Colombia is Already an Export Powerhouse Who Can Easily Take on Cannabis and Hemp
Colombia is slated to become the largest global exporter of industrial hemp in just the next few years.
Colombia has fertile soil, cheap acreage, affordable labor and established trade agreements with countries that have begun to regulate the marijuana market in recent years. This makes the country a prime location for cannabis industry giants in which to operate.
Law 1787, passed in 2016, allowed Colombia to set the framework for authorized production, extraction, export, sale and distribution of the cannabis plant and the products that it can be made into. This gave the country a competitive edge and five year head start on negotiating with cannabis companies vying for prime real estate in the world’s next big cannabis market.
Investing in Colombia’s Trade Agreements
The Colombian Government has bi- and multilateral trade agreements with the United States and Canada, the European Union, the Pacific Alliance (Colombia, Chile, Mexico and Peru), South Korea, and a pending agreement with Panama. Additionally, Colombia is negotiating a Post-Brexit trade deal with the UK.
The U.S.-Colombia Trade Promotion Agreement (TPA) enacted in May of 2012 eliminated import tariffs on 80 percent of U.S. exports of consumer and industrial products to Colombia. It also included stronger legal stability for U.S. investors, expanded access to service markets, better intellectual property rights protection, market access for remanufactured goods, and improved dispute settlement procedures, according to Trade.gov.
The COVID-19 Pandemic had an effect on the Colombian market though, which is price-sensitive. With costs determining most decisions, price is a primary concern. This created greater demand for inexpensive Chinese products. However, Colombia’s closeness- both geographically and with U.S. political ties- plus Colombians’ demand for quality and reliable U.S products, mean consumers there generally prefer U.S. goods and services.
Alternately, Trade.gov reports, the U.S. is steadily “the largest buyer of Colombian products and imported over USD 11 billion in 2019.” China, Colombia’s second largest import market, has been slower to invest in Colombia, giving way to rapid U.S. involvement in developing a better, more modern infrastructure.
Since then, U.S. investment in Colombia has blossomed and the U.S. has become Colombia’s largest trading partner. An estimated USD 4 billion is earmarked for Colombia’s 5G infrastructure over the next ten years. According to the International Monetary Fund, Foreign Direct Investment into Colombia increased by almost 26 percent in 2019 and was valued at USD 14.5 billion.
Despite increased involvement in Colombia’s TeleCom and port and highway infrastructure, China’s investment in Colombia shrank by an estimated USD 9 million in 2019. In that same year, the U.S. doubled down with an increase of USD 2.6 Billion.
Meanwhile, cannabis companies are investing roughly USD $250,000 per hectare of harvested hemp plants, and over $2 million in laboratory buildouts to support the production of that quantity of material.
Colombia’s Cannabis Market
Clearly Colombia is positioning themselves to lead global export markets and have managed to also supply nearly half of the world demand for industrialized hemp.
“Colombia will be a world leader in cannabis in a few years. Investors have poured about US $600 million in medical cannabis, including farms and laboratories of by-products in about three years,” Rodrigo Arcila, president of the Colombian Cannabis Association told Cannabis Business Times.
The difference in operating costs is astounding. According to the consultancy firm Crop America, a gram of cannabis flower costs between one-half and one U.S. dollar to produce in Colombia. Prices elsewhere like in the U.S., Canada and elsewhere can be nearly three times that of Colombian production.
“Our producing costs per gram of dry flower are US$0.04. In Canada, the cheapest that anyone has declared is US$0.95,” David Gordon, chief corporate officer of Pharmacielo, told Cannabis Business Times in an interview.
Investors like One World Pharma, one of 160 licensed companies operating in Colombia, have planted roots there due to the perfect growing conditions, affordability, and established trade agreements where cannabis is regulated.
Unlike other global cannabis companies though, OWP has partnered with the indigenous people of the Miska community in Colombia in a Certified Fair Trade agreement. OWP invests in the Misaks future by providing the hemp seeds for farmers to grow a harvest that OWP later purchases. Beyond this, OWP has also issued shares of its company to the tribespeople. When OWP succeeds, so do the indigenous people of Colombia. The Fair Trade agreement ensures the Misaks can maintain a sustainable financial infrastructure.
“Like in coffee, we hope Colombia will be distinguished as a world potential in production of very high-quality medical cannabis,” Arcila says.