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Uruguay cannabis producer sets sights on global dominance Benedict Mander Financial Times Saturday 06 Jun 2020 Coronavirus has hit global business hard but it has not derailed the ambitions of Uruguayan cannabis producers. After setting a record for the world's biggest single shipment of medical cannabis in May with a 1,421kg cargo of dried flowers to Portugal, Fotmer Life Sciences, the local subsidiary of Canada-based Silverpeak, expects to become the world’s largest exporter of medicinal cannabis this year. “Despite the challenges of operating amid the Covid pandemic we are making good progress. We continue to ship product around the world — helped in large part by the fact that cannabis has been deemed an essential service in most legal jurisdictions,” said Jordan Lewis, founder and chief executive of Silverpeak and Fotmer, based in Montevideo. As more countries legalise medicinal cannabis to treat illnesses and disorders from cancer to epilepsy, the South American nation is well positioned to benefit, having been the first country to legalise the production and sale of cannabis in 2013. “We are going to be so far out ahead of everyone else that it is going to be hard to catch up, both in Uruguay and elsewhere,” said Mr Lewis, adding that the medicinal cannabis market was forecast to be worth roughly $100bn within the next decade. “Having the first-mover advantage has allowed us to get out ahead of the pack and establish a commercial presence throughout the world,” said the US cannabis investor, whose company became the first to export medicinal cannabis from Uruguay last year with a 10kg shipment to Australia. “The Uruguayan experiment has been very successful?.?.?.?the timing was very opportune.” Mr Lewis said Fotmer’s “objective remains to raise around $30m” this year and that as soon as this month it could overtake the Dutch company Bedrocan – which produces marijuana for several governments including Holland, Germany and Canada – as the world’s largest exporter. “Our production has been running smoothly and our adjustment of biosecurity procedures for Covid was relatively easy given that we already had a very high level of biosecurity in place,” he said. Production costs in Uruguay, where plants can be grown outdoors, are less than half of those in Canada — the only other country to fully legalise cannabis, but which has far larger production capacity. Mr Lewis expects costs to fall by more than half again as economies of scale are reached within the next two to three years. Yet Uruguay’s cannabis industry has been slow to develop. Eduardo Blasina, entrepreneur and founder of the Cannabis Museum in Montevideo, blames the previous leftist government for not promoting the country’s exporting potential. But he is optimistic that the business-friendly president Luis Lacalle Pou, who took power in March, will be more proactive. Martín Rodríguez, executive director of Uruguay’s Institute for the Regulation and Control of Cannabis, admitted there had been “a learning curve” both for the government and the private sector. But “it has been a positive process. Each area has advanced, with its own difficulties, in the desired direction”, he said. He expected several new entrants to the local market soon — eight companies have so far been granted licences to grow and sell marijuana. “International trade for medicinal cannabis is just getting off the ground,” added Mr Rodríguez. In the next three to four years, he said, markets could develop in as many as 80 countries as pending legislation is approved, compared with about 30 now. “Medicinal cannabis based on CBD [cannabidiol] has enormous potential,” said Juan Sartori, a businessman and politician who was an early investor in Uruguay’s cannabis sector through a 30 per cent stake in ICC Labs, one of two companies growing marijuana for domestic consumption. ICC was sold for almost $300m to Canada’s Aurora in 2018, about double its value when it listed on the Toronto stock exchange in 2016. But Mr Sartori, 39, who was elected as Uruguay’s youngest senator in elections last year, warns that the legislative advantages for investors in Uruguay will diminish as more countries reform their cannabis laws — meaning the opportunity must be seized now. One of the biggest barriers for Uruguay is that US banks are prevented from doing business with companies involved in the sale or distribution of controlled substances. Most local banks prefer not to maintain accounts for businesses involved in the cannabis sector, fearing sanctions. “We have to work wonders. Every time we have to pay our providers it’s complicated — I can’t just do a transfer,” said Sergio Redin, the owner of a pharmacy in downtown Montevideo that was one of the first in Uruguay to sell cannabis. “It’s an unfair measure, treating us as if we were drug-traffickers — but there is nothing more legal than this; it has 100 per cent traceability,” he said, holding a vacuum-packed bag of cannabis buds replete with health warnings. Cannabis sales surge during pandemic spurs Hightimes deal Mr Lewis, whose company uses Canadian bank accounts for its transactions, said the banking restrictions added “layers of complexity to what should be a routine operation” but he believed the problem would be resolved soon. Europe, and Germany in particular, is the top priority — Fotmer is the first Latin American company to export medicinal cannabis to Europe. Brazil, which recently legalised medicinal cannabis, also offers opportunities, given its proximity to Uruguay. China could prove a huge market, given that cannabis is one of the main therapeutic elements historically used in Chinese medicine. “We are just scratching the surface of the therapeutic benefits of cannabis and its components,” said Mr Lewis, pointing to its potential as an analgesic and a sleep aid — the latter being a $22bn market in the US alone, he said. “There’s tremendous opportunity and we are just beginning to see markets open up.” https://www.ft.com/content/ad308e8b-935c-4153-842e-8156b76c5786
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