21 Jan 2021 BY MICHAEL BERGER
A few years ago, the Latin American cannabis opportunity was a major talking point for Canadian cannabis businesses. Fast forward to today and most of the operators that became highly focused on this emerging cannabis market have either written off the assets that are levered to this region.
Although we have seen a mass exodus of companies from the Latin American cannabis market, we believe there is long-term value associated with the vertical and have continued to monitor the industry.
Currently, there are only a few companies that are generating significant revenues in Latin American cannabis markets. This year, we expect to increased interest in certain markets in Central and South America and believe the industry is well positioned to record impressive growth on a going forward basis.
One of the most significant developments for the Latin American cannabis market in 2020 is related to legislation that was passed in Mexico. A few weeks ago, Mexico’s President, Andrés Manuel López Obrador, stalled legislation that would decriminalize the possession of up to 28 grams of cannabis, allow individuals to grow up to six plants, and license the production and sale of it. The legislation would also create a commission within Mexico’s Health Department to regulate the industry and we expect the passing of the legislation to be a catalyst for the entire cannabis industry.
President Obrador said an extension was requested so the two chambers could come to an agreement and expects the legislation to be approved in the near future. Mexico is one of the most exciting emerging cannabis markets and we are bullish with the growth prospects that are associated with it.
2020 was a year of progress for the Mexican cannabis industry and many analysts expect the market to serve as a major growth driver. Recreational cannabis is a real possibility in Mexico and we expect the industry to record substantial advancements this year.
Although the Mexican industry has been slow to advance, we have seen an increase in the number of companies that are levered to it. A few years ago, Aurora Cannabis Inc. (ACB.TO) (ACB) announced plans to enter the Mexican cannabis market and this aspect of the business seems to have stalled just like the legislation in Mexico. Over the next year, we expect to see large-scale US and Canadian cannabis operators expand into Mexico and this is a trend that our readers need to be aware of.
Besides for Mexico, we are bullish on the medical cannabis market in Colombia and Brazil. These are large markets in South America and we are favorable on the economics that are associated with cultivating cannabis in the region. When compared to the US, cannabis can be cultivated for much lower prices and we find this to be significant. Since most of the cannabis is extracted and turned into oil, the quality of the dried flower does not have too much of an impact on the market. We believe Canadian and US cannabis companies can cultivate cannabis that is more potent and expect to see an improvement in quality in Latin America over the coming years.
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