Latin America offers Canada a route to global dominance in medical marijuana
The drug trade in the headlines in Latin America is different than it was 25-years ago. Now it is regulated and legitimate. It's also attracting Canadian investment and global attention for its progressive and research-based policies.
In Latin America, after Uruguay, the move to legalize medical marijuana really began in one of the region's largest economies, with the first licences issued in Colombia in 2017.
In recent months, medical-cannabis legislation has also passed in Chile, Argentina and Peru, with politicians seeing the growing and cultivation of cannabis for medical purposes as a viable alternative to the illegal drug trade of a generation ago, and a defense against the opioid crisis seen across Canada and the United States.
As Canada's new recreational-cannabis laws come into effect later this year, it is fast being recognized as the leader in the sector in Latin America and around the globe with its expertise in market investment, banking, retail, technology, scientific and medical research.
Latin America is one of the largest and most dynamic trade regions in the world, attracting significant foreign-investment capital across the region. With a combined population of more than 640 million, it offers a vast strategic alternative to the United States for Canada to deploy its financial capital in the medical-marijuana industry.
Given the strong likelihood of a positive medical impact, and the low potential toxicity compared with many prescription drugs, one can estimate that medical cannabis could produce the equivalent revenue of at least two blockbuster drugs, and additional moderate-market-sized drugs. That would provide for an international market of as much as US$10-billion, perhaps more.
A 2016 study by Deloitte found that potential market is close to 40 per cent of the adult population. It also found that there was gender parity in consumption, and that millennials consume more cannabis than Generation X and baby boomers.
The study concluded that the recreational market in Canada could be as high as $5-billion, approximating the Canadian spirits market. If you include ancillary cannabis products and services – such things as infused products, testing laboratories, and security – the total medical cannabis market could approach $30-billion.
None of this has gone unnoticed by investors and we are now seeing the market capitalization of Canadian cannabis stocks reach more than $25-billion. The $245-million investment by Constellation Brands in Canada's Canopy Growth is considered a game changer for the cannabis industry – and for any who think the sector is in a bubble, BMO's lead role in a $175-million stock sale for the same company offers further indication that the sector has gone mainstream.
Medical marijuana is a vital and growing sector of the Canadian economy.
Legal confusion in the United States has also created further opportunity for Canada to shine.
The recent overturn of an Obama administration directive not to enforce U.S. federal anti-marijuana laws in states where medical or adult cannabis use is legal has created market uncertainty in Latin America. Further, banking is extremely difficult, and the larger stock exchanges are not listing actual cannabis producers.
International cannabis producers, with operations in South America, Israel and other jurisdictions are coming to Canada to raise capital, and benefit from the country's scientific research in cannabis plant genetics, agronomy and medicine. As industry pioneers, Canada can leverage this to expand its market reach, its research base and its global impact.