This is a golden opportunity for Colombia to become one of the largest suppliers in the world. Who are behind these investments and how does the business grow?

Así crece el próspero negocio del cannabis en Colombia

The Valentine's Day celebrations have these days flooded with Colombian flowers the streets of the United States and other European countries. It is a multicolored photo that is repeated every year and represents hundreds of millions of dollars for the flower industry in the country. However, a new agroindustrial activity flourishes these days in greenhouses, warehouses and laboratories in Colombia, in large part because of the money that comes from the Toronto Stock Exchange and the accumulated capital of big business owners of rice, flowers and coffee, among others.

This is the cannabis or legal marijuana that has been planted for a couple of years, after the enactment of Law 1787 of 2016, which allows the cultivation and manufacture of inputs and products of this plant for medicinal purposes.

This law was the trigger for between 20 and 30 large and medium-sized companies to build the scientific, legal, technological and commercial roadmap for this business to germinate.

The purpose of this nascent agro-industry is clear: enter the fight for a global legal marijuana market that could reach US $ 146,000 million by 2025, according to a report by Grand View Research.

In addition, the large food and beverage multinationals have already set their sights on the activity. A Bloomberg report notes that "the legitimization of marijuana has accelerated at an astonishing rate, with traditional consumer and pharmaceutical companies ranging from Constellation Brands and Anheuser-Busch InBev, to Altria Group and Novartis that invest or partner with companies of cannabis. "

Information published in international media accounts for at least 149 companies listed on the Canadian stock exchanges with a combined value of US $ 50,000 million.



The capital

Where does the financial fuel that "growing up" this growing agro-industry come from? In the case of Colombia, the first investments for the development of sowing areas, seeds and other inputs were made -in good part- with money in cash from large entrepreneurs in the rice sector, floriculture, coffee and even civil engineering. They saw a few years ago as Canada, the United States and other countries in Europe took important steps towards the legalization of marijuana for medicinal and recreational purposes. Then came the Ley Galán Law (1787 of 2016) that laid the foundations of the business.

However, for no one is it a secret that the largest financial 'fertilizer' of this activity comes from the Toronto Stock Exchange.

In June 2018 the Colombocanadian firm Khiron began trading on the TSX Venture Exchange in Toronto. "We were the first in Colombia to successfully reach that Exchange.Since then, we have managed to increase our presence and investments in other countries such as Chile and Uruguay, "Álvaro Torres, co-founder and CEO of Khiron, told Dinero.

In August of last year, a month later of this business venture, another local firm, Colombian Cannabis merged with Canopy Growth, the world's largest medicinal cannabis multinational. According to Bibiana Rojas, founder of Colombian Cannabis and current president of Spectrum Cannabis Colombia, this transaction allowed her to swap her company with Canopy shares; Something similar to what the Santo Domingo Group did with Bavaria at the time in its beer business.

"Canopy has three units today: Spectrum Cannabis, which focuses on medicinal products; Tweed for cannabis for recreational purposes and Canopy Health Innovation, which does research and development. The holding has a presence in 15 countries, "Rojas explained.

But not only Canadian dollars are fed into the business. On August 15, the beverage giant Constellation Brands (which has brands such as Corona and Modelo beer, among others) announced that it was increasing its participation to US $ 4 billion in Canopy Growth.

A month later, Bloomberg reported that Aurora Canopy, a Canopy competition, had had rapprochement with Coca-Cola for the development of CBD-infused beverages, a non-psychoactive component found in cannabis.

This fever of business and moves has boosted the actions of these companies both in Toronto, and in New York, where they have also found stock space. In the midst of this furor, some analysts are worried because some of these firms have apparently inflated stock market values. This is how one of the largest multinationals in the sector invoices US $ 20 million per year, but has a market value of US $ 40,000 million.

"The Stock Exchange is smart and bet on the team, the plan, the size and capacity, among others. It is like mining, there is a projection of a capacity, how much can be sold, etc. It's a market of patience, "explained Torres de Khiron.

And it may be true. Since last December, Khiron sells its cosmetic products with cannabis (non-psychoactive) in the Farmatodo chain through the Kuida brand. Likewise, it reached an agreement a couple of weeks ago with the American Dixie Brands to distribute Colombian products in Colorado and California.

In return, Khiron will manufacture and distribute Dixie's products in Latin America, of course, where legislation allows. Among those products with cannabis are food and painkillers for pets and supplements for people, among others. "It's the first time that a Colombian company makes this type of exports," said Torres. The latter has allowed the company to increase its value in the stock market; the action passed in a week from 1.95 to 2.88 Canadian dollars.

Although exchanges such as Toronto and New York seem convinced of the new green business, the banks of the world and Colombia are still on the sidelines - for the moment - of this boom.The only bank that has credit lines open to 'cannabis growers' is the BBVA, provided that rigorous qualification processes are followed. The matter seems to be reputational. Local banks, some of them with titles (ADR) in the United States, such as Grupo Aval and Bancolombia, fear reprisals from the US federal government that keeps trade and distribution of all types of cannabis banned.

