The country has land, sun and skilled workers, but it must also deliver on medicinal-grade quality
At Pharmacielo in Rionegro, Colombia, marijuana plants are cultivated and gathered for medicinal use. It is among a growing number of companies looking to build a base in the Latin American country © Reuters
Colombia is notorious as the world’s biggest supplier of cocaine. Now it is positioning itself as a producer and exporter of another drug, one that is increasingly legal around the world — cannabis.
With interest in medical marijuana booming, the big North American cannabis companies are increasingly looking abroad for places where they can grow plants easily and cheaply.
Colombia, with its equatorial climate and 12 hours of daylight all year round, fits the bill. Land and labour is relatively cheap, and a skilled rural workforce has experience in the cut-flower industry.
It is far cheaper for Colombian farmers to produce cannabis than their counterparts in North America and Europe, where growers have to spend money on climate-controlled greenhouses to combat harsh winters. The Colombians can produce a gramme of dry flower for $0.50-$0.80 while in Canada it costs around $2, says Mat Youkee, editor of Colombia Cannabis Investor, an industry newsletter.
As a result, some big North American pot companies have piled into Colombia.
The largest, Canopy Growth, with a market capitalisation of more than $13bn, has spent about $60m to create Spectrum Cannabis Colombia with a cultivation site in the southern province of Huila.
In June last year, Khiron Life Sciences, a Canadian-Colombian company, became the first cannabis producer with core operations in Colombia to list on the Toronto stock exchange.
Local operator Clever Leaves has teamed up with US venture capitalists Northern Swan and is producing cannabis in Boyacá, north of Bogotá. Julián Wilches, a co-founder of Clever Leaves, believes Colombia has the potential to become “the leading exporter of medical cannabis in the world”.
Toronto-listed PharmaCielo has a Colombian cannabis subsidiary in Rionegro, close to the country’s former cocaine capital Medellín. It describes Colombia as “the most cost-competitive and environmentally friendly nation” on earth for cannabis cultivation.
The incentives for this flurry of investment are clear. The legal cannabis industry is one of the fastest growing in the world. In just a few years, most of Europe and Latin America as well as Canada and over 30 US states have passed laws to allow the medicinal use of cannabis. Canada and Uruguay have gone further, legalising recreational marijuana use, as have some US states, most recently Illinois.
Grand View Research, a Californian-based consultancy, expects the global market for legal cannabis to grow by 24 per cent per year over the next six years from $13.8bn now to $66.3bn by the end of 2025.
The excitement over cannabis in Colombia has reached fever pitch with some local media reports suggesting the country could supply two-fifths of the world’s marijuana and earn more from it than it does from coal or cut flowers. Farmers have been encouraged to switch out of traditional crops like coffee and bananas to grow weed instead.
But industry experts sound a note of caution. The production of pharmaceutical-grade cannabis is a highly specialised process — it is not as simple as planting a few marijuana seeds, harvesting the crop and turning it into medicine.
“It might be true that Colombia is the best country in the world for cannabis cultivation because of the climate and sunlight and because land and labour are cheap,” said Andrés López, a former director of the National Narcotics Fund, a state body that regulates the legal drugs trade in Colombia.“
But that isn’t enough. To produce medical cannabis you need the very highest quality standards.
”That requires the kind of investment that many small-scale Colombian farmers cannot afford. Khiron, for example, has invested $5.5m in its state of the art processing laboratory in Tolima. Some local growers fear that without the backing of North American cash, they will be squeezed out of the cannabis market by a few big players.
Another challenge is security. Although Colombia is far safer than it once was — particularly since the government signed a historic peace deal with the Marxist guerrilla group the Revolutionary Armed Forces of Colombia in 2016 — it is not Canada.
Some observers fear that if the cannabis industry proves as lucrative as many predict it will fall into the same criminal hands that control the cocaine trade.
As he walks around Khiron's cultivation centre in the sweltering heat of Tolima, a traditional rice-growing area, the company's CEO Alvaro Torres explains that all the cannabis extract produced at the site will be flown to Bogotá by helicopter. “Each flask is worth around $100,000,” he says. “There’s no way we’re transporting it by road.”
Khiron also has the backing of former Mexican president Vicente Fox, who is on the board of directors. “The speed at which this company and this industry is expanding is unique,” he said during a recent visit to Bogotá.
There is a certain irony in the idea of Colombia — so often associated with drug-trafficking — producing and exporting drugs legally, especially from those parts of the country that were worst hit by the cocaine trade and the long civil conflict.
Tolima and Huila, the regions where Khiron and Spectrum Cannabis Colombia have their cultivation sites, were where the Farc first emerged in the 1960s. Coca and marijuana have been grown illegally there for decades. Rionegro, where PharmaCielo operates, was once blighted by fighting between the state, guerrillas and rightwing paramilitaries.
In a bid to help some of the victims of the conflict, PharmaCielo is working with a group of more than 60 farmers who it says were “at the front line of challenge from revolutionary forces over past decades”. They are being trained to produce cannabis pure enough for medicinal use.
The company is also working with indigenous groups who have grown cannabis in Colombia’s fertile hills for centuries. As the country embarks on this latest stage of its complex and often fraught relationship with narcotics, they too, PharmaCielo says, “must have their rightful seat at the table of the cannabis industry”.
Originally published here: https://www.ft.com/content/b9142c96-9742-11e9-9573-ee5cbb98ed36