Colombia’s recently elected president, Gustavo Petro wants the country to become a leader in the legal cannabis industry.
In 2021, Colombia exported $1.5 billion in cut flowers globally, making it one of the largest global exporters of cannabis in the world. Now, the country’s newly elected president is expected to revise the country’s cannabis laws following his victory in Sunday’s presidential runoff election.
Making history as Colombia’s first leftist head of state, Petro has vowed to end the “war on drugs” with his liberal approach to drug laws. The ex-guerilla-turned-politician has been a vocal proponent of the legalisation of cannabis and intends to legalise the consumption of the drug during his time in office.
Prior to his election win, Gustavo Petro was quoted stating: “The possibility of exportation of marijuana for recreational and medicinal purposes is the right of the Colombian people. It would be a historical paradox that after the war on drugs is over, other countries get to benefit from a business that will bring billions of dollars of economic benefit.”
Cannabis for personal use is currently decriminalised in Colombia while medical cannabis was legalised in 2015.
President-Elect Petro is currently a sitting member of the Colombian Senate and served as Mayor of Bogotá, the Capital of Colombia. It is his third time running for president.
Petro’s main opponent in the presidential race was Rodolfo Hernández, a right-wing businessman who has drawn comparisons with Donald Trump for his outspoken campaigning and conservative political views.
While Petro has been praised for his approach to social equality, he has faced criticism for his senior role in the M-19 guerilla faction which has been accused of crimes against humanity over the last decade.
Earlier this week, Spain’s National Court announced that a complaint had been filed against Petro for his alleged role in the kidnap of journalist Fernando Gonzalez Pacheco in 1981, The Telegraph reported earlier this week.
While Petro is not without his critics, the cannabis industry in Colombia is likely to benefit from Petro’s plans for drug policy reform.
Flora Growth Corp, a cultivator, manufacturer and distributor of cannabis products headquartered in Bogotá, voiced its support for Gustavo Petro and the Humane Colombia Party.
“We would like to congratulate President-Elect Gustavo Petro on his victory and we look forward to working with the new government to continue Colombia’s progressive momentum in the global cannabis industry,” said Luis Merchan, Flora’s Chairman and CEO.
“We are encouraged by President-Elect Petro’s stance on seeing Colombia become a leader in the legal cannabis industry and we are hopeful for progressive legislation that will allow Colombia to create a safe environment for cannabis consumption domestically – potentially leading to a recreational market in the country – while also proving Colombia has all the environmental and labour conditions necessary to be a global cannabis powerhouse.”
Flora Growth operates a 249-acre cannabis cultivation, extraction and isolation facility in Bucaramanga, Colombia and a GMP-certified processing facility for beauty, phytotherapeutic and nutraceutical products in Bogotá.
“While approximately 90% of Flora’s forecasted revenue is expected to be derived outside of Colombia, we see Colombia as particularly well suited both for production of high-quality, cost-advantaged cannabis and the manufacturing of cannabinoid-derived medical formulations that can be sold domestically and internationally,” said Jason Warnock, Chief Commercial Officer at Flora Growth.
The economic advantages of amending cannabis legislation
What can the UK cannabis market learn from Colorado? Industry representatives met to hear of the State’s experience legalising cannabis.
The UK’s All Party Parliamentary Group for CBD met in Parliament to learn from the US Cannabis Council and law firm, Vicente Sederberg, about the economic advantages of amending cannabis legislation.
Colorado legalised cannabis in 2012, making it one of the most mature cannabis markets in the world to date. Today, Colorado’s cannabis industry has more jobs than the State has firefighters, bank tellers and insurance agents, employing over 428,000 people.
With a number of countries across Europe looking towards more progressive cannabis legislation, the UK is being encouraged to seize the cannabis opportunity and develop legislation in order to allow the industry to flourish.
Colorado, which has an adult population of 4.3 million, one-twelfth the size of the UK at 53.9 million, has generated over $2bn in tax and fee revenue collections since February 2014 and generates around $400m a year from a market now worth $2.2bn.
