Colombia's legal marijuana industry, once seen as a promising investment opportunity, is facing significant challenges. Despite being one of the first countries in Latin America to legalize cannabis for medicinal use in 2017, the industry has been hampered by regulatory hurdles and a lack of progress on legalizing recreational use.
Over the past year, many cannabis producers have been forced to close their doors due to strict regulations that require expensive and lengthy studies on medicine composition before products can be sold domestically. Additionally, a law coming into effect in February will require companies to destroy inventories that are over two years old.
The challenges facing the industry are reflected in the experiences of a Colombian-Canadian company that invested $20 million in a cannabis growing operation near Bogota. The company, which once employed 218 people and planned to grow 25 varieties of cannabis, has been forced to lay off most of its workforce and abandon its greenhouses due to the regulatory burden.
The company's owner, who requested anonymity, said that the industry is facing a "slow agony" and that the pressure from investors and the lack of cash flow are making it difficult to survive.
Despite the challenges, the industry has attracted an estimated $500 million in foreign investment, much of which has not been recouped. Many investors are from Canada, which was seen as a potential export market for Colombian cannabis.
However, the industry's fortunes have declined sharply this year, with an estimated 200 companies closing their doors. This brings the total number of closures to 600, or nearly 50% of the companies founded since the legalization of medicinal use.
The challenges facing the industry are compounded by the fact that President Gustavo Petro, who has expressed support for relaxing marijuana laws, has not yet taken any concrete steps to legalize recreational use.
Unless the sale of cannabis for recreational use is made legal, the local market will remain in the hands of criminals rather than licensed companies, said Asocolcanna president Camilo de Guzman.
Despite serving about 5,000 patients in four clinics in Colombia, Khiron has closed similar clinics in the United Kingdom, Brazil, and Peru due to the lack of insurance coverage for medical marijuana in those countries.
Khiron's president, Alvaro Torres, said that the company had expected more industry-friendly rules to follow the 2017 law that legalized medical marijuana in Colombia, but progress has been slow. He noted that the lack of insurance coverage for medical marijuana is a major obstacle to sales.
The company's stock, which was trading at $4.05 Canadian dollars in 2019, slumped to $0.04 Canadian dollars in May, the last time it was traded.
Without a legal domestic market for cannabis, companies operating out of Colombia are limited to pursuing exports, which average $5 million a year, according to government trade organization Procolombia.
Mauricio Krausz, director of Plena Global, which exports to the U.K., Germany, Israel, and Australia, said that the lack of a local market has made it difficult for companies to support cash flow.
Colombia's food and medicine regulator, INVIMA, said that in most cases, those seeking authorization for medical marijuana products present incomplete documentation and that companies must comply with established legal and technical requirements.
The ministries of health, justice, and agriculture, which also have a hand in marijuana regulation, did not respond to requests for comment.
The Petro government has not provided a detailed explanation for the slow progress on marijuana regulation, but the challenges faced by Khiron and other companies echo those of previous administrations.
Camila Sierra, a 28-year-old woman from Colombia, grows 18 cannabis plants to treat her grandmother's chronic pain and sometimes to smoke herself. She started growing cannabis with her grandmother, using the flowers to make salves.
The contradiction between legal personal use and restricted legal sales of cannabis was the target of a bill sponsored by lawmaker Juan Carlos Losada. However, the bill was rejected this month, a decision that President Petro criticized, arguing that it would only benefit drug traffickers.
Some in the industry, however, believe that the government is not following through on its promises to support the legal cannabis industry. They point to the requirement that companies destroy inventories that are over two years old as a major obstacle.
Miguel Samper, a former deputy minister of justice who headed Asocolcanna until recently, said that the industry was in intensive care and that the government's actions could lead to its demise.
The contradictions in Colombia's marijuana laws are a source of frustration for both those who want to see a thriving legal industry and those who simply want to access cannabis for medicinal purposes.