For Rafael Mejía, president of the Mercantile Exchange of Colombia, it is not ruled out that at some point this type of products can be traded there, "as long as the demand justifies it". Mejía recalled that great fortunes in the United States were forged with prohibited products such as alcohol and tobacco.

The Agrarian Bank of Colombia also prepared a financing product for this activity, but growers say that in recent months the issue has "withered".


Álvaro Torres, CEO and co-founder of Khiron; Federico Cock-Correa, CEO of PharmaCielo Colombia Holdings;

Bibiana Rojas, Country Manager of Spectrum Cannabis Colombia, and Andrés Fajardo, President of Cleaver Leaves



New national industry

20 or 30 years ago, the rural area of Rionegro, Antioquia, was the epicenter of the extortive action of groups such as the ELN. "It was easy to see abandoned houses with bullet holes in the facade," says one of its residents. However, everything changed in a couple of decades. In the same neighborhood and about 20 minutes by car from the Rionegro International Airport, one of the most complete and modern agroindustrial complexes in Colombia for the processing of medicinal cannabis, PharmaCielo, is built.

Dinero visited these facilities, taking into account that this company with Canadian roots, was listed on the Toronto Stock Exchange (TSXV) on January 18.

It is necessary to say that despite the good security climate that exists in the region these days, the entrance to the complex requires a strict security control with guards, electric gates and fences.

Once inside it is possible to see the dimensions of this business that grows not only in Antioquia but in many areas of Tolima, Quindío, Huila, Antioquia and Cundinamarca, among other areas. This is how it took us almost 3 hours to go through greenhouses in different phases of cannabis production, flower refining lines with the use of high technology machinery and qualified personnel. Rarely seen in the Colombian agribusiness such a level of sophistication, especially in such a new activity, at least on the legal side.

In the first building we received a plant biotechnologist who is dedicated, in simple words, to clone or multiply a stem cell in thousands of plants that are resistant to adverse climates and pests. "We work on the development of healthy and vigorous plant cells," says one of the experts, while showing us some laboratory tests (see photo).

These cells grow in controlled media for two months, then spend another 6 months to generate the first tissue or plant that then goes to the greenhouse. It is a scientific process in which the cannabinoid THC, which is psychoactive, is almost completely eliminated. Instead, it works with the CBD compound, which is most used in pharmaceutical and cosmetic applications.

In PharmaCielo, this plant is grown in an area of 6 hectares (ha), but by the end of this year it will be 20.

The CEO and co-founder of the company, Federico Cock-Correa, attends us from one of his plantations to tell us, exclusively, details of the process. (See video here). According to this businessman, who has spent 34 years dedicated to the industry and export of roses, pompoms and chrysanthemums, in this complex of Rionegro invest about US $ 50 million. "When my Canadian partner proposed a business focused on the cultivation of medicinal cannabis, I said flatly that not because of all the implications that our country had had, the violence and the blood that had been spilled.

However, we see today that this is the best opportunity to change everything; so that indigenous and peasant communities get involved and technified and so that many patients have relief, "said Cock-Correa. The other thing that convinced this businessman was the serious economic moment for which floriculture had been going on for years. "The industry was almost bankrupt, the exchange rate so low did not give," he says.

All this environment paved the way to start this company in what was once a chrysanthemum crop. Today Cock-Correa talks about a transition process between the illegal and the legal and where medical cannabis oil is already seen as a commodity. "This is a very young industry that is just being invented," says the businessman and adds that friends, family, clergy and local government are slowly becoming convinced of the benefits of the business.



The regulation

Colombia's new medicinal cannabis industry seeks to position its product legally. That is why they do not accept the term marijuana, associated for decades to phenomena of violence, illegal trafficking and clandestinity. "Not to mention that marijuana does not comply with any standard of cleanliness or care. It's a totally different story, "explained one of the people who accompany us on the tour of PharmaCielo.

It must also be said that since 1986 there is Law 30 that allows the cultivation and manufacture of products with cannabis in the country, the underlying issue is that this rule was never regulated due to the great problems generated by drug trafficking in the country.

It was in 2016 when the liberal senator Juan Manuel Galán promoted Law 1787, which regulated not only the manufacture but the commercialization of this type of agro-industrial inputs. Then, with decree 613 of 2017, the Ministry of Health set the conditions to produce and sell medicinal cannabis products. "It was necessary to propose a new drug policy because the world will never be free of drugs, they are before humanity. What can be done is a world free of drug abuse, "ex-Senator Galán told Dinero.

Since then, some 25 local companies have been in a frantic race to obtain the licenses and permits necessary to cultivate, manufacture, distribute and sell products derived from medical cannabis.

According to information from the Ministry of Justice, there are already 19 permits for the use of seeds, 62 for the cultivation of psychoactive cannabis plants (THC); 89 licenses for the cultivation of plants of non-psychoactive cannabis (CBD), for a total of 170. "The bottleneck is currently in the ICA, due to the lack of personnel and the large amount of information to be processed", said a government source very close to the authorization processes.