The APPG states that the potential tax-take and benefits to the UK economy are clear, but emphasises that without amendments and updates to existing legislation and regulation – including proceeds of crime, consumer protection, quality standards, appropriate definitions and limits, banking, agriculture and insurance – none of this will be achievable for the UK.
To find out what can be learnt from Colorado, Jessica Billingsley, chair of the US Cannabis Council (USCC) and Shawn Hauser, managing partner at Vicente Sederberg LLP, visited the UK to share insights into the pros and cons that the State has experienced since legalising cannabis.
The economic advantages of legalisation change
Colorado first had a well established medical programme before legalisation, a gradual path that Hauser says allowed the cannabis industry in the State to grow faster than any other sector.
The State has seen significant economic benefits from amending its legislation to create a legal and tax revenue-generating cannabis market. Colorado has imposed a 30 per cent excise tax on wholesale cannabis and a 50 per cent retail tax, a portion of which is shared back with local governments, which can also adopt their own taxes.
“Legalisation has had broadly very positive impacts on the US public health and economy. States with legal regimes have realised over $11bn in taxes, in many States, exceeding revenue from alcohol sales,” said Hauser.
As cannabis is still federally illegal in the United States, this has created no state-level control and means that there is no interstate commerce, making a highly localised industry. However, Hauser says that in Colorado, the industry generates more local economic output than any other kind of sector.
“Every dollar spent on cannabis generates about $2.40 per dollar, which is remarkable compared to something like retail which is around $1.79 per dollar,” said Hauser.
Billingsley commented: “The regulated cannabis industry in the US has proven to be an economic engine. It is estimated that the adult use market for state regulated cannabis products was roughly $40bn in 2021. When we combine this figure with over $11bn in the sales of medical cannabis, we reached an industry total that exceeded $25bn.”
The industry has created hundreds of thousands of jobs in areas such as cultivation and manufacturing, ancillary jobs, such as legal, accounting, construction, marketing, tourism, hospitality and other supportive industries – often, these are high paying jobs.
“In 2021, there was a 33 per cent increase in jobs in a single year, which was the fifth year in a row the annual job growth was greater than 27 per cent,” Hauser commented.
“This is unparalleled by any other American industry, and is comparable to growth in financial and construction industries. It’s clear that States that foster markets that attract business opportunities and investors are the ones that are most likely to see job growth.”
Cannabis programmes that have banned product forms have not done well, says Hauser, such as those that ban smokeable flower, as this segment represents 40 to 60 per cent of consumer demand. This drives consumers back to the illicit market.
“We’re learning the hard way in the US industry, where the latest Federal Food and Drug regulation limited the types of products that were available to big box retailers. The only products that were widely available because of FDA delays were topicals, which constitute less than 5 per cent of the market,” said Hauser.
“This resulted in underwhelming CBD sales and projected market sales never growing at the pace expected, and the market crashing when there is too much supply and demand.”
The three key components to success that Colorado has learned are availability, affordability and assortment.
“This means availability – access to legal supply; affordability – pricing that can compete with illicit channels; and also reasonable tax rates and compliance costs,” said Hauser, highlighting that enforcement is also a crucial aspect of a successful market, otherwise, responsible operators have to compete in a market with bad actors who don’t comply with safety standards
Hauser commented: “Attractive markets require a well regulated, level playing field with some reasonable barriers to entry, whether that be factoring practices, criminal background checks and enforcement of that playing field.
“For markets to be attractive and generate sizeable tax revenues, consumers have to be able to easily access the market and obtain the products they demand.”
Investing in the community
Hauser highlights that a key takeaway from replacing prohibition with a regulated market is that it provides States with a new revenue stream. In Colorado this has gone toward funding programmes that were formerly underfunded, or not funded at all.
This includes school, community health and safety programmes and local budgets, such as school construction, bullying prevention, behavioural health, school nurses and school professionals.
“It’s been an incredibly impactful for our community. In Colorado, $538.7m of cannabis tax dollars has been dedicated to improving the State’s school system,” said Hauser.
