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In a long-awaited announcement, Colombia has approved the export of dried cannabis flowers for medicinal purposes. For companies in the country, this is a move that will increase the growth potential of the burgeoning cannabis industry.
Colombia approved a legal framework in July 2016 that regulates the production, distribution, sale and export of seeds and products such as creams and other cannabis-based derivatives, but banned the export of dried cannabis flowers because it feared such a move Enable the diversion of legal cannabis products onto the illegal market.
New Decree 811, dated July 23, amends an earlier law regulating the commercialization of medicinal cannabis, Justice Minister Wilson Ruiz said.
The new decree also allows manufacturers to produce goods such as oils, extracts, textiles or foods that contain “non-psychoactive cannabis” – as long as they are limited to biomass with a THC content of less than 1%. (Unlike other countries, Colombia does not differentiate between “cannabis” and “hemp”, but uses the “psychoactive” nomenclature at the 1% THC threshold.)
Colombian President Ivan Duque signed a decree ending the “Ban on Dried Flower Export”, a decree, at an event held at a facility owned by Clever Leaves, one of 18 multinational companies that grow medicinal cannabis in Colombia.
“Colombia is starting to play a big role, and with this decree we are putting ourselves at the forefront of regulatory competitiveness, at least in Latin America and the Caribbean,” he said, noting that the country was no longer just operating in a pharmaceutical market. “We’re opening up the space to do a lot more in cosmetics … [including] Food and beverages and even textiles, ”said the president.
Duque’s office estimates the global medical and industrial cannabis market could be valued at $ 62 billion by 2024. National and international companies have invested US $ 250 million in Colombia to develop this industry.
Colombia, one of the largest cannabis producers in the world in the 1960s and 1970s and the world’s largest supplier of cocaine, continues to transform the country’s drug policy.
With the regulation, followed by a new resolution regulating the production of dried flowers, Colombia will join other counties in the region that have approved the export of dried flowers, said Jon Ruiz, director of consulting firm CannCons and former CEO of cannabis company Pharmacielo and Medcann. Colombia will have a competitive advantage over Ecuador, a neighboring country with similar geographic conditions that only allowed the export of non-psychoactive dried flowers, he said
The resolution should be ready in two months, Ruiz said. The Ministry of Justice will continue to be responsible for issuing licenses for seeds for growing cannabis plants. In the meantime, the National Food and Drug Surveillance Institute (INVIMA) will license derivatives.
Until recently, dried flowers produced in Colombia were only allowed to enter the free trade zone for conversion into secondary products such as cannabis extracts or oils.
According to analysts, the greatest competitive advantage in the manufacture and export of dried flowers is the pure production costs.
According to Ruiz, a gram of cannabis flower costs less than $ 0.50 in Colombia, while in Canada the cost tends to be more than $ 1.00.
Located near the equatorial line, cannabis plantations can soak up the sun 12 hours a day year-round, compared to Europe or North America, where farmers in many areas build greenhouses or indoor facilities to ensure year-round production.
Investors have also considered the cost of growing cannabis in Colombia compared to their counterparts as they can find skilled cheap labor with experience in the flower industry and cheap land.
Colombian think tank Fedesarrollo sees export revenue from the cannabis industry to be $ 800 million by 2025 and an average of $ 2.3 billion in a decade. According to Rodrigo Arcila, president of the Colombian Cannabis Association (Asocolcanna), Colombia exported $ 5 million in cannabis by-products in 2020 and $ 8 million in the period from January to June 2021.
“The growth potential is enormous. I can’t give an exact number, but companies have been waiting for this announcement to prepare their crops and organize their business plans, “Arcila told CBT.
Executives at Clever Leaves, a Nasdaq-listed breeder, manufacturer and distributor, said the export of dried flowers accounts for more than 50% of the global medical cannabis market, and participation in this segment will boost the country’s exports.
Julian Wilches, co-founder and director of Clever Leaves’ Public Affairs, said Colombia was one of Latin America’s pioneers in regulating the production and export of derivatives, but exporting flowers will allow the portfolio of products and services to expand and to generate more opportunities and better prospects for the holistic development of the industry.
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“Countries in the region like Peru, Ecuador, Mexico and Brazil have updated their regulations to make them more competitive. Colombia’s answer was to be on the front lines and we are ready to serve these new segments, ”said Wilches.
In the German retail trade, dried flowers account for 53% of sales. It is a country that represents 75% of the European medical cannabis market and is currently completely dependent on imports. Likewise, the proportion of dried flowers in Canada accounts for 73% of units sold, while in the US it is estimated at over 60% of total sales, according to the Clever Leaves team, citing a study published by Health Canada.
The company – with 18 hectares entirely in production in the central Boyacá province and a sophisticated laboratory in Tocancipá, north of Bogotá – has invested $ 70 million in Colombia since 2018, and the market will show how much it has to invest around to expand into flower exports, added Wilches.
Ruiz’s Justice Minister said the Duque government is banking on this sector to reduce unemployment in Colombia, a nation barely affected by the pandemic. According to the national statistics agency, the Colombian economy contracted by 6.8% in 2020. This is the worst year since records began tracking such metrics in 1905, and the record-breaking measurements have plagued the country with rising debt and mass unemployment.
The cannabis sector creates 17.3 jobs per hectare and could create 7,772 formal agricultural jobs by 2025 and 26,968 by 2030, Fedesarrollo said.
“The decree strengthens a strategic sector for economic growth and job creation,” said Ruiz.
Colombia had 120 hectares for growing medicinal cannabis, and the potential for expansion is 450 hectares by 2025 and up to 1,558 hectares in 2030, added Fedesarrollo.
The decree also strengthens the measures to monitor and control the permits issued so that the authorities have clarity about the start of the activity. Companies that obtain licenses to grow non-psychoactive hemp will be granted licenses for 10 years with the potential to renovate them.