Sometimes it is not only the early bird who grabs the worm, as is the case with Peru, a country that legalized marijuana in 2017 and announced deregulation guidelines last week. The country’s regulators are welcoming potential cannabis cultivators and producers with an estimate that 1 hectare of land could produce $1 million with only $120,000 of investment.
Opening up the market
DIGEMID—the Peruvian national drug, medicine, and supply institution, as well as a subsidiary of the Ministry of Health—is responsible for issuing licenses and upholding the newly minted regulations. DIGEMID’s long-term commitment to ensuring safe and ready access to medicinal cannabis, allowed them to immediately begin processing applications from cannabis cultivators and start a national registry of medical patients.
The process for companies to register with DIGEMID can take up to a year, which received criticism from the director of the Peruvian Institute of Medical Cannabis, Juan José García, reported to Gestión, a Peruvian news site. “During the process, in order to not abandon the families that are finding a solution in cannabis, the legislation should be more flexible.”
No exceptions to the legislation have been reported, but any doctor in the country is immediately allowed to provide a cannabis prescription to a patient in need.
These barriers have many advocates worried about a lack of medicinal cannabis for patients.
Current estimates suggest that in the next few years, 10,000 patients will be served with 1.5 million prescriptions in 5 years. That process, too, will take time. Peru already has Khiron Life Sciences Corp (OTCMKTS:KHRNF), Plena Global Holdings, and Canopy Growth Corp. (NYSE:CGC) involved in or negotiating their involvement in the cultivation and extraction market, which should satisfy the demand for a time.
Ensuring Peru benefits
North American firms are flocking to Latin America to cultivate and process medical cannabis for in-country use and exportation. With a long cultivation season and relatively inexpensive land costs in comparison to North America, it is the ideal thing to do to get their weed growing.
Peruvian private regulating and marketing bodies such as ADIFAN, a Peruvian pharmaceutical firm that promotes Peruvian medicinal products and supplies, and DIGEMID want to ensure that the investment from abroad is directed toward patients and the Peruvian economy.
ADIFAN’s president also suggests that the legislation should be flexible, warning that “favoring international labs” undermines the potential strength of the Peruvian market. He too is worried that “complicated procedures” could prevent firms from emerging in the Peruvian market.
There is a lot at stake.
Peru seeks to protect the potential 1,250 percent profits
Many potential cultivators, local and international, are frustrated by the lack of clarity regarding areas of the country that will be open for cannabis cultivation.
Reports from Peruvian agricultural consultancy firm, ACM, suggests that each hectare of land cultivated with medicinal marijuana could be worth over twelve times the original investment, from $120,000 to $1.5 million; an increase of 1,250 percent.
Tony Salas, president of ACM, reported his prediction to Gestion, “One hectare can produce 200 kilos of CBD oil, and one kilo sells for $5,000 USD.”
Driving this uncertainty is both the desire to keep the capital within Peru but also to stave off potential violence from drug traffickers, who historically owned and managed the marijuana market.
Slow and steady wins the race
In addition to a long licensing process period, Salas says that farms, too, will have a warm-up period, stating that initially plantations will only be permitted at 10 hectares, but “in [five] years, they could be 3,000 hectares; especially if you combine medical cannabis with the nutraceutical [industry].”
Peru’s legislation is “competitive and modern,” Salas continued. It isn’t initially competing with a country like Colombia, who deregulated cannabis in 2016 and has since invited many firms to participate in the market. What the Peruvian legislation seeks is to provide for patients, ensuring they have access to safe, affordable medicine, They also want to ensure cannabis is used as a resource to bring investment and capital into Peru in such a way that it benefits the economy and its residents.
Peru’s sequential deregulation is unique across the region. Many countries, despite allowing medicinal marijuana for patients, still reside in a prohibitive era where in-country growth by individuals or firms is illegal with no path to legality in site.
Peru’s commitment to increasing production as the market expands ensures adequate supply and the potential for an influx of capital for the country as a whole.