By Tomás Rodríguez Ansorena and Florencia Pulla
When the era of prohibition comes to an end (and it won't be too long), it will be remembered as a sigh in the very long history of cannabis cultivation. George Washington planted it on his Vermont estates and Belgrano wanted to industrialize it in the bureaucratically stagnant Viceroyalty of the Río de la Plata. Now that consultants value the (legal) market at more than US$30 billion and that several of the world's largest consumer goods companies have green plans, the idea of deepening their criminal prosecution sounds naive. . According to data from the UN International Narcotics Control Board, the world production of cannabis for legal use went from less than one ton in 2000 to 290 in 2018.
And that's just for the production of cannabinoids. The hemp market is even bigger. China, which exhibits zero tolerance for any narcotic, is the main producer of this variety of the plant with very low concentrations of THC (less than 0.3 percent), the famous psychoactive component of marijuana. In 2019, it registered almost 70,000 hectares dedicated to the production of fibers with a very varied destination: textiles, construction materials, balanced food, cosmetics, bioplastics and paper. The outdoor brand Patagonia is one of the importers of Chinese hemp ( hemp, in English) for her own line of clothing made from this industrial crop, which according to some studies has advantages over cotton, starting with its water footprint. The rest is used for the extraction of CBD, the pain-relieving, relaxing, nausea-reducing, seizure-preventing component that is the basis of all "medical" cannabis products.
In Argentina, the discussion on this chapter of civil liberties is open but far from closed. Where a clearer picture does begin to emerge is in non-psychoactive cannabis. In his recent opening speech for the 2021 legislative sessions, President Alberto Fernández announced the sending of a bill to promote "cultivation exclusively for medicinal and industrial use." Among the arguments, he highlighted that "the global medical cannabis industry will triple its turnover in the next five years." The Minister of Productive Development, Matías Kulfas, added in a dialogue with APERTURA that cannabis is "a great opportunity to generate employment throughout the country, increase exports and mobilize high value-added activities linked to production".
This new step in the legislation arouses enthusiasm on the part of the nascent but already very large ecosystem of cannabis entrepreneurs. Until now, the framework established by Law 27,350 of 2017 was limited to the legalization of medicinal use for certain patients and scientific research. That allowed the launch of the Argentine projects that were pioneers in the cultivation of the controversial plant. The range was expanded at the end of last year with the authorization of "self-cultivation and solidarity cultivation" and the authorization of pharmacies to sell oils. The new law will definitively shape the production system. There, Argentina has the conditions to be a powerhouse and get into the business in which, in the region, Colombia and Uruguay have already taken root, the players in the industry say.
I don't want to wait any longer
Ten days after the PASO of 2019, Facundo Garretón felt that the game was over in Argentina and began the procedures to settle in the Eastern Republic. " I realized that people wanted something else and I was the wrong person. So I decided to leave ," he says today from Uruguay, where he designs "the largest cannabis company in America Latin". In full harvest of the three and a half tons of flowers that it plans to export to Europe this year, it presents its new holding company, Terraflos Inc., with which it will integrate with different companies the four main links in the cannabis value chain: the production of raw material, the extraction of essential components, the elaboration of products and the commercialization. In addition to its current operations in Uruguay, Canada and Colombia, it is about to make a name for itself in Argentina with the acquisition of a manufacturing company for the production of cannabis products (once the law allows it). To this is added Dr. Gea, a new online platform for the sale of these and other products founded by the Argentines Gonzalo Carrasco, Jorge Lloveras, Martín Andrés and Nicolás Cavaliere that will have its official launch in Mexico and Colombia.
It is not improvised. In the year 2000 Garretón founded InvertirOnline, the pioneering company in Internet trading that ended up being sold in 2018 for almost US$ 60 million to Grupo Supervielle. In addition, he is a promoter of entrepreneurship and was part of organizations such as Endeavor. In 2015, he was elected national representative of the PRO for Tucumán, his native province, where before IOL he had created the first Internet provider in northern Argentina, Tucumán BBS.
His first serious contact with cannabis occurred in 2017 as a congressman, when Argentina began to regulate the industry and he began to study comparative legislation. There he found a boiling market that reminded him of the dot-com bubble of the late 1990s: everything to invent, a lot of smoke to sell and a lot of room to fail, but certainly a plant loaded with the future. "I saw that the opportunity was there, but you had to be very selective and have a good investment hypothesis. I began to follow more than 300 cannabis companies, more than half of them in Latin America," he recalls. .