“Legalising, regulating and taxing sales has allowed us to fund important public health programmes that either didn’t exist or were severely underfunded. And over a decade of data from 20 years of medical cannabis shows us that the negative harm for cannabis can be well managed through proper education and sensible product regulation.”
Legalisation has also significantly reduced cannabis arrests across all racial groups without seeing an increase in new use.
Billingsley commented: “Legalisation has the potential to free up resources. This can include reducing the prison population, and enabling law enforcement to get away from costly, possibly unpopular enforcement, in favour of combatting serious crime.”
Billingsley highlights that one thing that Colorado did not get right when legalising cannabis 12 years ago, was social equity.
“Cannabis prohibition in the US and many other nations has its roots in racial discrimination. America’s so-called war on drugs has disproportionately impacted minority communities, and it’s something we need to acknowledge and work to rectify,” said Billingsley.
“This is why the USCC strongly supports, not only donation, but also the expungement of cannabis-related criminal charges. In addition to rectifying the past, we believe that those directly impacted by prohibition should have a real shot at participating in the newly legal industry.
“Nobody should be excluded because they used to work in cannabis prior to legalisation. Don’t let this fall by the wayside, instead, social equity should be integrated into your plan from the start.”
Combatting the illicit market
Hauser highlights that the billions of dollars of cannabis demand has shifted from the illicit market to one that is taxed and regulated, protects children and where operators are subject to robust manufacturing, packaging, labelling and marketing standards.
However, despite the success of the State programmes, the US industry being federally prohibited limits its growth and success.
Hauser commented: “Our businesses don’t realise their maximum potential and we’re unable to fully eliminate the illicit market because of federal illegality. US businesses don’t have access to traditional financial services – very limited banking, insurance options, interstate commerce, and other fundamental limitations that are a result of prohibition.
“We don’t have federal agencies focusing on consumer protection and other regulation – that is all up to the States. So, it’s impractical and impossible to expect the complete eradication of an illicit market and diversion with federal illegality.
“Because not all 50 states have programmes, the extent that illicit activity does occur in a State like Colorado is driven by prohibition in other States, where consumers don’t have access to a regulated market. The solution is federal legalisation.”
Another aspect of combatting the illicit market, says Hauser, is that the tax rate is only part of the equation.
“Cannabis has to be competitive with the illicit market and we must consider that a business cost is not just the taxes, but also operational and compliance expenses,” said Hauser.
“On the east coast of the United States, Massachusetts’ cannabis tax rate is only two-thirds of Colorado, but the prices that consumers pay are significantly higher because of their licensing and compliance costs, and because they have a less competitive market.
“The government must be sure not to impose a heavy tax burden. Starting, as we did in Colorado, with a lower tax rate that increases over time allows regulated businesses to market and counterbalances future retail price declines.
“Reasonable tax rates, coupled with clear and efficient regulatory structures, benefits investors, consumers and businesses. We’ve seen in the United States and especially in Colorado over the past 12 years, tax revenue continues to increase as the market matures.”
Billingsley said: “The State regulated programmes provide roughly 30 per cent of the market across the board. In the United States, the market is still largely illicit so there is more work to be done.
“It’s unfortunate that most of the industry remains in the hands of criminal organisations. The activity is unregulated and people don’t have the competence to know what they’re getting and what they’re putting in their bodies.
“We’ve seen examples of how overly burdensome regulation and high taxes help perpetuate the illicit market, undermining consumer safety in the process.
“So, I recommend devising a strategy for the emerging market, but also to extinguish the illicit market and to grasp onto the scientific pursuit of cannabis efficacy with both hands.”
Germany to begins consultations for cannabis legalisation
Hearings are planned throughout 2022 to discuss the country’s new approach to cannabis legislation.
Germany has confirmed it will be kicking off a consultation process to prepare for upcoming cannabis legislation change.
In November 2021, Germany’s traffic light coalition made its plans to legalise recreational cannabis official with the publication of its agreement. The coalition, which includes the Social Democratic Party of Germany (SPD), the Free Democratic Party (FDP) and The Greens, agreed to legalise the controlled distribution of cannabis to adults for “pleasure purposes”.
