Interview - Alfredo Pascual of MJ Biz Daily
When we launched Crazy Calm last month, many colleagues including an investor in a very large Cannabis outfit in Colombia asked us: “So you are going to source the coffee and cannabis all from Colombia right?”
Our answer: “No, but maybe in the future.”
For context, we, Robbie and Matt, have a combined 15 years of sourcing, manufacturing, and exporting exotic fruits and unrefined cane sugar (panela) from Colombia.
It is the most biodiverse country in the world, a powerhouse coffee producer and it’s cannabis sector has received more investment than any other country in Latin America.
Still, there are serious challenges that Colombia must overcome. While it has flourished in flowers and coffee, it has vastly underperformed as an aggregate in the agricultural sector.
To get some insight, we brought in Alfredo Pascual, International Analyst at Marijuana Business Daily, the premier publication in the cannabis sector.
Alfredo recently wrote an article examining the Colombian cannabis industry in 2019 and why 2020 is an important year for an aspiring leader in the cannabis sector.
He was kind enough to answer a few questions on Colombia and the broader international cannabis market.
Matt: Tell me about your connection to Colombia. How long have you been following the cannabis sector there?
Alfredo: At the beginning of 2018, before joining Marijuana Business Daily, I was working as an international cannabis consultant and ended up in Colombia helping a cannabis company get started with the licenses’ application process. There were not many of us involved in the Colombian cannabis industry back then. I’ve seen the sector grow to what it is today, obviously following it very closely as part of my editorial work.
In 2019, when we organized our first MJBizDaily’s Latin American Cannabis Symposium in Bogota I had a very good reason to reconnect with old industry friends and make new ones. We’re going back to Colombia in 2020 (details to be announced soon).
Matt: In your recent article in La Republica (Spanish), you talk about the importance of a domestic market. Does Colombia really need a domestic market in order to have a successful industry? Couldn’t the lucrative export industry suffice?
Alfredo: I’ve seen many countries legalize medical cannabis and then implement their frameworks in a way that’s designed to attract investment for export, largely ignoring domestic patients. I haven’t seen that working anywhere.
First, it’s not fair toward domestic patients in need. But leaving fairness aside and talking only from a business perspective: it’s not sustainable that almost every country wants to export and almost no country wants to import.
The only countries that I know want to only import, not allowing domestic cultivation, are Brazil and Poland. Brazil will be a meaningful market mainly because of its population. But enough for all the others that want to export?
So far investments “for export” have been made in a large list of countries because Germany, the largest European market, has been totally dependent on imports. But domestic supply is coming online by the end of 2020 in Germany.
And even if German grows won’t be enough and imports into Germany will continue to be necessary, I doubt that import markets are enough for the dozens of companies licensed or in the process of getting licensed in countries like Colombia, Portugal, Greece, Lesotho, you name it.
Matt: You mention that Colombia has only exported CBD so far, and that THC may have higher margins. What are the biggest obstacles for Colombia to export THC products?
Alfredo: As far as I know, complying with the pharmaceutical requirements of the countries of destination. This usually means being EU-GMP certified. Everyone talks about GMP but as of early 2020 no facility is EU-GMP certified in Colombia to produce medical cannabis.
THC as a controlled substance also implies extra requirements and hurdles, but today the issue is EU-GMP. Without it, you can largely forget about exporting extracts to the EU.
North America has been closed to commercial imports. Maybe there are other countries in the world where Colombian companies could ship without EU-GMP, but if a company today wants to have meaningful exports, EU-GMP to access the EU is a must.
Matt: Between North America and Europe, which region is more open to allow Colombian cannabis companies to compete as suppliers?
Alfredo: The U.S. is closed for medical cannabis because of federal prohibition, but some Colombian companies already proved they could ship CBD (foodstuff or cosmetics). Canada could in theory import medical cannabis, but I don’t expect that Health Canada will open the gates any time soon.
The EU is open so long as companies comply with the quality requirements and produce in a country compliant with the international drug control conventions (something which Colombia does).
Matt: I’ve heard the argument that Colombia, which has done well in the flower industry for sometime, can grow marijuana flowers cheaper than competing countries and utilize the same competitive advantage (cheaper production)? Are there any flaws in this argument? Shouldn’t Colombia be able to have success in marijuana as well?
Alfredo: Cost is only one part of the equation. In an emerging global industry that is extremely regulated, full of complexities, cost is just one advantage.
The largest exporters of medical cannabis today aren’t low-cost jurisdictions. Regulatory frameworks, access to financial and highly qualified human capital could be more important than the number of hours that the sun shines a day.
As time goes by and price compression becomes a thing, cost could become increasingly important.
Matt: How does Colombia compare to Peru as a cannabis exporting country?
Alfredo: Colombia is far ahead as of February 2020. But things can quickly change in this industry.
Matt: What companies (if any) do you see being the closest to having commercial success abroad?
Alfredo: I would rather not comment on specific companies. But if I were an investor today, I’d try to find focused companies instead of companies trying to do and be everything.
And I’d analyze closely whether the companies I invest in have enough cash and a good plan to survive the long period needed to get products to market.
The days in which the company that had the largest planned capacity could raise the most money are long gone.
Make sure to follow Alfredo on Twitter.
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