Garretón understood that he had to specialize and that is why his first investment was in Yvy Life Sciences, a Uruguayan company focused on sourcing raw materials: from genetics to trimming (cutting the flower) and drying. In addition to her own plantations, Yvy advises and sources the crop from small farmers that began to flourish in 2013 after Uruguay became the first nation in the world to regulate the production, sale, and consumption of cannabis. In 2020, the Uruguayan industry closed exports for US$6 million, mainly to Switzerland, with prices that varied between US$200 and US$2,000 per kilo of dried flower.
With Yvy, Garretón made it to current affairs magazines this summer, after he bought Susana Giménez's iconic farm in the town of Garzón for a million-dollar amount. The Terraflos headquarters will be there, combined with a research and development hub and a series of cannabis ventures: a themed hotel, a restaurant with an ad hoc menu, a wellness center and activities typical of Mendoza wineries but with color green and penetrating aroma.
Garretón's second investment is called Blueberries Medical Corp, based in Canada and listed on the Canadian stock exchange with a market capitalization of more than 25 million Canadian dollars (CAD 1: US$0.80). Garretón today is Chairman of the company but his intervention began with minimal participation. When he acquired 5 percent of the shares, he agreed to occupy a chair on the board of directors with the acquiescence of his founders, who in turn proposed that he double his participation through a debenture (instrument similar to a convertible note). At the end of 2020, an offer from an Australian group to buy the majority of the share package accelerated its plans and, invoking its "first refusal" right, it matched the offer and became the most relevant shareholder. The total investment was US$ 1 million, in which FLA Ventures, the fund of his now partner Sebastián Hochbaum, also contributed.
Blueberries is dedicated to the second link in the chain: the extraction of cannabinoids. Its main operation is in Colombia, where they carry out the "supercritical" extraction process with CO2, a GMP (Good Manufacturing Practices) certified method that enables them to market high-quality activated ingredients for the pharmaceutical industry. The choice of Colombia is not accidental since its regulation, also pioneering, expressly prohibits the export of dried flowers. The entire Colombian harvest must be destined for industrialization, which has already aroused the claims of primary producers who wanted to scale up their production and access better prices. According to the Colombian Association of Cannabis Industries (Acolcanna), total exports of cannabis-derived products reached US$4.5 million in 2020, a flow that Blueberries plans to increase considerably. And although its clients today are mainly pharmaceutical laboratories, Garretón intends to allocate its products to more segments.
"Cannabis does not cure specific illnesses but rather alleviates ailments and has therapeutic applications", says Garretón. "In Argentina, for example, it was originally approved for refractory epilepsy, which does not cure the disease but reduces epilepsy events. In Parkinson's the same: it improves tremors. In the same sense, it helps if you have anxiety, to sleep better or if your joints hurt. What am I doing with this? We understand cannabis as a wellness tool. We are not so direct in the classification between medicinal and non-medical. We think of it as a wellness tool."
Between Yvy, Blueberries, Dr. Gea and his brand new acquisition in the country, Garretón estimates the assets of Terraflos Inc. at close to US$ 100 million. And he is confident that it is just the beginning. Although his near future remains in Uruguay, he says that "Argentina can do all the links in the chain. In sourcing, no way. It has fields, it has knowledge, it has technology and great professionals. In the The second link also has knowledge and experience. Argentina has sugarcane extraction plants, corn and soybean processing plants, and other alternative crops. And manufacturing too: I would say that most of the leading laboratories in Latin America originate from in Argentina. It may be the world's next cannabis granary."
Could you be loved?
In Uruguay the cultivation of both varieties is legal: rich in cannabidiol (CBD) and rich in tetrahydrocannabinol (THC). The requirements and controls to grow and market the latter, however, are much higher. This is why the CBD market is exploding. In addition to Garretón's ventures, a good number of Argentines crossed the pond to ride the wave. The partners of CPlant, Lucas Crivilone and Guido Husni, who before turning 30 are already among the main exporters in the country stand out. Nicolás Bianchi is just getting started. Until five minutes ago, he made his living as a lawyer specializing in international litigation. But together with his brother and his partner, they have just formed SAS Bloom Growth in Uruguay to get into this business in which, he believes, everything remains to be done. To grant the cultivation license, the eastern authorities require a sustainable and credible agricultural plan and carry out rigorous scrutiny regarding money laundering. Bloom's plan begins with 250 plants for experimentation in barely half a hectare. For the following campaign, which is planted at the end of winter and harvested at the end of March, his project is for five hectares.
According to your calculations, excluding trimming. Nothing bad. However, not all are success stories. According to Bianchi, those who tried extensive crops without previous experience failed resoundingly. (the most labor-intensive stage), the investment for this extension is around US$ 200,000. With an average yield of one ton per hectare and export prices close to US$ 300 per kilo, its projection of profit is one and a half million dollars. Nothing bad. However, not all are success stories. According to Bianchi, those who tried extensive crops without previous experience failed resoundingly.
