Latin America has emerged as a hotbed for cannabis investors and companies. Peru, Chile, Argentina, and Colombia have all passed medical marijuana legalization laws and legal cannabis sales in South American markets are expected to surge from just $125 million in 2018 to $776 million by 2027.
Columbia is a desirable target for ambitious Canadian cannabis companies. Its hot, damp climate makes much of the country ideal for robust cannabis cultivation. “Colombia’s rich with opportunity,” Eric Logan, CEO of LVE Trust, a leading CBD hemp commodities firm, told me. “The climate to grow is 12 hours of sun, and 12 hours of darkness and grower labor is a mere $500 per month for full-time work,” he reasoned.
Similarly, Uruguay, the first and only country to decriminalize all drugs, offers optimal, low-cost, and fertile growing conditions for cannabis. Throw in the country of Jamaica and its first marijuana cultivation licence issued in July of this year, and it’s no wonder the cannabis industry’s biggest Canadian companies are leading the charge to progressive countries closer to and south of the equator.
Cannabis investments are landing in countries where medical marijuana programs are running successfully and legalization is progressive.
“Until the system was really rolled out and cannabis [was] being sold at pharmacies, foreign capital was hesitant,” said Eduardo Blasina director of Uruguay’s Cannabis Museum of Montevideo (MCM). “Only now that the system is in place and working [are] investors manifesting a real, tangible interest.”
Canadian cannabis company Aphria Inc. (OTCMKTS: APHQF) is the most recent large player to claim a massive stake in Latin and South America expansion. The Ontario-based company closed a deal to buy Latin American and Caribbean assets from international marijuana company Scythian Biosciences Corp (CSE: SCYB) (9SB.F) (OTC – Nasdaq Intl: SCCYF) .
In so doing, Aphria has acquired stakes in subsidiary cannabis-related companies in Argentina, Colombia, and Jamaica, as well as the right to buy the bulk of a Brazilian producer.
According to the Financial Post, Aphria’s stock price had risen nearly 75% since the Scythian transaction was first announced in July, pushing the value of the deal up to approximately $300 million. “[We have] a ‘war chest’ of cash going forward,” Andy DeFrancesco, the chairman of Scythian’s board of directors, said.
“Aphria continues to execute on its plans for strategic international expansion, including in Latin America and the Caribbean,” said Vic Neufeld, Chief Executive Officer of Aphria according to a press release. “This acquisition firmly cements Aphria’s leadership in the region and on the global cannabis stage.”
It all comes down to differentiation
For certain, Aphria’s looking to build healthy export channels from this Latin American deal, but the company’s objectives are even greater than that. Generations of cannabis growers in countries replete with generations of experience become more proficient in the cultivation of cannabis, this export of expertise will be a key differentiator for successful Canadian companies that are looking outside of Canada to succeed.
“Good companies and teams need to recognize that you only know what you know but more importantly, know what you don’t know,” DeFrancesco told me. “The guys that will get hurt here are the ones always thinking they are the smartest ones in the room.”
Aphria management, paired with existing and acquired cultivation expertise, will enable the company to take a dominant market position in Latin America and the Caribbean markets, particularly under the leadership of co-founders Cole Cacciavillani and John Cervini.
“Providing super high-quality cultivation, manufacturing, and extraction along with end products at the very lowest costs benefiting stockholders which Scythian is now one of the largest, and the retailers and the end customers,” DeFrancesco continued. “This was a great all-around win for all stockholders in both companies.”
Should Canadian cannabis companies operate from generosity and partnership–two important tenets of the North American cannabis community–the Latin American region will flourish equally well. And perhaps granting the hope Nobel Prize-winning Chilean writer Pablo Nerudaenvisioned in this prose.
Latin America is very fond of the word “hope.” We like to be called the “continent of hope.” Candidates for deputy, senator, president, call themselves “candidates of hope.” This hope is really something like a promise of heaven, an IOU whose payment is always being put off. It is put off until the next legislative campaign, until next year, until the next century.