Over the past year, many cannabis producers have been forced to close their doors due to strict regulations that require expensive and lengthy studies on medicine composition before products can be sold domestically. Additionally, a law coming into effect in February will require companies to destroy inventories that are over two years old.
The challenges facing the industry are reflected in the experiences of a Colombian-Canadian company that invested $20 million in a cannabis growing operation near Bogota. The company, which once employed 218 people and planned to grow 25 varieties of cannabis, has been forced to lay off most of its workforce and abandon its greenhouses due to the regulatory burden.
The company's owner, who requested anonymity, said that the industry is facing a "slow agony" and that the pressure from investors and the lack of cash flow are making it difficult to survive.
Despite the challenges, the industry has attracted an estimated $500 million in foreign investment, much of which has not been recouped. Many investors are from Canada, which was seen as a potential export market for Colombian cannabis.
However, the industry's fortunes have declined sharply this year, with an estimated 200 companies closing their doors. This brings the total number of closures to 600, or nearly 50% of the companies founded since the legalization of medicinal use.
The challenges facing the industry are compounded by the fact that President Gustavo Petro, who has expressed support for relaxing marijuana laws, has not yet taken any concrete steps to legalize recreational use.
Unless the sale of cannabis for recreational use is made legal, the local market will remain in the hands of criminals rather than licensed companies, said Asocolcanna president Camilo de Guzman.
Khiron Life Science Struggles Amid Regulatory Challenges
Khiron Life Science, a Toronto-listed company with operations in Colombia, has been forced to shutter a $15 million medical marijuana plantation and a cannabis-based cosmetics line due to regulatory challenges and the lack of a legal domestic market.Despite serving about 5,000 patients in four clinics in Colombia, Khiron has closed similar clinics in the United Kingdom, Brazil, and Peru due to the lack of insurance coverage for medical marijuana in those countries.
Khiron's president, Alvaro Torres, said that the company had expected more industry-friendly rules to follow the 2017 law that legalized medical marijuana in Colombia, but progress has been slow. He noted that the lack of insurance coverage for medical marijuana is a major obstacle to sales.
The company's stock, which was trading at $4.05 Canadian dollars in 2019, slumped to $0.04 Canadian dollars in May, the last time it was traded.
Without a legal domestic market for cannabis, companies operating out of Colombia are limited to pursuing exports, which average $5 million a year, according to government trade organization Procolombia.
Mauricio Krausz, director of Plena Global, which exports to the U.K., Germany, Israel, and Australia, said that the lack of a local market has made it difficult for companies to support cash flow.
Colombia's food and medicine regulator, INVIMA, said that in most cases, those seeking authorization for medical marijuana products present incomplete documentation and that companies must comply with established legal and technical requirements.
The ministries of health, justice, and agriculture, which also have a hand in marijuana regulation, did not respond to requests for comment.
The Petro government has not provided a detailed explanation for the slow progress on marijuana regulation, but the challenges faced by Khiron and other companies echo those of previous administrations.
Illegal Versus Legal: The Contradictions of Colombia's Marijuana Laws
In the absence of a legal market for recreational cannabis in Colombia, some people are resorting to growing their own marijuana for medicinal purposes.Camila Sierra, a 28-year-old woman from Colombia, grows 18 cannabis plants to treat her grandmother's chronic pain and sometimes to smoke herself. She started growing cannabis with her grandmother, using the flowers to make salves.
The contradiction between legal personal use and restricted legal sales of cannabis was the target of a bill sponsored by lawmaker Juan Carlos Losada. However, the bill was rejected this month, a decision that President Petro criticized, arguing that it would only benefit drug traffickers.
Some in the industry, however, believe that the government is not following through on its promises to support the legal cannabis industry. They point to the requirement that companies destroy inventories that are over two years old as a major obstacle.
Miguel Samper, a former deputy minister of justice who headed Asocolcanna until recently, said that the industry was in intensive care and that the government's actions could lead to its demise.
The contradictions in Colombia's marijuana laws are a source of frustration for both those who want to see a thriving legal industry and those who simply want to access cannabis for medicinal purposes.
