2018 SENAD seized 1,000 tons of dry flower ready for distribution, while in 2019 it destroyed 1,629 hectares.

The value of Paraguayan cannabis exports into Brazil reportedly reached $709 million USD. In comparison, in 2019, Paraguay exported $389 million USD worth of soy, its largest agricultural crop.

Despite its enormous scale, research on Paraguayan illegal cannabis production has been limited — the impact of this economic microcosm is rarely discussed in relation to Brazilian health and environmental policies. Brazil’s restrictive and prohibitionist regulatory regime reduces competition and increases prices, creating large, tax-free businesses. Prohibition creates significant economic incentives for consumers and government officials to purchase cannabis for personal use in the illicit market, weakening state institutions. The Brazilian government has yet to find instructions to “descascar o abacaxi”, yet users are finding ways to improve access to defend their rights and improve access to medical products.

Advances and struggles

Numerous patient associations around the country have cooperated to facilitate access to medicinal products, and a few initiatives achieved national recognition. Brazil has more than three dozen registered associations formed by medical cannabis users, though they often struggle to develop and maintain reliable supplies for their members. Associations including Abrace Esperança (Associação Brasileira de Apoio Cannabis Esperança) and Apepi (Associação de Apoio à Pesquisa e a Pacientes de Cannabis Medicinal) have served thousands of patients in various jurisdictions thanks to a legal action, and became an example for numerous patients around the country that lack access to safe and affordable cannabis products.

Patient associations are lobbying ANVISA, fundraising to expand their productive capacity, and promoting a series of regulatory initiatives aimed to expand cannabis access, particularly through a bill that would regulate cannabis and cultivation. Though popularly received by the media and public, how the legislation will survive the lower chamber of congress and the senate remains to be seen, given opposition from broader dialogue on cannabis reform, conservatives and the president himself.

Sharp contradictions plague the Brazilian cannabis policy regime. While registered products remain prohibitively expensive, associations face increasing compliance costs and legal challenges, and the state looks the other way as well-organized actors smuggle in hundreds of tons of dry cannabis flower. Despite the challenges, users and patients found ways to develop products and technologies to educate themselves and the public. While it is impossible to anticipate how the legislative power will rule in the coming months, reform and the legal cannabis industry seem part of a manifest global trend unlikely to be reversed.