Ask Our Experts 3/10/2019: What’s the Latest from the Latin American Markets?

By Beau Whitney and Yona Torres, New Frontier Data

Q:  How is the  Latin American cannabis market shaping up? How developed is it, and what are the risks?

A: For investors or operators in the emerging Latin American legalized cannabis industry, attention must be focused on both the domestic and export markets. In the main, Latin Americans are globalists: Countries like Colombia and Panama are looking outwards, focused on exports, whereas Brazil is more interested in opening its domestic medical market — the largest in Latin America —with a total addressable market worth $2.4 billion.

The markets are too new for decided frontrunners yet to have established themselves. There are virtually no products being manufactured or marketed; rather, operators in many countries are cultivating while waiting for the regulations to become definitively established.

Some Latin American markets will be too small or constrained by competition from low-cost illicit markets to sustain robust national cannabis industries. Thus, operations in countries like Colombia or Panama anticipate most of their revenues coming from foreign markets, such as Canada’s or the European Union’s.

With Uruguay as the notable exception, Latin American nations have remained slower to adopt legalization than countries in North America or Europe. Yet, what they have lost in delays they are poised to recoup through advantages of lessons learned from the mistakes of previously established legal markets.

Private operators are also asking about the future harmonization of rules and laws between countries, knowing that standards of Good Manufacturing Practice (GMP), Good Distribution (GDP), and Good Clinical Practice (GCP) will be required by developed importing markets. Such practices can represent barriers to entry for smaller producers looking to transition into the legal markets. At a minimum, a company must conform to those and other International Organization for Standardization (ISO) standards in order to be competitive in the near future, and viable in the long term.

In a recent InterCannAlliance Symposium held in Panama in February, Latin American government officials inquired from those in mature markets about models of regulations and ways to effectuate policy goals while maintaining a healthy market. The newer participants are eager for revenue, and — unlike other global regions — share keen understandings about the distinction between hemp/CBD and cannabis, and the different markets to be established.

Many operators are looking for advice on current and advanced cultivation techniques, extraction processes, and best practices. Having knowledge and expertise in-house will play a key role in the success or failure of a project. However, over-focusing on the supply side can risk overlooking the importance of identifying access to markets, and an understanding of where the demand will come from. Domestically, it may come from physicians; internationally, such will likely come in the forms of brokers, dealers, and large, medically oriented companies. Risks remain, and the infrastructure is still being developed. Investors and operators will encounter many unforeseen obstacles — including local regulations — and limits on what can be exported, imported, or sold to local markets.

Likewise, pivotal questions remain about 1) access to pharmacies or other sales channels; 2) the specific impacts of international laws; and 3) the lack of each banking, infrastructure, and testing (not unlike in the U.S.).

For a greater understanding about the region, its opportunities, and challenges to entry download a complimentary copy of New Frontier Data’s The Latin America Regional Cannabis Report: 2019 Industry Outlook with insights to help inform and guide operators’ and investors’ business strategies in the region’s emerging sectors.