By / May 19, 2021

Argentinian Government to present project for medical cannabis industry

The Argentinian Minister of Productive Development, Matías Kulfas, will announce the initiative that seeks to provide a regulatory framework for the development and production of the medical cannabis industry. It is a potential market of $450 million USD per year.

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Argentinian Ministry spearheads medical cannabis initiative

After several months of elaboration and debate with the different sectors involved, the Minister of Productive Development, Matías Kulfas, will present the bill on Monday, May 24. Titled “Development of the medical cannabis and industrial hemp industry”, the bill presented before the Economic and Social Council (CES) opens up a market with a potential of u$s450 million per year, according to a study of the Council for Structural Change (CCE).

Ministry sources explained that the project “seeks to provide a regulatory framework for the development of the medical cannabis and industrial hemp industry”. Kulfas will make the presentation before counselors of the CES: a group that includes academics, deputies and senators who have been working on the cannabis issue, as well as sector representatives and governors.

The Ministry of Productive Development has been working on this project since last year. The official portfolio stated that “the SMEs and cooperatives of the sector will have an important space in the project to promote the development of the industry”. After Kulfas’ presentation, the initiative will be sent to Congress for debate.

Argentina goes beyond authorizing medical cannabis, and into investment

It is worth clarifying that this project is independent of the Argentinian Law 27.350 on the Medical Use of Cannabis, which legalized self-cultivation for that purpose. The law regulated on November 12 last year established a specific registry for those who grow cannabis for medicinal, therapeutic, and/or palliative purposes. In addition, the law guarantees the provision for patients, encourages research, and authorizes the public and private production of oil and other derivatives.

This authorization unlocked an extremely lucrative, but hard to corner, market. According to the CEE study, which depends on the Ministry of Productive Development, “the calculation of the potential market for medical cannabis in Argentina presents a series of difficulties, given that so far it is illegal, except in the few cases authorized by Law 27,350 and its original regulation. This is why it is not possible, for example, to know with certainty the number of users in question”.

Against this backdrop, the study made an estimate of the potential market based on a comparison with the case of Canada. “According to data from Prohibition Partners (2019a), in 2019 the medical cannabis market in Canada reached u$s876 million,” the report states. Adjusting for two basic parameters (population and GDP per capita in purchasing power parity), “it is estimated that the Argentinian medical cannabis market could reach around u$s450 million, assuming, of course, the same degree of potential penetration in the medium-long term”, they added.

Cannabis value chain has a lot to offer Argentinian companies

The study by the Ministry of Productive Development points out that the cannabis value chain includes a long series of processes and actors ranging from the development of critical inputs -genetics in seeds, phytosanitary products, equipment, etc.-, through the actual agricultural production -which can be indoor, in greenhouses or outdoor- followed by the harvest, to the transformation of the biomass according to the intended uses -for example, medicinal, recreational, industrial-.

“The expansion opportunities for this industry are not limited to the medicinal and recreational market,” the study indicates. Currently, cannabis can be used for industrial and horticultural purposes, to manufacture various derivatives (fibers, cosmetics, paper, construction materials, etc.), as well as food, beverages, and infusions.

In addition, the report argues that the industry generates indirect impacts not only through the purchase of inputs and capital goods for its various stages and segments, but also through the need, for example, for analysis and testing services to ensure quality attributes, traceability, composition and potency (THC content, the main psychoactive component) of the raw material and derivatives, including genetics, compound profiles, detection of contaminants and/or agrochemicals, and presence of pathogens.

“Throughout all these stages, a series of services associated with the quality, safety and traceability of production are also required. The chain may be vertically integrated, in which case the main production activities are carried out by the same actor, or it may be based on models in which specialized firms emerge at certain stages,” explains the CEE. Either way, substantial economic value stands to be created in the country.

In addition, the study emphasizes that “the progress in the legalization of cannabis, and the consequent emergence of regulated markets where private companies operate, led to the establishment of requirements and standards for the exchange in those markets”. In this regard, it adds that, although this can cover the production of cannabis for any of its uses, it is in the medical segment where these labels are most present.


(Featured image by Florencia Dallas Lesta via Unsplash)

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