GlobalInvestment IdeasLegalizationNewsRegulationsColombia Overturns Ban on Public Cannabis Use—Is Legalization Next?

Colombia’s Constitutional Court lifted the ban on public cannabis consumption signalling the country, noted for ideal growing conditions and huge export potential, is closer to adult use legalization.
Avatar David JJune 24, 20198 min

After Uruguay and Canada were the first two countries in the world to legalize cannabis for adult use, more countries are changing perceptions and moving towards doing the same, including Colombia. The South American nation legalized medical marijuana three years ago, and last week Colombia’s Constitutional Court lifted the ban on public cannabis consumption signalling the country, noted for ideal growing conditions and huge export potential, is closer to complete legalization of the drug.

Colombia’s conservative, right wing President Iván Duque passed a law called the Police Code in 2017 that banned public consumption after the country reformed laws and made medical marijuana legal. But Colombia’s Constitutional Court ruled the law violated citizens’ fundamental human rights instead of protecting children like it was supposed to, and lifted the ban earlier this month.

Opposition Senator Gustavo Bolívar told LA Weekly the Police Code was put in place to punish cannabis users after it became legal for medical use, but many parts of the law were “onerous and unjustified.” However, he added the court’s ruling was based more on “technical legislative errors” than progressing cannabis legislation.

But Senator Bolívar represents a growing number of Colombian politicians who are pushing to end the country’s War on Drugs policies and are creating a far-reaching drug policy reform bill to introduce into Congress at the end of July.

We are going to formulate a new drug policy for our country; one based on evidence and numbers, one that will allow us to think of an effective strategy, since all data we examined shows a big fail in our war against drugs

– Colombian Senator Gustavo Bolívar

Colombian legalization could transform global cannabis industry

While it’s still early, some cannabis companies are carefully watching Colombia’s legalization efforts because they think it could be a game changer for the industry.

The South American nation is considered an ideal location to produce cheaper cannabis with its equatorial climate and its low-cost, skilled labour force. Therefore, if Colombia legalizes exports, it could put downward pressure on global prices of the drug.

Currently, Colombian growers say it costs 50 cents to produce a gram of cannabis, according to a recent Barron’s report, and if the market opens up further from a legal standpoint, that price will only decrease.

But for Canadian firms like Canopy Growth Corp. (TSX:WEED)(NYSE:CGC), Tilray Inc. (NASDAQ:TLRY), and Aurora Cannabis Inc. (TSX:ACB)(NYSE:ACB), who have all invested hundreds of millions to grow cannabis in facilities designed for cooler climates, Colombia could pose a threat with its significantly lower production costs.

Most large Canadian producers have a long-term target of lowering production costs below two Canadian dollars per gram of cannabis. But even then, they would have a hard time competing with Colombian producers if the country legalizes the drug for export.

And this isn’t being ignored by the North American firms either. Companies like Aphria Inc. (NYSE:APHA)(TSX:APHA), Canopy, and Aurora have been looking to extend their presence in Colombia and in South America and tap into the region’s lower cultivation costs.

Opportunities, industry threat likely still years away

However, despite Colombia posing as a new opportunity and potential threat for the industry, it will still likely take years for the country to completely reform cannabis laws. Its recent change in legislation wasn’t based on the current government’s change of heart on marijuana, but was based on a technicality for Colombia’s Constitutional Court to overrule existing laws that banned public consumption.

And with a conservative government in power, it’s possible Colombian lawmakers will try to push back against the recent ruling and the opposition’s efforts to change the country’s War on Drugs policies.

Although advancing legislation would open up many opportunities for the country in gaining tax revenues to fund programs, it would also expose Colombia to social risks that cause many lawmakers around the world to be hesitant on legalizing cannabis due to fears of increased substance abuse. And with only two countries having legalized adult-use cannabis thus far, there’s limited information and data to support or disprove that hypothesis.

Countries like New Zealand or Mexico might be more likely to become the third country to legalize cannabis over Colombia in the near future. And it’s also likely if the U.S. eventually legalizes recreational cannabis, it will increase the chances for other countries to follow suit. But in the U.S., that largely depends on what will transpire in the upcoming 2020 elections.

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