As long as the permit transaction in the ICA is resolved, companies can start exports of oils and extracts. Flowers, the raw material of all products, can not be sold abroad.

In the case of PharmaCielo and other companies based in Colombia, the first export of extracts and oils is planned for the middle of this year, which will represent a new milestone in this industry.

In the international context, issues have also been unlocked. Countries like the Netherlands allow the use of cannabis for decades. However, only last year that country started a pilot program for the cultivation of the plant. Although in the United States the federal government prohibits the use of marijuana, in 9 states recreational consumption is allowed and in 29 medicinal use. Likewise, in 2018 there were two news that paid even more land to this activity. In June the United States Food and Drug Administration (FDA) allowed its use for the treatment of seizures associated with two rare and serious forms of epilepsy: Lennox-Gastaut syndrome and Dravet syndrome. in patients older than two years.

Three months later, the Drug Enforcement Agency, DEA was taking this drug off its blacklist: "The DEA will continue to support sound scientific research that promotes the legitimate therapeutic uses of cannabis components approved by the FDA, in accordance with the federal law, "said interim administrator of the DEA Uttam Dhillon at the time, in a press release.

In the Ministry of Health, a resolution is pending which will determine which substances and drugs that contain cannabis will be susceptible to control by the National Narcotics Fund. It is expected that a first draft of the standard will be published for comments in the coming weeks.

Finally, the International Narcotics Control Board (UNO) is the entity in charge of approving the legal cannabis production quotas in each country. The cannabis growers must process and justify these productions every year.




Cost effectiveness

Being a very new business, it is still difficult to know how profitable it will be for both the pioneers and the investors who want to enter the game. "Profitability is very high today but that may vary over time. It's very different if you're just a producer or if you have the industrial capacity - which he called a refinery - which allows you to manufacture drugs, "said Cock-Correa, who also has an agreement with a Mexican firm to distribute products in that country. country.

In large numbers, producing one gram of flower in Colombia can cost 5 cents, while in Canada or the United States the figure is US $ 1.30 to US $ 2. The explanation is logical: tropical climate that favors the growth of the plant, a cheaper workforce and availability of large areas of cultivation. A greenhouse may require investments in North America for US $ 1.5 million, while in Colombia it may be between US $ 100,000 and US $ 200,000.

Another option that is being presented in the Colombian market is indoor or indoor cultivation. This is the case of the firm Pideka, which is about to finish a series of wineries in Tocancipá for the controlled cultivation of medicinal cannabis.

According to the manager of the company, Spaniard Borja Sanz of Madrid, in each winery some 3,000 "high quality" plants can be grown. This year Pideka plans to produce about 180 liters of cannabis extract and by 2020 from 1,200 to 1,600 liters. Each liter can be sold in the international market at around US $ 30,000, bearing in mind that these are plants that have a strict control of temperature, humidity and pests.

However, the true turning point in the business is in the medical offices of Colombia and the world. To the extent that health professionals begin to formulate medicines to patients is that the business will be consolidated.

Khiron took important steps on that front when he bought an IPS last year, the Latin American Institute of Neurology and Science, which according to the CEO of the company serves about 100,000 patients a year. Another of the company's plans is to build Zerenia, a clinic for the treatment of pain, epilepsy, sclerosis and other pathologies. The idea with these business bets is to collect the largest volume of scientific studies and, once they have these bases, address the EPS in 2020 with a solid offer of products, at least those are the plans.

Businessmen like Bibiana Rojas, Federico Cock-Correa and Álvaro Torres, among many others, are convinced that this is a fantastic opportunity to turn a tragedy that had the country on its knees, in a thriving business as big as flowers or coffee itself.

"Being a medical cannabis entrepreneur is the extreme sport of an entrepreneur, is the biggest challenge I have had in my business life compared to my other eight companies. We are opening the way with machete, this is a strategic product and it is necessary that it has all the support, "Rojas points out.







The challenges

Sebastián Londoño-Ochoa, general manager of Medpharm (partner of the Colombian Green Equity SA), highlights that among the challenges of the sector is to integrate the small grower to the global medical cannabis chain, "facilitating techniques of cultivation and business management, financing for the production cycle, price protection and access to the compliance and risk management system, "he said. The businessman also assured that it is a challenge to export pure extract or finished cannabis product this year to countries such as Canada and Germany, as well as to achieve the first registration with the Invima of a local pharmaceutical product. For his part, Andres Fajardo, president of Cleaver Leaves, said that part of his success as a company specializing in medicinal cannabis is that it also has vertical integration. "We have 5 hectares of active crops and operating, an expansion program to 15, with we will complete more than 25 by the end of 2019. The goal to 2023 is to have more than 100 hectares and we plan to expand the goal, "he explained.

Clevaer Leaves has a laboratory that has one of the largest installed capacities in the world, about 30 million milliliters. To date, the company is investing more than US $ 10 million in infrastructure and crops.