Marijuana’s billion-dollar potential attracts startups despite no cultivation in Brazil

RIO DE JANEIRO, BRAZIL – The projection is the result of a survey conducted by Kaya Mind, a Brazilian cannabis data intelligence consultancy. For a better illustration, this amount is equivalent to the entire turnover of the cell phone market in Brazil in 2019. Or, to the value of pesticide production and the sale of inputs for plastic packaging in 2018.

“It is very rare, at the global economy’s advanced stage of maturity, for new billion-dollar markets to emerge from scratch, which is what has been happening with the cannabis sector with the recent relaxations regarding the plant worldwide,” says Kaya Mind CEO Maria Eugenia Riscala.

“In addition, there are many uses for the plant, which can provide raw material for many different sectors – we have an extremely promising market within its limitations. Cannabis will not replace all medicinal or construction uses, but it can benefit many of these markets,” she adds.

Anoither projection from the consulting company estimate that, with a more comprehensive regulation, in its 4th year of legalization, the public coffers could have an injection of R$8 (US$1.4) billion in taxes.

This amount would be enough to preserve the Ministry of Education’s budget, for example, which was cut by R$4 billion in 2021, or to cover the costs of the SUS (Unified Health System) with drug addicts for the next decade.

STARTUPS WITH A EYE ON THE BILLION-DOLLAR MARKET

One of the main obstacles to the development of this billion-dollar market, according to experts, is planting regulations in Brazil.

Although the Brazilian Health Regulatory Agency (ANVISA) has been releasing the import of cannabis-derived medicines on a case-by-case basis since 2015, not having local production implies that access to this type of product is still limited and expensive.

For example, a package with three 10 ml bottles of Mevatyl, a medication used in the treatment of multiple sclerosis (MS) symptoms, costs approximately R$3,000.

Nevertheless, this has not prevented an ecosystem of startups related to the sector from being founded in Brazil in recent years.

“The building of this ecosystem is still in its early stages, but Brazilian startups explore from biotechnology to creative economy, passing through financial solutions and have in academia an important birthplace,” says The Green Hub marketing director Marcelo De Vita Grecco, a platform specialized in accelerating startups, with a specific focus on businesses related to the cannabis industry.

“The initiatives should grow and multiply with the progress of this market,” the executive adds.

For Grecco, the inability to cultivate cannabis more widely in Brazil does not necessarily impact initiatives of this nature. While liberalization does not occur, the productive chain can initially develop by means of legal imports of the plant’s derivatives, he says.

“There is a large supply of raw material, even in neighboring countries like Uruguay and Paraguay. As a result, strategically, technology would be developed in the country for the many applications, the logistical system, and, most importantly, the consumer market,” he argues.

SUPPLY AND DEMAND

Analyzing a potential marijuana market in Brazil, Grecco points out that before focusing so much on cultivation, it is necessary to generate demand to absorb this production. Otherwise, the country will become a producer of raw material and not of end products (such as medicines made from the plant, for instance).

“This is the case of Uruguay and Ecuador. Both have focused heavily on production, they have many people planting, but there is still not enough demand to absorb it. With a market formed, once planting is allowed in Brazil, the growth in the supply of raw material will help cheapen the end products and make them more accessible,” he explains.

RESEARCH, CULTIVATION AND A “MARIJUANA BANK”

Asked about which companies have stood out in the sector, Grecco highlights initiatives such as:

The Dogons: research and development of cannabinoid-infused probiotic products;
Kaneh Bosm Genes: researching aquaponic (in water) cultivation of cannabis;
Cannabinoid Center of Excellence: focuses on clinical care, education, and research related to the medicinal use of cannabis;
Scirama: studies psychedelics for use in assisted psychotherapy;
Adwa: focus on genetic improvement;
Rubian Extracts: effective solutions for the production of plant extracts rich in cannabis bioactives.

There are also initiatives aimed at the financial exploitation of this market, such as Cannapag Bank, a fintech focused on financial solutions for patients, clinics, associations and cannabis industries.

The creative industry, such as Jamba Studios, which combines art and information to deconstruct prejudice against cannabis, including storytelling strategies and educational entertainment, is also another part of the market.

For now, marijuana planting in Brazil depends on Bill (PL) 399/15, passed in June by a special committee of the Chamber of Deputies and sent to the Senate for approval.

PHARMACEUTICAL INDUSTRY

While the planting and use of cannabis in other areas is not yet a reality in Brazil, the consumption of cannabis derivatives is still concentrated in the pharmaceutical industry.

And even at this point and in global terms, the perception is that we are only “scratching the surface” when talking about the plant’s potential, according to respondents.

“It is safe to say that we have only begun to understand cannabis and its relationship with our body, although its use dates back more than 1,000 years,” says Marcelo Falchi, a psychiatrist and researcher at Unicamp who specializes in the neuroscience of psychedelics.

According to the scientist, until recently science knew little about the endocannabinoid system. By better understanding its functioning, the studies began to contribute to the understanding of the physiopathological mechanisms – the study of the impact of diseases on the body – of how cannabinoids operate in potential healing processes.

PROMISING CANNABIS TREATMENTS

Currently, cannabis derivatives have solid evidence, even attesting safety and efficacy, in the treatment of neurological disorders such as epilepsy, spasms, chronic pain, nausea, and vomiting.

In the case of psychiatric conditions such as anxiety, psychosis, and depression (among others), these substances are promising, albeit lacking higher levels of evidence, the experts explain.

Most studies are conducted with isolated active ingredients, while the clinical practice can be done with phytocomplexes, which combine several active ingredients and differentiate the treatment considerably.

For Renato Filev, PhD from the post-graduate program in neurosciences at Unifesp (Federal University of São Paulo) and a specialist in cannabis and the endocannabinoid system, the lack of regulation and criminalization of cannabis affects everyone, even those who have never consumed the plant.

“Drug prohibition ultimately generates more costs and social and public health and individual damages than those the policy aims to fight. The result is that people struggling with some sort of health condition for which cannabis could be employed is affected by prohibition at different levels,” he says.

“The lack of regulation hinders access to options and varieties with distinct molecular profiles and, consequently, research,” he adds.

For the full picture, see our Brazil Tax Reform: Complete Guide.