Revenues from the cannabis sector in Colombia are forecast to increase to US$ 791 million by 2025, from US$ 99 million in 2020. North American Cannabis companies like Veritas Farms Inc. (OTC: VFRMD), have already shown the potential of the market.
Colombian cannabis producers, many with financial backing from Canadian and U.S. companies, estimate that up to $500 million has been invested to buy farmland, build greenhouses and establish laboratories to produce oils, creams and other CBD-based products. These products are used to treat a wide variety of conditions, from chronic pain to insomnia.
Colombian laws on cannabis
Embracing the cannabis industry may seem surprising for a country that has long been embarrassed by its status as the world’s largest producer of cocaine. However, with the global cannabis market estimated to reach more than $50 billion by 2025, Colombia has sought to become a center of production for exports to countries around the world that are legalizing cannabis use. National laws allow the possession of small quantities of marijuana for personal consumption. However, the country has not established definitive regulations for its medicinal use.
“When Colombia is mentioned, unfortunately, some people associate that name with illegal drugs,” said Julián Wilches, former director of anti-drug policy at the Ministry of Justice and co-founder of the medical cannabis company Clever Leaves, which began operating in 2016. “Here we have the opportunity to take a controlled substance and change that reputation, to bring health to people and the development of our country.
Clever Leaves produces about 24 metric tons of dried cannabis a year, grown in greenhouses on a giant farm located in a valley about 2,500 meters (8,000 feet) above sea level in the Andes. With expansion underway, the farm could produce around 324 metric tons next year, making it one of the world’s largest producers.
In 2016, Colombia joined a small group of countries that allowed the cultivation of cannabis, prompting hundreds of companies to apply for licenses. The country’s natural advantage is its position close to the equator, which provides about 12 hours of sunlight all year round. This attracted some of the most important names in the cannabis industry, with investments from listed Canadian companies such as Canopy Growth Corp., PharmaCielo, Khiron Life Sciences, Aurora Cannabis Inc. and Aphria Inc.
Expansion has continued even as investors have cooled on high-flying marijuana stocks. The largest fund of publicly traded marijuana companies fell more than 35% in the last three months. The fund’s shares were dragged down by concerns about vaping-related illnesses in the U.S. and a slow path to profitability for some of the industry’s major players.
“The cannabis industry in the last three months has faced a reduction in investment, but interest in Colombia remains very promising,” said Juan Diego Alvarez, vice president of regulatory affairs at Khiron. He plans to produce about 80 tons a year of cannabis in Tolima, a mountainous area in the central Andes. “Colombia in the near future will become a center of development and research for the industry.”
The cannabis market in North America
The Columbian cannabis sector has been constrained by a complicated regulatory and permitting system. While hundreds of companies have been licensed since 2016, only a few have applied for cultivation. No type of cannabis that’s currently produced contains THC, because of the more onerous regulatory procedures for those strains. Because Colombia has not yet defined regulations for the domestic market, producers are focusing on exports.
Last month, President Ivan Duque pledged to reduce bureaucracy and support the industry. Revenues for the sector in Colombia are forecast to increase to $791 million by 2025 from $99 million by 2020. Researchers estimate that the CBD market in the U.S. alone could be worth nearly $23 billion by 2023.
One particular cannabis company from the U.S. shows the huge potential of the CBD market. Veritas Farms Inc (OTC: VFRMD), a successful producer and distributor of CBD products, has experienced impressive growth since it was founded in 2015. In Q2 2019, Veritas generated more than $2.9 million in total revenue, a 500% increase since Q2 2018. The company’s gross profits reached $1,523,413 and thanks to great results, it managed to reduce liabilities by over $1.3 million.
Veritas Farms focuses on transparency and on offering high-quality CBD products such as lip balms, lotions and tinctures. Veritas’ customers can check the authenticity of the products via a QR code packaging system. The company owns a 140-acre industrial hemp farm and facility in Pueblo, Colorado, where the nine product categories come from.
The cannabis market in North America has definitely taken off and cannabis companies make huge profits, taking advantage of legislation. As authorities in Colombia update legislation, North American cannabis companies are likely to enter the cannabis sector in Colombia, which shows massive potential for development.