The illegal cultivation of cannabis has created one of the most lucrative industries in the world in Latin America during the 20th century.
However, with legalization in some countries in recent years, the product has become a less attractive business in the region.
In Mexico, Colombia, and later in countries like Paraguay, there was a huge illegal cannabis production industry known for both its violence and profits.
In this 21st century, several Latin American countries have gradually legalized the industry, following the first example of Uruguay, which legalized cultivation in 2013.
Today, cannabis for medicinal purposes is legal in countries such as Argentina, Chile, Colombia, Mexico, and Peru.
According to estimates by Euromonitor consulting firm, the region’s sector is worth more than US$170 million annually.
However, the big gains some had expected from legalization have not materialized.
Colombia was one of the largest illicit cannabis producers after Mexico in the 20th century, during a period known in the South American country as “bonanza marimbera.”
This phase preceded the rise of the large cocaine cartels that gave the country a sad reputation in later decades.
The winds of legalization reached Colombia in 2016 when then-Deputy Justice Minister Miguel Samper ensured that the country became the fifth in the world to legalize cannabis and allow it for medicinal purposes.
After leading the way, however, Colombia “took a back seat” in developing the industry, according to Samper, who is now a union leader.
Venezuela’s neighbor has 57,000 hectares approved by the government for legal cannabis cultivation, more than any other country in Latin America.
However, according to Samper, only about 520 hectares of that, or about 1%, is actually cultivated.
He also estimates that by 2022, about one in three of the 1,300 companies officially approved for cultivation will have exited the business.
In his estimation, one of the problems facing the sector is that local production cannot find a market in the pharmaceutical industry.
The government has not approved the industrial production of medicines from Colombian cannabis, he says.
MYTHS OF THE INDUSTRY
Colombia is not the only case of dashed expectations in the region’s cannabis industry.
Partial legalization, says Erwin Henriquez, senior analyst at consulting firm Euromonitor, does not mean an imminent end to criminal activity surrounding illicit cannabis cultivation.
“The illegal cannabis market is still significantly larger than any legal market,” he points out.
“We expect it to continue to grow.” In Latin America, per capita consumption of cannabis barely reaches US$1 per year, compared with US$88 in the United States, Henriquez said.
In an interview with BBC World News, he also spoke about what he sees as the misconceptions that have arisen around the new industry related to legalization.
Over time, Henriquez said, the clandestine aspect could gradually disappear.
He points out that in Canada, the legal industry has overtaken illegal cannabis cultivation for the first time.
“Legalizing cannabis is not an instant cure for the existence of the illegal market,” he says.
Others believed legalizing cannabis would open great export opportunities to the United States.
Again, Henriquez says, this is not necessarily the case in reality.
“The United States is not a big export market for cannabis in Latin America.”
One of the reasons, he said, is that the country’s legal industry “can serve the domestic market.”
On the other hand, markets such as the Middle East and Asia may be more attractive, he adds.
The picture experts have painted of this industry in Latin America is that of a collection of unfulfilled expectations.
However, these same experts believe that these frustrations could soon change.
“In the cannabis industry, Latin America is expected to be the fastest growing region in five years. In real terms, growth will be very close to the pace seen in Western Europe,” says Erwin Henriquez.
Many Latin American countries have natural competitive advantages for the product.
Because there are no distinct seasons, they can have up to three harvests a year.
Land, labor, and electricity are generally cheaper than in other regions of Europe or North America.
Researchers point out that much of the industry’s development will depend on how the debate over future regulation of the industry, and recreational marijuana in particular, plays out in the parliaments of Latin American countries.
In Mexico and Colombia, two major potential markets, draft legislation to legalize and regulate adult-use cannabis is currently being debated.
Only two countries have taken the full step toward legalizing and regulating recreational cannabis: Canada and Uruguay.
Colombia is certainly one of the countries eager to see how this discussion will play out, especially as Gustavo Petro comes to power in 2022 at the helm of a new government that, unlike its predecessor, is favorable to decriminalizing and regulating cannabis for recreational use.
Samper told BBC World News that there is now an “air of optimism” in the Colombian cannabis industry, given Petro’s expressed “political will” to take a “new approach to drug policy.
The Colombian president has said he wants a less repressive drug approach and wants to protect small producers.
“Cannabis will be the perfect springboard for the new drug policy, which is in contrast to the prohibitionist approach that has only left waves of violence and decades of suffering in the country,” Samper says.
MULTINATIONALS HAVE A STRONG PRESENCE
The Colombian president explains that although Colombian law requires that all companies participating in the market must be legally incorporated in the country, several of the major companies to date have foreign capital participation.
Petro pointed to this situation with only four days left in office, saying in a speech on Aug. 11, 2022, “Will it be the Canadian multinational that gets the dollars and runs the cannabis plantations? Or will it be the cannabis producers (from Colombia’s Cauca region)? Why can’t they?”
For Miguel Samper, the participation of multinational companies in the medical cannabis market is a consequence of the high investment required to meet the very high-quality standards of the global pharmaceutical industry.
Without neglecting public health, he believes that a potential recreational cannabis market would not need to have such high barriers to entry.
Therefore, more local farmers would share in the profits, especially if the government relaxes the existing license requirements.
Samper estimates that each hectare of legal marijuana cultivation in Colombia creates 20 direct jobs and nearly 18 indirect jobs.
Considering that more than 56,000 hectares are already licensed but not yet cultivated in the South American country, the potential for job creation would also be quite large.
POLITICAL DEBATE CONTINUES
Despite Petro’s proposal, the proposal to extend cannabis legalization to recreational use has strong political opponents in Colombia and many other countries in the region.
“Progressives should understand that Colombia rejects the legalization of cannabis for recreational use because it is not recreational use at all, but only leads to the destruction of the person,” Colombian Senator María Fernanda Cabal wrote on Twitter last November.
In her tweet, Cabal cited a poll conducted by Colombia’s Invamer, which showed that 57% of her countrymen oppose the legalization of cannabis for recreational purposes.
In Mexico, another of the major potential expansion markets, the final decision on the legalization of “adult use,” already approved by the House of Representatives, is in the hands of the country’s Senate.
On January 19, the chairman of the Mexican Senate’s Finance Committee, Alejandro Armenta, stated that the discussion would resume in February.
Announcements related to the release of marijuana laws in Latin America over the past decade have raised more expectations than results.
It remains to be seen whether now, with more widespread legalization, a new economic boom will begin in the region.