Argentina's Cannabis Market: What Do Investors And Entrepreneurs Need To Know?

Argentina's Cannabis Market: What Do Investors And Entrepreneurs Need To Know?

Argentina's cannabis marketplace shows signs of much promise coupled with significant national uncertainty.

Incremental progress has been underway for several years. The Supreme Court decriminalized small amount use in 2009. In 2017, the country approved the import of cannabis products with a doctor's prescription. In 2020, the bill expanded when lawmakers approved home cultivation for medical patients.

Progress continues to be discussed. Lawmakers recently proposed legislation aimed at approving cannabis production for medical and industrial purposes.

"If passed, this new regulation would mark the next stage of the cannabis industry in Argentina, but there is still a long process ahead before actual changes can be made," said Euromonitor International senior analyst Erwin Henriquez.

In recent weeks, President Alberto Fernández has made the rounds voicing his support for a debate on the subject.

Continued progress could see significant gains for a nation contending with a stagnant economy.

A draft of the regulations is in Congress, following voting procedures. If approved, the newly formed national agency, ARICCAME, would be tasked with overseeing cannabis and hemp supply chains that could create 10,000 jobs.

Prohibition Partners reports that the nation could earn US$500 million in annual domestic sales, with another $50 million generated by yearly exports.

Despite the promise of fertile soil and a large population of consumers, operators and analysts tell Benzinga that concerns remain as Argentina's regulations take shape.

Cannabis Offers Potential As National GDP Slides

Several sources brought up Argentina's population and size.

Lance Lambert, VP of marketing and business development for Nevada-based brand GreenBroz Inc., said the country's population of over 45 million is "one to watch and be ready to take advantage of when the time is right."

Lambert and GreenBroz, who sell equipment in Argentina, consider the country and the continent appealing. He said much of the region is "experiencing exponential growth and presenting both operators and investors with a largely untapped market and staggering future growth potential."

Despite the cannabis potential, the nation saw its GDP drop 9.9% in 2020, according to World Bank figures. GDP may have declined, but public enthusiasm for cannabis has not.

Prohibition Partners LATAM analyst Hector Gomes noted that societal acceptance is relatively high. "Social stigma or lack of knowledge is less of a deterrent when compared to other countries," he stated.

Euromonitor's Henriquez had similar feelings. "A cannabis culture is also quickly developing in Argentina as consumers are more open-minded and curious about different products, such as CBD oils and supplements, rather than pharmaceutical-level medical cannabis," Henriquez reported.

Gomes added that the country has cultivation potential, with hemp of particular interest. Other advantages include the Co-operation Pharmaceutical Inspection Convention and Pharmaceutical Inspection Scheme, which Gomes said, in theory, could help with exports of products and pharma-grade extracts.

Uncertainty Potentially Underscores Positive Long-Term Market Outlook

The national economy and cannabis regulations appear to be primary pressing concerns.

Gomes said the ongoing economic situation could affect investments in new businesses, including nascent spaces like cannabis, where regulations are still undetermined in most facets.

"This crisis is very likely to affect potential local market demand for the years to come."

Even if regulations were to be finalized soon, Henriquez noted that a market boost isn't immediately guaranteed.

"Although legislation is moving fast, Argentina has proven that legalization does not equate to a booming market overnight, and actual legal frameworks for the market to function are critical," Henriquez said, adding that the nation currently looks set to replicate Uruguay's highly regulated approach.

While the Uruguay model has merits, Henriquez pointed out that the "Highly bureaucratic process also means the system could be slower to adapt to consumer demand and moving beyond medical use only to accommodate non-therapeutic consumption."

Despite this concern, Henriquez said Argentina should see positive cannabis market growth over the next five years or more as access and ownership diversifies.

Gomes agreed but added that political instability could prove problematic. "Those investing today, taking advantage of low production costs, could benefit and profit from this industry in the years ahead," Gomes concluded.

 

Photo: Lautaro Andreani on Unsplash

Posted In: ARICCAMECo-operation Pharmaceutical Inspection Convention and Pharmaceutical Inspection SchemeEuromonitor InternationalPresident Alberto FernándezProhibition PartnersProhibition Partners LATAMWorld BankCannabisGovernmentNewsRegulationsMarketsInterview

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