Evolving Perspectives for LatAm Legal Cannabis Exports
By Esteban Rossi I., Ph.D., Analyst, New Frontier Data
As the legal cannabis industry matures, Latin American producers are paying increasing attention to emerging business opportunities in European markets. Undoubtedly, Western Europe constitutes the ideal market for lower-cost, South American flower and oil producers. Yet, it remains unclear how policymakers in Germany, Italy, France, and neighboring countries will regulate the nascent industry. Through analysis of regional regulatory advances and commercial milestones, New Frontier Data outlines three key potential scenarios for policy change along with their implications of Latin American firms.
Across Europe, both policymakers and the public continue to implement reforms. In recent months, progress was seen in each Switzerland (via an adult-use pilot program), Denmark (municipal referendum) and France (medical pilot program). Italians attempted a national referendum, but the initiative was derailed by its constitutional court at the last minute. The initiatives illustrate changing perspectives among local political leaders, along with changing preferences and attitudes among voters. Moreover, impressive sales and tax revenues from the most mature markets in the United States (e.g., CO, CA, and WA) demonstrate opportunities for European jurisdictions. Colorado, for example, with a population of roughly 5.7 million, reported 2021 sales of $2.2 billion USD. Meanwhile, the 2020 U.S. legal market surpassed $22 billion USD.
Thus, policymakers on either side of the Atlantic cannot ignore the magnitude of consumer markets and their growing popularity. In jurisdictions worldwide, users from different age groups are turning towards (grey) consumer markets (whether physical or online) to acquire cannabis flower, edibles, and tinctures from undetermined sources. As online resources and social media become increasingly connected internationally, quality information is increasingly accessible to consumers, heightening the need to educate and capture young consumers by drawing them to legally regulated markets.
For more comprehensive and specific data and analysis, visit New Frontier Data’s online business intelligence portal Equio® to gain additional insights available within the Global Market Dashboard. If interested in a Spanish version, “El Informe Global de Cannabis: Panorama en America Latina” is available to paid subscribers to Equio®.
Scenarios for Policy Changes
How will Latin American producers step up to capture niches in European markets? Based on current trends and emerging European legislation, New Frontier Data identified potential opportunities for Latin American companies.
The analysis contains three basic scenarios to facilitate discussion and guide future research: a) business as usual; b) protectionism; and c) breakthroughs. The first resembles current dynamics in Colombia, and (to some extent) Uruguay, where large corporations with close affinity with governments — armed with quality certifications (e.g., EU-GMP) and strong lobbying — will grow to dominate the market.
Presently, a handful of large companies (some publicly listed) dominate LatAm export markets; once they find buyers in Europe, they position themselves for significant growth. The scenario presents some daunting challenges for small producers, while failing to provide social justice benefits if nevertheless being very comfortable for regulators.
Alternatively, European countries could choose a more protectionist approach, developing cannabis industries from the local level. Rather than establishing comprehensive national frameworks per Uruguay (with a public adult-use program), or Canada (deploying a privately administered adult-use program), local leaders could foster more pilot programs and decentralize decision-making to allow states or municipalities to develop their own approaches to advance gradually. Ongoing efforts in Denmark and the Czech Republic illustrate those scenarios. They will benefit domestic users and a portion of the public, but lead to slow growth in the import-export flower market that Latin firms seek.
Lastly, a combination of forces could build momentum toward a breakthrough with global consequences. For example, a small European country like Malta could establish a successful cannabis tourism program, draw users from other jurisdictions, and essentially force neighbors to regulate. Meanwhile, Mexico could take a step forward and approve a form of the adult-use bill as it has been discussing since 2019, prompting the government under Andres Manuel Lopez Obrador to turn the page on prohibition while creating the world’s largest adult-use market. Conversely, a bold country could follow Uruguay’s path, to endorse an alternative reading of the 1961 Drug Convention and redirect the global discussion. Perhaps a Costa Rica (which recently passed a medical program) could lead such an effort, which would offer a highly beneficial for Latin American firms in Colombia and Uruguay.
Maintaining a Vision
Regardless of the paths respectively chosen by countries and the required adjustments along the way, a broader global discussion should incorporate a few basic principles. First, to create a broad set of rules favoring creation of dynamic and inclusive domestic markets. Arguably, Spanish cannabis clubs represented a good step in that direction, allowing users to obtain and quality cannabis in secure ways, while under state supervision. Unfortunately, some club managers overreached, and clashed with regulators. Moreover, the policy discussion should balance and reconcile individual rights, consumers’ health and well-being, and companies’ opportunities for profit. For instance, Uruguay and the State of Florida (USA) offer contrasting but successful examples of how to balance competing interests and societal values, allowing for dispensaries or pharmacies to sell quality flower directly to patients or consumers.
Internationally, legal cannabis remains a promising if small industry, with room yet to establish a compelling vision for what all that a responsibly and efficiently regulated cannabis market could represent and generate in terms of social benefits. Whoever first outlines and implements such a vision will reap enormous success.