How Will Colombia’s Elections Affect Its Cannabis Industry?
By Esteban Rossi I., Ph.D., Analyst, New Frontier Data
After four difficult years while progress for Colombia’s cannabis reforms were hindered by regulatory obstacles coupled with the COVID-19 pandemic, firms remain optimistic about growth prospects for the next term. As the country and its cannabis industry look forward to the second round of the nation’s presidential elections on June 19, comparative profiles of the candidates seem instructive.
From the Right
Rodolfo Hernandez, a 77-year-old engineer, former mayor and real-estate developer from Santander, represents social conservatives. elections. A relatively new candidate, he surprised the country by launching his campaign, and shocked the establishment by winning on May 29 (Colombia has a two-round voting process for presidential elections). Pundits have attributed his success to a candid and spontaneous style, along with a strong anti-corruption message that resonates with seniors and young voters, particularly on social media.
His critics contend that his policy proposals lack depth and detail. His government plan only mentions the cannabis industry in passing, by highlighting support for small growers and industrialization of the sector. Unlike his rivals, rather than outlining incremental policy changes to promote the cannabis industry, Hernández has taken a strong position against all prohibitionist policies.
Specifically, he defends broad legalization to unleash market forces and eliminate the perverse incentives created by prohibition.
For more than a decade, progressives championed similar arguments but wound up ignored by traditional parties. In addition, Hernández insists that addiction should be managed as a public health issue, and that the state should provide care, thereby reducing crime associated with problematic drug use. His concrete and direct messages characteristically contrast with the carefully crafted and pre-tested speeches from other candidates.
Implementation impediments threaten to derail his ambitious agenda. Despite growing public approval, Hernandez will lack any congressional majority required to implement his policies. The international community (particularly the INCB) could also oppose legalization efforts. Interestingly, the U.S. ambassador to Colombia recently invited Hernandez to privately discuss his views regarding drug policies. The takeaway is that while progressives and the public at large openly support his ideas, clarity, and boldness, the cannabis industry has yet to see concrete proposals to facilitate increased sales and revenue.
From the Left
Gustavo Petro, a 62-year-old economist, senator, and previous mayor and presidential candidate garnered the most votes in the first round, but was unable to amass the majority required for election. The pundits attribute his success to a deep knowledge of Colombian society and his long commitment to public service, while his socially oriented policies resonate with a significant sector of the populace.
Petro’s proposals reflect years of experience and understanding for the cannabis industry. His plans highlight training for farmers, expediting administrative procedures, creating domestic markets for cannabis products, and increasing research and exports.
Curiously, Petro also opposes prohibitionist approaches to cannabis (and drug policy more broadly) and defined a roadmap to protect rural communities heavily impacted by draconian policies over the last three decades.
Petro argues that traditional cannabis farmers should be included in the legal industry, and receive technical assistance along the value chain. Moreover, he has emphasized the need to expand medical access and product development.
Presently, technical and legal entry barriers continue to prevent legal producers from joining the domestic medical market. Numerous experts highlighted the importance of regulating flower consumption since 2018, but the administration of Ivan Duque rejected those ideas. In broad terms, Petro and Hernández agree to approach drug policy reform drawing on the same three pillars: human rights, public health and economic opportunities.
Petro seems better poised to overcome the implementation challenges plaguing new policies. His “Pacto Historico” argument secured 25 seats in the lower chamber and 20 seats in the senate for the 2022-2026 term. In addition, during the previous term his party developed an adult-use bill receiving wide public attention in 2020, but failed to reach the Senate floor. Since Petro and his team know the intricacies of public administration, they should be less likely to be derailed by bureaucratic resistance.
In sum, a Petro administration would present better chances of fostering the cannabis industry in the next administration.
As we have noted, unlicensed gray-market firms continue to dominate consumer demand. In 2020, Colombia’s estimated 1.5 million adult cannabis consumers overall (i.e., in both legal and illicit markets) spent close to $710 million on cannabis products, while the spending of some 16,000 registered medical patients accounted for just $3.5 million of that.
Nevertheless, most of the sold tinctures, edibles, and flower are manufactured and distributed by unlicensed firms. Meanwhile, accumulated licensed exports amount to just $12.5 million USD.
Due to outdated regulations, roughly 1,800 licensed firms in Colombia cannot sell products in the domestic market. The task for the next government includes regulating the commercialization of dry flower for medicinal purposes as occurs in Germany. Subsequently, they should restart the public dialogue to regulate other products, and develop an adequate adult-use framework.
Though ideological commitments often clash with cannabis policies, prohibitionist approaches continue falter. Hernández’s approach illustrates that traditional leaders also support cannabis regulation. Therefore, regardless of who wins, this month’s election looms as a watershed for Colombia.