The Latin American Cannabis Market Is About to Take Off
What you need to know so you don't miss the boat.
In the global cannabis marketplace, Latin America is a region on the rise, with more business opportunities emerging and a developing consumer marketplace. With a population of 655 million and over 30 countries, Latin America offers the perfect conditions for growing high-quality raw material, extracting the oil, and producing finished goods at a relatively low cost. These products can then be exported to other counties within the region and the U.S. and Europe.
While there is currently a lack of regulatory standardization and commonality from country to country, there is an excellent opportunity for dialogue between countries to find common ground and create standards around hemp to make trade easier. Latin American associations and groups are discussing the issues and challenges around cannabis and hemp production—and standardization of regulations would only provide a benefit to companies operating in these countries. Regulatory change won’t happen overnight, but it would be in the best interest of everyone involved. At the same time, regional trade treaties should be leveraged, such as USMCA, The Pacific Alliance, and Mercosur to name a few.
What Mexican legalization means
If the national recreational use bill currently in the Mexican Senate is approved, Mexico will be the most attractive market in the next 12 to 24 months because it creates a huge opportunity for product producers, from medicinal to recreational products. With a population of 127 million people, Mexico would be the largest adult-use market in the world if the bill is approved. Of course, it will take some time to get all the regulations and rules of engagement in place, just as it did when Canada approved federal adult recreational use of cannabis. Still, the opportunity for business development and job creation is vast. It will allow producers and product developers the chance to provide CBD and THC products to the consumer, including edibles.
Legalization in Mexico would also pressure Colombia to ease some of the restrictions they have had on exporting product. Mexico will have to import products for the first 24 months or so because it won’t have its own raw material for a while. That will provide other countries and companies producing CBD products the opportunity to penetrate the Mexican market.
While it is a considerable advantage that Mexico’s bill will allow a great range of hemp and marijuana products by delineating between psychoactive (1%>) and non-psychoactive (1%<), there will be limitations, such as no importing or exporting of psychoactive products. The commercialization of vapes will not be allowed, nor will there be online sales or telesales. Sales would have to be in person where eligibility to purchase can be proved. Mixing cannabis with other substances like alcohol, caffeine, and nicotine will not be permitted either. Finally, there will be no promotion or advertising of the product.
As we have seen in other countries, the implementation and fast execution of the bill will be critical, along with significant market and consumer education. Nevertheless, industry experts estimate the legal Mexican cannabis business could raise up to $2 billion by 2025.
What U.S. businesses can do
One way for U.S. businesses to become involved in the Latin American market is by exploring joint ventures and partnerships with local companies. In the past nine months, SōRSE has created strategic alliances in the region. This includes a joint venture with FCM Global in Colombia, which will allow SōRSE to produce its top liquid emulsion products, leveraging the high-quality raw material from Colombia to satisfy local and regional customer needs. At the same time, SōRSE has established a distribution agreement with MEDARA in Uruguay.
U.S. companies can bring their experience, know-how, and technology to Latin American companies that are growing flowers, doing extractions, or producing finished goods, providing them the opportunity to consider ways to expand and grow their own businesses in a burgeoning marketplace.
Felipe Sanchez is the VP of Latin America for SōRSE Technology, the leading CBD, hemp, and terpene water-soluble emulsion supplier.