Starting a Cannabis Business: Understand the Different Industries in the Market

Tetrahydrocannabinol (THC), a component of cannabis, remains a prohibited substance in most countries worldwide. However, in recent years a series of political, legislative and judicial processes in different parts of the globe have given rise to various reforms in favour of its use. This trend is sweeping through the Americas, in particular in Latin America and the Caribbean. This is where the largest number of available experiences is concentrated, and where regulatory changes are occurring successively.

Latin America is now reportedly a faster-growing region than Asia. In 2017, the region attracted foreign investment of over US$161.7 billion. It’s powerful agriculture sectors features low costing and favorable growing environments across the continent, making it a popular choice for investors.

The Latin American countries embracing decriminalization have clear legal frameworks regarding medical cannabis and cheap production costs. As a result, Latin America is emerging as a key role player within the medical cannabis industry. According to experts, the global legal cannabis market size is expected to reach US$66.3 billion by the end of 2025.

Starting a Business – Overview of cannabis legislation in Latin America

Currently, Latin America is the world leader in the promotion and adoption of policies allowing access to cannabis for therapeutic uses.

Argentina, Chile, Colombia, Peru and Mexico, have passed medical cannabis legalization laws. Uruguay was the first country in the world and the only country in Latin America to fully legalize cannabis use for recreational purpose. Ecuador looks likely to become the fifth country to join the list where the medical use of cannabis is permitted. 

Paraguay approved its medical cannabis legal framework in 2017. However, it was not until this year the licensing process has begun. Paraguayan authorities granted licenses to 5 companies with a total area of 5 hectares.

On the other hand, Brazil’s medical cannabis legal framework is not clear yet, only allowing the import of medical cannabis derivates in some specific cases.

Latin America medical cannabis industry is in an advantageous position to supply global market needs. Countries like Canada, Mexico, Germany and Australia providing a clear legal framework to import cannabis-based products.

Dividing the cannabis market

The medicinal cannabis market can be divided into two main sectors:

• the cultivation and derivates manufacturing of psychoactive cannabis whereby the presence of its main compound, THC is higher than 1%;
• the cultivation and derivates manufacturing of non-psychoactive cannabis known as ‘Hemp’, whereby cannabidiol (CBD) concentration is frequently higher than the concentration of THC (usually less than 1%).

Psychoactive, non-psychoactive, and hemp

Derivates of the psychoactive cannabis have potential for a wide range of uses.

The derivatives of the non-psychoactive cannabis have a diversity of application. It is a nascent industry in terms of research and regulation, but scientists and governments are committing to further exploration of the plant’s qualitites. Slowly, non-psychoactive cannabis opportunities are emerging in regional and international markets.

CBD, which comes from hemp, can be found in varous personal care products and veterinarian products. 

The hemp industry has many uses, including paper, textiles, biodegradable plastics, construction, food, and fuel. Currently, the major producers of hemp are Canada, France and China. The United States is the main importer of hemp products, though the United States government does not consistently distinguish between psychoactive cannabis and non-psychoactive cannabis used for industrial and commercial purposes.

The cannabis industry, psychoactive and non-psychoactive, has proven to be an intriguing, multi-faceted emerging market. Cannabis and its derivatives have great potential in various industries, including pharmaceutical, food, personal care, nutraceutical, textile and others.

Don’t wait to get started

Due to its recent appearance in the global market, various investment and entrepreneurial opportunities are emerging in countries who have decriminalized the industry. Early movers are quickly taking advantage of licensing opportunities and regional industry advantages to explore this promising market.

Make your move into cannabis while the industry is still budding. Find a niche in supplying psychoactive or non-psychoactive products. These burgeoning markets are experiencing exponential demand increases post-legalization, such as those in Canada and some US states. Setting up now in a climate-friendly and low-cost Latin American industry will position your business for long-term, sustainable success domestically and internationally.

Contact industry experts

The cannabis sector in Latin America is open for international investors on the lookout for new opportunities. With the stable legal framework established and specific information available regarding the sector, Latin America is forecasted to become a key exporter of cannabis extracts and derivatives into the foreseeable future.

If you want to enter the cannabis market in Latin America, and need some guidance, we can help. At Biz Latin Hub, we want to ensure your success in entering the Latin America market of your choice.

Our team of local and expatriate experts offers a range of legal and commercial back-office services that are customized to each of our clients’ needs. In Colombia specifically, we offer streamlined processes for businesses applying for cannabis licenses.

Contact us today for personalized support. We’re ready when you are.

Learn more about our team and expert authors.