And failure is not the exclusive preserve of the adventurous. Marcelo Duerto would never say that his experience was a "failure", but things did not end as he expected. An aeronautical engineer by training and a consultant for 26 years for all types of industries at Accenture, his leap into the cannabis business was a momentous change. In 2019, he was appointed Country Manager for the Southern Cone of Canopy, one of the most important cannabis companies in the world, like so many, of Canadian origin. He did not last more than a year in office. In the meantime, the departure of its founder and a definitive change of strategy took place at the command of Constellation Brands, owner of Corona and other strong brands in the beverage market. Canopy had wanted to be a pioneer in all markets in the Americas, but for its new owners, they had to focus where there was regulatory certainty. "It happened with many companies: they tried in many countries hoping for a favorable regulation that never happened," says Duerto.
In personal terms, his time at Canopy was all profit, and today he designs the landing, also in the Southern Cone, of another major in the world of cannabis. "Huge expectations had been generated and the changes did not occur as quickly as expected. But cannabis is here to stay, I have no doubts ", he explains. In the middle of a round of investors to finance his new project, he is convinced that Argentina will be a crucial cannabis pole for the development of the industry in the region. However, he does not believe that cannabis is an industry "per se" but rather a new segment in a myriad of markets, from food to pharmaceuticals.
The flower inside you
The enactment of the 2017 law launched the race in Argentina to take advantage of the narrow spaces provided by the regulatory framework. The most daring province was Jujuy, which that same year adhered to the framework law and the following year created the Estatal Cannabis Avatara. Gastón Morales, son of the Governor, took over as head of the company, who until then had worked to promote renewable energy in the province. As Morales explains, the initiative came from "the conviction that it was the only way to overcome the contradiction that existed at that time: on the one hand, a law that legalized research and medicinal use, but on the other, people resorting to the black market or to imported products at exorbitant prices. With an investment that at the moment required US$4 million, Cannava intends to reach pharmacies in Jujuy this year with a "safe and affordable medical grade product". But in addition to satisfying this demand, the Jujuy project pursues perhaps more ambitious objectives: "Cannabis can contribute a lot to the diversification of the productive matrix of the province as a very important complement to tobacco and sugar cane, the two main commodities of the regional agricultural industry, which have been in decline for years. In Jujuy there are about 25,000 families that depend on tobacco and cane. The cannabis industry can be an alternative."
Cannava goes from seed to final medical grade products, Morales describes. Over the past year and a half he has been conducting agricultural trials both outdoors and under cover in his nine greenhouses. In addition, they have a germination chamber and a pilot research and development laboratory where today they carry out the extraction, distillation and other processes to obtain the active ingredients. "The objective of this stage was to achieve the stabilization of the product and we are already achieving it," says Morales. "Cannava also has a biotechnology complex that houses an agricultural laboratory and a 600 m2 pharmaceutical laboratory , which was designed by specialists and validated in an international exchange process. It is a GMP-grade cannabis-derived medicine production plant. The equipment for this plant is arriving in the middle of the year and the plant is going to have a processing capacity of 45 kg of plant biomass per hour", he explains. From that production, they get 10 percent of that volume in active pharmaceutical ingredients. "The genetics have a predominance of CBD with a very low percentage of THC. This is how we are verifying it in the laboratory. But it is a false dichotomy that CBD is medicinal and THC is not," Morales believes: "It is an error that is born Due to the lack of knowledge of the therapeutic power of the plant and all its cannabinoids, we are reserving THC for scientific research and it has enormous potential."
For Morales, Fernández's announcement "is up to the challenge that medical cannabis has for Argentina in terms of development and growth." There, he stresses that one of Cannava's objectives is to create an ecosystem of small and medium-sized producers: "Today we are experiencing the challenges of the activity firsthand so that we can later turn them into a guide to good practices that can be used very soon by growers".
Among the wide spectrum of state agencies involved in the activity (safety, health and agriculture to begin with), one of the most cumbersome instances for Cannava was the importation of seeds. For this reason, the province is about to launch its provincial genetic improvement plan. "Our goal is to achieve economic sustainability and that depends to a large extent on achieving a Jujuy variety".
At the close of this edition, the National Seed Institute had a dozen requests to import cannabis sativa seeds in progress, a process that was also tedious for Benjamín Enrici, president of Agrogenética Riojana, a mixed company majority-owned by the State of La Rioja. Along with Misiones (Misio-Pharma), San Juan (Canme) and Jujuy, the province completes the federal panorama of specific projects to integrate into the market and provide cannabis products. The project headed by Enrici arose from the need to modernize and contain the small producers of the "oasis agriculture" that characterizes the province: the olive tree, the raisin vine, the walnut and the almond tree. To train and bring updated solutions to these production systems, Enrici traveled in 2009 to a geographically similar region but with a different history of development: California. There he discovered the cannabis boom and understood that La Rioja could not miss out on such an opportunity.
