By Luis Merchan, President, CEO & Chairman of the Board, Flora Growth Corp
Today, Colombia represents an intriguing alternative to Canada for US cannabis companies and investors looking to place their bets on the next generation of the cannabis industry. The US has previously looked to Canada, as the country offered a unique and close-to-home opportunity for investment outside the US cannabis market. But strict regulation and lack of progress by the Canadian federal government and restrictive cannabis laws are now making international markets, like Colombia, look more attractive as competitive cannabis players. Critical factors ranging from ideal cultivation environments and lower production costs to aggressive R&D all contribute to Colombia's cannabis rise. Where Canada has drawn most of the headlines and finance coverage on cable news, public companies operating in Colombia have entered the fold and proven incredibly successful – and are currently a sleeping giant.
Sweeping Regulatory Reform
Much of Colombia's market gains can be attributed to beneficial government legislation. Critical decisions include a summer 2021 decree from former President Ivan Duque. The decree helped accelerate the country's cannabis revenue potential by removing export bans on dried cannabis, and the decision was regarded as a sign that Colombia's cannabis market was ready to take off. That thesis is proving true, with Colombia considered to have a leg up on the international market in some eyes.
Another compelling market component is Colombia's low number of active operators. This is due to a stringent government approval process for both domestic medical use cannabis growers and those looking to engage in global export. Colombia's medical cannabis market is uncapped but contains regulations that keep most operators from entering the marketplace. While these regulations may seem restrictive in a nascent market, it is done in the interest of Colombian patients who require consistent, accurately dosed cannabis medication.
In April 2022, the Ministries of Justice, Agriculture and Trade signed off on import and licensing regulations. Since 2016, the country has granted approximately 700 licenses to cultivators and operators. Today, about 10 of those licensed are fully engaged in the country. The limited number of active operators indicates that the government takes product quality seriously. Before receiving full approval, a company must have its harvested crops pass a government-run certification process for industrial or medical cannabis.
Colombia has been laying the foundation for meaningful cannabis reform long before the recent decisions. According to government claims, the country had already received $250 million in international funding in support of the cannabis sector. That funding came partly from several years of regulatory reform, including 2016's medical cannabis legalization bill. The bill, introduced by Senator Juan Manuel Galán, allowed licensed cultivators to grow medical cannabis. Since then, especially over the past four years, leadership has continued to make moves that position Colombia in the vanguard of the cannabis market, including allowing for export of both recreational and medical cannabis and requiring domestic cannabis prescriptions to be fully covered by insurance.
The country also takes a stance on differentiating between psychoactive and non-psychoactive cannabis. The government has offered to partner with companies to develop the industrialized hemp space further and improve production efficiency on materials such as construction materials, fabrics and clothing, plastic composites, biofuels, and more.
Such decisions highlight the country's nuanced stance and broad approach to the plant. Judging by their actions, it would be fair to say Colombia has a healthy appetite for cannabis education alongside market development. Forging partnerships with various institutions to help advance understanding of the plant and the subindustries it can produce.
Cannabis brands are doing their part to advance education too. Flora is proud to work with various institutions to explore novel applications and modalities for the plant and develop a marketplace for medical grade, prescription, and dietary supplement based products for market. Among several endeavors, Flora is working with INVIMA to understand the safest concentrations of specific molecules in dietary supplements. We've also worked with the Industrial University of Santander on product development and genetics research.
Simultaneously, Flora is working closely with the government to demonstrate the country's growing status as a cannabis mecca capable of dominating the global cannabis supply chain.
World-Class Cultivation Conditions
Alongside the impressive regulatory environment, Colombia’s biodiversity and natural abundance alongside its cultivation cost savings are incomparable compared to its North American neighbors. Grown near the equator at 1,500 meters above sea level and using natural water deposits, Colombia is a premier destination for outdoor, sun-grown cannabis which offers a terroir not seen in any other part of the world. Try as they might, even the best in the business struggle to recreate the natural advantages Colombia has to offer.
Ideal agricultural conditions mean Colombian ventures don't have to invest in the same costly equipment and production costs associated with indoor and hybrid farming. While some investment is required for production and transformation processes, Colombia offers much of the settings other locales strive to replicate. At the same time, the local skilled labor is difficult to beat. After generations of working in the local soil with various crops, including the cut flower trade (think bouquets), Colombia's cultivators have an intimate knowledge of the land and its best practices.
The combination of ideal land and labor equals lower production costs and savings for international partners. In many cases, when a North American producer is manufacturing cannabis at $1.25 per gram, Colombian ventures like Flora are doing it for $0.06.
Blazing the Trail for the Future of Cannabis
Colombia continues to mature into a global medical cannabis market leader. The government and companies are investing in the marketplace's future and the betterment of Colombian citizens. Through advanced research and international partnerships, Colombia understands the cannabis plant, the citizens who use it, and how products may help address medical conditions. At the same time, Colombia's cannabis appears poised to move across the globe offering a more affordable solution for medical and recreational markets alike.
We can celebrate the achievements but not lose track of what's left ahead for the industry. There is still much work to be done to understand better plant medicine, regulations and how legalization can address the effects of the war on drugs. The Colombian government, licensed operators and citizens have their parts to play. The work won't be easy, but as we've seen so far, the fruits of our labor could benefit Colombia for decades ahead.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.