Sarah Ratliff   |   March 27, 2020

Quest for Low-Cost Cannabis Shines a Spotlight on South America

Cannabis manufacturers and investors are turning their eyes toward South America, where opportunities for future profits abound.
Following 20 years in the corporate world—culminating with biotech giant Amgen in Southern California, where she worked in health outcomes—Sarah Ratliff and her husband bought an organic farm on the Caribbean island of Puerto Rico. Today…

South America features an ideal confluence of factors that promise a great financial harvest for the medical cannabis industry. Countries in the region offer ideal growing climates, affordable land, low labor and construction costs, abundant water resources, a well-trained and experienced agricultural workforce, and a commitment to creating a more diversified agricultural economy.  Advanced technology is the final straw that stirs the drink, and companies that apply the latest technological breakthroughs in cultivation and manufacturing could enjoy record profits once their South American subsidiaries reach full operating capacity.

Brazil, Argentina, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay have all legalized medical cannabis, which they plan to produce for domestic markets and for export. North American cannabis companies are busy forming partnerships with locally-owned cannabis enterprises throughout the region, with plans to create genetically precise medicines and healthcare products for both export and domestic use.

Most of these countries have legalized medical cannabis only within the last three years. But sophisticated technology plus low input costs is a winning formula that has already begun to pay dividends.

Canadian Cannabis Companies are Coming to Colombia

Colombia has attracted a significant portion of the early investment dollars in the fledgling South American cannabis industry (over $400 million and rising), according to government sources). The country has targeted the custom pharmaceutical market as its best bet for gaining traction internationally, and they are encouraging investments in genetic research that will develop cultivars appropriate for producing high-quality cannabis-based prescription medications. 

One beneficiary of the Colombian approach is PharmaCielo, Ltd. This company is incorporated in Toronto but is growing and processing cannabis exclusively in Colombia at this point. PharmaCielo specializes in producing natural medical-grade cannabis oil, which is grown outdoors and in open-air greenhouses. In fact, the company is Colombia’s first licensed cultivator and processor of cannabis oil extracts.  

PharmaCielo chose to set up shop in Colombia because it offers an ideal environment for cannabis cultivation. The country features a broad range of microclimates based on variations in altitude, allowing prospective growers to select locations with temperatures and humidity levels in the appropriate range for cannabis crops. Because Colombia straddles the equator, its night-and-day cycle is in nearly perfect balance, providing 12 hours per day of bright sunlight all year round. Significant quantities of clean water are available in many parts of the country, reducing uncertainty and vulnerability to drought. Add in meager costs for labor, building materials, and equipment, and you have an opportunity to grow cannabis prodigiously, efficiently, and affordably.

How affordably? At the cost of five cents per gram, according to PharmaCielo’s own estimates. To put this in perspective, the company says it would cost them $2 a gram to grow similar quality cannabis in Canada. These astonishing savings will help offset the costs usually associated with exporting, which can be prohibitive in some cases. PharmaCielo has already obtained export licenses to send its products to 15 countries, and that is likely just the beginning.

Embracing the concept of environmental responsibility, PharmaCielo is using its own proprietary chemical-free fertilizers and insecticides to nurture and protect its cannabis crops. It has also developed and installed high-efficiency rainwater collection systems for irrigation, to keep costs down while preserving the sanctity of local aquifers.

PharmaCielo has invested in advanced breeding techniques and genetic research to create unique cultivars appropriate for local climates, which will help reduce the need for additional inputs to boost production. On the manufacturing side, they’ve implemented the most modern, energy-efficient extraction and processing technologies, to keep energy consumption manageable while still guaranteeing the quality and purity of their cannabis oil products.

PharmaCielo is not the only Canadian cannabis company ramping up its activity in Colombia. CannabCo Pharmaceutical Corporation, which is based in Brampton, Ontario, recently reached an agreement with government authorities to grow medical cannabis and hemp in specially constructed greenhouses in the vast Los Llanos region of northwestern Colombia.  

To maximize production, the company will be deploying its brand-new proprietary cannabis grow system called PHOENIX, which is specifically designed to manage indoor hydroponic systems for peak efficiency. PHOENIX relies on proprietary technology to reduce waste and input requirements, and it is capable of growing medical-grade cannabis at the cost of just 35 cents per gram. This would establish new standards for cost efficiency for indoor-grown cannabis, giving CannabCo a significant boost once they officially enter the international export market.  

Like PharmaCielo, CannabCo is also investing heavily in genetic research in Colombia. They are working to create a strain of cannabis plants designed to thrive in the Los Llanos area climate.

In addition to their operations in Los Llanos, the company also plans to construct a one-million-square-foot greenhouse near Colombia’s capital city of Bogota, which will be reserved for the growth of medical-grade cannabis plants. CannabCo is also building a modern extraction facility near Bogota, where its cannabis crops can be quickly and cleanly processed for the manufacture of cannabis-based pharmaceutical medications.

Solving the Water Problem 

Since the average cannabis plant requires 22 liters of water per day, high-efficiency irrigation technology is of vital importance to South American cannabis growers.  There is an excellent motivation for cannabis cultivators to reduce water consumption in any way they can, even in regions where water is plentiful.

Fortunately, help may be just around the corner. An Israeli company called Water Ways Technologies has developed a new automated management system for cannabis crops, which they are aggressively marketing to South American cannabis growers. The CANNAWays system relies on an intricate network of digital sensors to collect detailed agricultural-related data. This data is then passed on to specially designed automation software that can control irrigation, filtration, fertilization, temperature, and humidity levels on a 24-hour basis.

In October 2019, Water Ways Technologies announced it had signed a Memorandum of Understanding with the Colombian medical cannabis company Emerald Bud. Water Ways has pledged to design and construct a state-of-the-art automated irrigation and fertilization system (called CANNAWays) for Emerald Bud’s 43,000-square-meter greenhouse facility in the small Colombian city of San Gil. Premium automation technology can deliver considerable cost savings over the long haul, and if the CANNAWays system proves its mettle in San Gil, it could become a standard installation at cannabis facilities in South America and beyond.

A Sleeping Giant Will Soon Awake

At present, the medical cannabis industry in South America remains in its nascent stage.

Regulatory systems to manage cannabis research, cultivation, production, and distribution have yet to be finalized in most locations. Construction of greenhouses and processing facilities has only just begun in most locales if it has begun at all. The agricultural workforce in South America has had little previous experience with cannabis and will require extensive training on how to handle sensitive cannabis plants.  Foreign and domestic investments have been coming in, but at a relatively modest pace, considering how bright the long-term prospects for cannabis are in the region.

Despite the obstacles it currently faces, the future of the cannabis industry in South America is dazzlingly bright. Continued technological advancements will only amplify the continent’s inherent geographical and climatological advantages while opening doors for productive investment that will have a profound and positive impact on local economies. Cannabis could jumpstart lagging export sectors in many countries as well. Healthcare will also improve in South America, as new and highly effective remedies for a wide range of illnesses and medical conditions will come into much broader use.

Low-cost, medical-grade cannabis will be a high-demand product, internationally and domestically. South American countries appear set to dominate the list of the world’s preeminent suppliers.

 

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