New Report Claims Latin American Cannabis Markets Show No Signs Of Near-Term Development
Market research and cannabis consultancy company Brightfield Group on Tuesday released a report analyzing the current state of the Latin American cannabis market. The report focuses on looking at each country’s legislation, to assess their potential consumer markets.
Too Green For The Green Rush?
The report analyses the situation of the cannabis industry in Chile, Mexico, Colombia, Brazil, Argentina, Peru and Uruguay. It’s important to point out that these countries only account for seven out of the 20 countries that make up the region.
A region overview by the Brightfield Group states that, although many Latin American countries are developing policies that will eventually lead to legal marijuana markets, the business opportunities behind these markets are limited. According to the study, the results derived from today’s authorized medical and recreational marijuana markets are “unlikely to provide significant market potential in the near term.''
"Even with the variety of different models that are being tried in different countries, the cost of extraction/formulation and compliance drives up prices to be somewhat ridiculous, given the considerably lower GDP per capita in these countries," said Bethany Gomez, Managing Director of Brightfield Group. "Markets are not going to scale if the only products available are $200 bottles of tinctures when the average GDP per capita is $15k/year or less."
Click here for more information about the upcoming Benzinga Cannabis Capital Conference Oct. 22-23 in Chicago.
CBD, King In The Region
According to the report’s projections, CBD is expected to become the most important cannabis segment by far, reaching $448 million by 2023, with Mexico accounting for over half of that market. Medical marijuana is expected at $109 million by that same year and recreational projections show no growth from today’s scenario.
Don’t miss out on the top cannabis stories of the day. Click here to sign up for our daily insider newsletter.
Big Expectations For Cultivation And Export Potential
"There are a lot of challenges with this model, the first being that there are very few markets currently to actually export to, and this is unlikely to change significantly over the longer term," said Gomez. "Canada and the United States have a massive amount of cultivation capacity in each region and a great deal of skepticism about the quality of product grown abroad, and European markets are growing quite slowly, and are interested in developing their own cultivation facilities as well,"
Although consumer markets in Latin America cannot compete with the U.S. or European demand, the region shows a promising potential as an exporter of cannabis products, thanks to good weather conditions for marijuana growth, and low farming costs.
Several big weed companies like Canopy Growth (NYSE:CGC), Aurora (NYSE:ACB), Aphira (NYSE:APHA), Tilray (NASDAQ:TLRY) and Khiron (OTC:KHRNF) have already made investments in Latin American soil, and some have already seen their first crops.
Regulation, however, has not yet allowed for big exports to leave their homeland and reach international shelves.
A ‘Wait And See’ Case
According to the report, low average household incomes, patients’ freedom to grow their own cannabis, and strictly regulated medical markets are placing Latin America away from world-class markets like Canada, some US states and some European countries.
However, educational efforts from advocacy organizations and international investors are shaping public opinion positively for cannabis, generating demand on medical cannabis.
Although the report offers a sensible overview of the region’s panorama, it lacks certain traits shared by academic-level market studies. This means that, while its projections might be accurate, it’s not recommended to take them for granted, since the report offers no evidence to the reliability of its sources or method used in projecting its results.
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.