The objective of creating a legal cannabis industry in the country is to move consumers away from the black market, control quality and ensure the protection of minors, as well as to end the criminalisation of cannabis users and focus on health-oriented cannabis policy.
The German Government has confirmed that five hearings are planned throughout the year to discuss the legislative process on the controlled supply of cannabis to adults for recreational purposes, with the first meeting being held on Tuesday, 14 June, 2022 at the Federal Ministry of Health.
The announcement follows comments from Germany’s federal Minister of Health, Karl Lauterbach, speaking to the German newspaper Handelsblatt, who said the government plans to accelerate a number of projects that have been stalled due to the Covid-19 pandemic – including cannabis legislation.
The Federal Government Commissioner for Addiction and Drugs, Burkhard Blienert, commented: “From now on we are breaking new ground on the subject of cannabis.”
“The time has come: we are starting the preparatory phase of legislation. Being able to finally announce this is a special, gratifying moment for me personally.
“Like many others, I have been working for years to ensure that we in Germany finally stop criminalising cannabis users and start a modern and health-oriented cannabis policy.
“The hearings are intended to discuss which measures can be used to ensure the best protection for young people, health and consumers in the event of implementation. Because one thing is clear: we want to protect children and young people in particular from possible risks.”
More than 200 leading experts from the areas of addiction medicine and help, law and business as well as representatives of the federal states, municipalities, federal ministries and federal authorities will attend to exchange views. The government has confirmed that international experts will also have their say.
The five planned hearings will cover the topics of: health and consumer protection; the protection of minors and prevention; supply chains, ecological and economic issues; criminal liability, control measures and licensing to accompany the introduction of the controlled sale of cannabis for recreational purposes; and, international experiences.
Germany is already the largest market in Europe for medical cannabis and its legalisation is set to light up the European cannabis market according to Mike Sassano, CEO of Somai Pharmaceuticals, who wrote in an article for Cannabis Wealth that “most countries around Europe will be following the German lead.”
Sassano wrote: “Smart money is already positioned toward the potential that Europe will unlock multiple country markets as it works its way to its rightful position as the second-largest continental cannabis market.”
Implementation of the legislation changes is not expected until 2023.
Renewed calls for cannabis legalisation from Portuguese political party
“The State must regulate the entire cultivation, production and distribution circuit.”
The Bloco de Esquerda (The Left Bloc), Portugal’s left-wing democratic socialist party, has renewed its calls for cannabis legalisation.
The party delivered a new draft law to the Assembly of the Republic this week proposing the legalisation of cannabis for personal use, as reported by CannaReporter. The Left Bloc proposes that Portugal changes its laws to permit the online sale of cannabis, home cultivation of up to five plants and the authorisation of brick and mortar cannabis establishments.
Contrary to previous attempts to legalise recreational cannabis, the socialist party has dropped its original proposal to prohibit edible cannabis products, while “the sale of cannabis enriched with aromas, flavors or additives” and synthetic cannabis would remain banned.
“The State must regulate the entire cultivation, production and distribution circuit, being able to determine a maximum THC limit, as well as the consumer price, in order to combat trafficking and the illegal market”, the draft states.
“The retail sale of cannabis plants, substances or preparations for personal consumption without a medical prescription and provided that for purposes other than medicinal ones, is subject to authorisation from the General Directorate of Economic Activities”.
The party sees legalisation as a strategy for combatting the black market, “manipulated substances” and “uninformed consumption”.
“The prohibitionist policy is not a solution, in fact, it is an integral part of the problem and enhances its aggravation, protecting the clandestinity of trafficking and jeopardising public health,” the law draft reads.
“Legalising cannabis for personal use – more commonly known as recreational use – is to combat trafficking networks and is to combat organised crime networks that are often financed through the trafficking of substances like cannabis.”
The Left Bloc’s previous submitted its previous proposal last year but the draft expired with the dissolution of the Assembly of the Republic at the end of last year.