Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) announced last week the acquisition of Spectrum Cannabis Chile SpA, which is in alignment with the company’s strategy to focus on the emerging Latin American cannabis market. The timing follows the fact that more countries in the region continue to expand their medical marijuana programs, with Chile being the most notable.
The Chilean Medical Marijuana Model
Chile is cited as one of the most progressive countries in the Latin American region when it comes to medical cannabis. In 2016, they opened the largest medical marijuana farm in the region. Cultivation kicked off in the small town of Colbún under the supervision of the government’s agricultural program with the expectation of producing over one and a half tons of medical marijuana.
In addition to pioneering in the cultivation of medical marijuana, Chile also became the first country in the region to offer medical cannabis pharmacies in 2017. Tilray (NASDAQ:TLRY), a Canadian cannabis producer and distributor, partnered with Chilean company Alef Biotechnology to provide medical marijuana to Chilean pharmacies. The relationship was seen by many as a net positive for medical cannabis patients in Chile. Prior to medical grade cannabis being available in pharmacies, patients either had to import it or go to a small number of farms who were allowed to provide it to consumers.
Chilean Investments In Clinical Cannabis Studies
Chile also holds another prestigious distinction in South America that can impact medical cannabis globally. The country reportedly has more clinical studies, per resident, than any other country in the region. In fact, Canopy Growth’s newly acquired Spectrum Cannabis is doing their own clinical cannabis studies.
One of those studies led by Spectrum Cannabis is a two-phase clinical trial relating to pain management. The study is being led by Dr. Serio Sànchez, who is a major cannabis advocate in Chile. His work has been extensive in the industry as he has treated more than 5000 patients in Chile with medical cannabis. Dr. Sànchez’s work in the cannabis space in Latin America has led to him being named to the Medical Board for Canopy LATAM.
In July, Canopy Growth announced the formation of Canopy LATAM to lead the charge to expand medical cannabis in the Latin American region. As part of the expansion, the company acquired Spectrum Cannabis Colombia S.A.S.,` the only licensed cannabis producer, manufacturer, and exporter in the country. Spectrum Cannabis Columbia is expected to be the cannabis hub of Latin America for Canopy Growth.
South America Is A Hub For The Cannabis Industry
Companies like Tilray and Canopy Growth enter a market with a lot of potential for growth. ArcView Market Research in partnership with BDS Analytics released a report showing that the South American cannabis market is expected to swell from $125 million in 2018 to $776 million by 2027.
It is no coincidence that Canopy Growth is focusing on countries like Chile, Colombia, and Brazil. Chile was the first in the region to grow medical grade cannabis. The sheer size of Brazil and the population has made it a target for cannabis companies. With the largest population in the region, alone Brazilians are expected to spend more than $360 million on medical cannabis by 2027. Historically, Colombia has been a premium producer of cannabis and was especially popular in the 1960’s and 1970’s on the United States black market.
Now that medical cannabis is legal, companies are utilizing the country's biodiversity to grow specific landrace strains which have led to Colombia becoming one of the top two producers in South America.
While Canopy Growth has focused on medical marijuana in South America, there is room for growth when it comes to recreational cannabis. Still, the region is home to, Uruguay, the first country in the world to legalize recreational marijuana. Canopy Growth is a Canadian company, where recreational marijuana will become legal in October. As the company prepares for Canada's new law and as more countries in Latin America entertain the idea of legalizing recreational cannabis, the company is well positioned to become a provider in the market.