Enrici is convinced that the prohibition of cannabis does not originate from its effects on the mind but from the fact that it was an obstacle to the development of other industries. Specifically, the paper industry and the petrochemical industry. But beyond this, he believes that the prohibition was a tragedy due to the censorship suffered by research into the different uses of cannabis and especially its therapeutic potential. Agrogenética already has agreements with the Conicet and the universities of La Plata and La Rioja both to train professionals in cultivation and its therapeutic application and to produce phytoderivatives for medicinal purposes. Enrici is convinced that the prohibition of cannabis does not originate from its effects on the mind but rather from the fact that it was an obstacle to the development of other industries . Specifically, the paper industry and the petrochemical industry. But beyond this, he believes that the prohibition was a tragedy due to the censorship suffered by research into the different uses of cannabis and especially its therapeutic potential. Agrogenética already has agreements with the Conicet and the universities of La Plata and La Rioja both to train professionals in cultivation and its therapeutic application and to produce phytoderivatives for medicinal purposes.
Enrici wants to turn the province into a national cannabis power, with agricultural projects (that complement and improve the situation of smallholders), medicinal, food, industrial and even tourism. On the other hand, he believes that "recreational" use will sooner rather than later be legal in Argentina: " No country that regulated for medicinal use did not regulate recreational use afterwards. The line is easy to cross from one side to another ".
National and therapeutic
Pablo Fazio doesn't like the word "recreational." "Why does everything have to be fun?" he wonders. That is why he speaks of "responsible adult consumption", one of the lines that he intends to install as president of Argencann, the Argentine Chamber of Cannabis. It is not the most important, of course, but Fazio places great value on the symbolic level. He believes that it ispositive that the President gives relevance to the industry in the most important institutional speech of the year. Fazio is a founding partner and operational coordinator of Pampa Hemp, the first Argentine company to achieve a public-private agreement with INTA for the research and production of medical cannabis. The process was not easy. Fazio, who earlier pioneered the craft beer boom with Otro Mundo, would have preferred other times. In fact, he traveled to Uruguay to evaluate a series of projects but preferred to continue trying in Argentina: "Regardless of the fact that it is a business in which I want to be a protagonist, this is something that Argentina has to do, it cannot turn its back on it. We are talking about cannabis but ultimately we are talking about something else: it is development, it is foreign currency, it is to value an incredible capital that is the academic and scientific ecosystem that Argentina has. If we do not start to dream a little differently, we will not be able to create a different country".
Now, the opportunity is not eternal, he remarks. "In relation to primary production, every week we find out that new countries are entering, lately a lot in Africa. At some point it is going to be a commodity market. After that there are many opportunities in innovation and product development Argentina, being an agro-industrial and agri-food country, has to enter now," he insists. Fazio and all those consulted for this article see unique potential in the "edibles" segment, foods and beverages with CBD and other cannabinoids: dry pasta, edible oils, cereal bars, waters and soft drinks, yerba; the list is endless. Fazio even highlights veterinary products, with balanced foods designed for pets with chronic ailments or in the last stage of their lives.
Fazio believes that the new legislation and its regulation must be specific and clear to avoid approval and certification bottlenecks: "If we are going to open up, let us know what will happen with all possible uses "Are we going to be able to develop phytopreparations, veterinary products, seeds? If the law is very nice but then Anmat does not allow you to incorporate CBD as an input for food, it will come to nothing," he says.
In the midst of the debate about which model to adopt (from industrialization to the Colombian one; from "primarization" to the Uruguayan one), he says that Argentina must go for everything. "He has to produce, he has to develop his industry and he has to export" , he says. "What's the problem with exporting? If marijuana becomes a commodity, what's the problem? That would be great." And he also highlights the added value "backwards" in the development of cannabis: "Do you know the amount of technology you have to develop to have a quality flower? We are developing an AI system for the early detection of diseases; a system of sensorization (to measure the acidity of the substrates, humidity of the environment); all this information goes to a platform to be able to automate the greenhouse. And we do this with companies that are dedicated to specific topics: plant nutrition, technology, genetics. Do you know the amount of added value that this generates?
There is a feeling of inexorability in Fazio's enthusiasm. The end, for him and for many, is clear. Not only did prohibition not end the drug trade, it prevented the development of legitimate industries and health-promoting products, he argues. You can't help but ask "why alcohol and marijuana?" , but understand that the processes are long, that everything cannot be discussed at once. And that each step, if it is forward, goes in the right direction.
The original text of this note was published in issue 328 of Apertura magazine
