Cannabis as an Agricultural Product
The cannabis market is undergoing significant changes as it becomes a highly relevant agricultural product. This has generated a competition to find the best growing climate at the lowest cost. In this context, a new candidate is emerging in South America: Paraguay.
Paraguay: A New Player in the Cannabis Industry
Paraguay is positioning itself as a key player in the production of medicinal cannabis. CPplant Switzerland, a cannabis exporting company, plans to acquire a licensed producer in Paraguay to produce high-THC flowers and extracts. This would allow them to supply the company’s Swiss laboratory at a much lower cost than in other countries in the region.
Regulation and market prices are determining factors for CPlant Switzerland’s decision. If cannabis prices continue to decline, they will likely move most of their cultivation from Uruguay to Paraguay, where operating costs are 50% lower.
The Challenge of Prices and Competition
Cannabis exporters are facing falling prices due to increased production in Mediterranean and Southern Hemisphere countries. This situation is driving companies to seek favorable growing climates with lower operating costs.
Paraguay presents itself as an attractive option due to its favorable regulation, cheap electricity, low wages and established pharmaceutical industry. Since the legalization of medicinal cannabis in 2017, Paraguay has limited production to 12 local investors who obtained licenses in 2020. Some of these companies are already supplying products to pharmacies and the country’s Ministry of Health.
The Future of the Cannabis Industry in Paraguay
CPplant plans to grow up to 5 hectares of high-THC flowers in Paraguay by 2024. This shift towards THC is due to declining prices for CBD products. CBD flower prices in the European Union are expected to decline by around 20% this year. In contrast, CBD flower prices were down 20% in 2021 from the previous year.
In addition to Paraguay, Uruguay also plays an important role in the cannabis industry in South America. Since 2013, Uruguay has been a pioneer in legalizing most uses of the drug and has exported large volumes of cannabis to countries in Europe and Latin America.
The Growth Potential in the Cannabis Market
The medical cannabis market in Europe is expected to reach US$2.6 billion by 2026, according to Prohibition Partners. This represents significant growth compared to the estimated US$270 million in 2021. Companies like CPlant are taking advantage of this opportunity and looking to expand in the region.
CPplant has begun raising funds to finance product development and expansion projects in Paraguay, Argentina, Brazil and Slovenia. Additionally, they are exploring the possibility of producing and exporting psilocybin mushrooms for medical purposes in Uruguay.
Conclusion
The drop in cannabis prices is creating an opportunity for Paraguay in the cannabis industry in South America. With its favorable regulation, low operating costs and an established pharmaceutical industry, Paraguay is positioning itself as a key competitor in the production of medicinal cannabis. Companies like CPlant are taking advantage of this opportunity and looking to expand in the region.
