Focus: Cannabis firms catch a whiff of opportunity in Brazil

Clever Leaves Holdings

20/08/2021 11:00

By Ana Mano
    SAO PAULO, Aug 20 (Reuters) - International cannabis
companies are showing interest in Brazil, both its large
consumer market for medicinal products and a proposal that could
legalize planting of the crop. 
    Major producers like Colombia's Clever Leaves  CLVR.O  and
Canada's Canopy Growth  WEED.TO  are developing and selling
medicinal cannabis products to a Brazilian consumer segment
estimated at 10 million to 13 million people. This results from
a 2019 regulatory change allowing the import, sale and
manufacturing of such products. 
    But permission for cultivation of hemp and cannabis in
Brazil would be a bigger prize. If granted, the industry could
blossom in four to five years, based on the experience of other
countries such as Colombia.
    "By 2025, I would like to be planting hemp in the interior
of Pernambuco," said José Bacellar, founder of Canada's
VerdeMed, referring to a northeastern state known for illegal
marijuana growing. 
    A proposal that would legalize cultivation was approved in
June by a congressional committee. Lawmakers are weighing if it
could be fast-tracked to the Senate for approval. If passed
there, President Jair Bolsonaro would have to sign it into law. 
  
    While Bolsonaro's far-right positions may seem an unlikely
match for the bill, the proposal has support from some members
of the powerful farm sector, a key constituency that helped him
win the 2018 election. 
    
    SILICON VALLEY OF CANNABIS 
    In the quiet town of Viçosa in southeastern Brazil - which
some call the Silicon Valley of cannabis - researchers are
developing a hemp variety better suited to the tropics.
    If the law is changed and research is successful, Brazil
could become a top grower of cannabis and hemp, experts said.
    Sérgio Rocha, director of ag-tech startup Adwa which is
developing the hemp strain for Brazil, said about 3 million
square kilometers (1.2 million square miles) of land would
potentially be suitable for cultivating the new variety.
    Brazil could overtake China, the world's largest hemp
producer, which has about 670 square kilometers (259 square
miles) planted.
    "Using a part of Brazil's agricultural land would be enough
to give the country the title of world's largest producer and
exporter of hemp fibers, seeds and flowers for medicinal and
industrial purposes," said Dennys Zsolt, an agronomist
specializing in the plant.
    Brazil bans growing of Cannabis sativa L, the plant that
produces hemp and marijuana. Hemp, which has less than 0.3% of
the psychoactive compound THC, contains CBD or cannabidiol. This
non-intoxicating ingredient has been touted as beneficial for
many health conditions including childhood epilepsy.
    Growing the plants in Brazil would lay the foundation for a
vertically integrated industry. A stable source of the raw
material would support manufacturing of medicinal cannabis
products, growth of a retail market and exports. Recreational
cannabis would remain illegal.
    Gabriela Cezar, chief executive of New York-based Panarea
Partners investment banking firm, sees Brazil playing a leading
role in hemp in Latin America, a region she calls the "epicenter
of world hemp production." 
    Panarea plans to form a Brazilian cannabis company focused
on pharmaceutical products for pets while seeking to broker more
cannabis deals in Brazil. 
    
    TROPICAL ADVANTAGE 
    Among Brazil's advantages are lower growing costs because
its warm climate allows plants to grow outdoors compared to
greenhouses in some countries. Stable hours of sunlight due to
Brazil's proximity to the equator are another plus. 
    Canopy Growth is "actively monitoring the advancement of
hemp regulations in Brazil," David Culver, the company's vice
president of global government relations, said. 
    But nothing is certain without the change to Brazil's law,
though some signs suggest the prospects are favorable. When
Rocha spoke to a congressional committee about hemp in 2019, he
was surprised that conservative lawmakers were not hostile.
    "After I finished presenting the maps and hemp's potential,
I was applauded," he said.
    Although the farm caucus has not taken a formal position,
members of the group said a majority in both houses of Congress
back the proposal. The farm caucus controls slightly fewer than
half the seats in the two chambers, and the law requires
approval by a simple majority. 
    Center-right lawmaker Fausto Pinato, a member of the farm
caucus, said he supports the bill. "If you are authorizing the
sale, why not cultivation?," he said.

 (Reporting by Ana Mano in São Paulo, Jimin Kang in Seul and
Maximilian Heath in Buenos Aires; Editing by Cynthia Osterman)
 ((ana.mano@thomsonreuters.com; Tel: +55-11-5644-7704; Mob:
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