Caribbean looks to seize opportunity in medical marijuana market

Cannabis may be the most widely consumed psychoactive substance in the world, but until recently consuming it remained illegal in most places. However, as attitudes shift and the failure of the US-led global war on drugs becomes ever more apparent, policies are changing too.

High time, as some might say. 

In the Caribbean islands, policymakers want to get in on the ground floor of the nascent global market for legal marijuana production.

Whereas marijuana supply chains used to run through underworld entities or some guy named Chad’s basement, the gathering pace of legalisation for medical and – in some cases – personal use means a new industry is emerging. Experts expect it could reach $50bn in value worldwide.

In Jamaica, which has taken the lead on legalisation in the Caribbean, tourism minister Edmund Bartlett also wants to position the country in the $438bn wellness tourism sector.

A boon to law enforcement

In the Caribbean, countries are focusing on legalising medical marijuana only, with some looking to grant exceptions for the religious practices of groups such as the Rastafari.

Personal recreational use remains illegal, though recent decriminalisation in places such as Jamaica, Bermuda and Puerto Rico means that being caught by the police with a small amount of pot is now treated more like a traffic violation than a criminal proceeding.

The legalisation of medical cannabis production also provides an opportunity to turn pre-existing, illicit production into thriving local industries. In Saint Vincent and the Grenadines, which is expected to legalise medical marijuana in August, experts believe that illegal production currently exceeds $40m per year – more than banana exports.

“We are optimistic that it can reduce incidents of illegality,” says Saboto Caesar, minister of agriculture for Saint Vincent and the Grenadines. “However, we live in the real world, and vacuums are sometimes easily filled.”

Jamaica at the forefront

Jamaica is already the largest illicit producer and exporter of marijuana in the Central America and Caribbean region, according to the International Narcotics Control Board. Now a regulatory framework is in place in the country and the medical marijuana industry is already growing, literally and figuratively. In 2015, the government created the Cannabis Licensing Authority. The first business licences were granted in 2017.

Kingston-based Medicanja, first incorporated in 2013, was the first registered medical marijuana company in the Caribbean. Building on decades of medical research by its founder and executive chairman, Dr Henry Lowe, it plans to list on local and Canadian stock exchanges within the year.

It has received a $10m grant from the Development Bank of Jamaica to fund its research as well as, in June 2017, orphan drug status from the US Food and Drug Administration for chrysoeriol, a cannabis-based drug intended to treat acute leukaemia cancers. Orphan status qualifies a drug for development incentives and tax credits.

“Tapping into a percentage of this large market would allow for a high return on investment while contributing to the fight against cancer,” says Mr Lowe.

Portmore-based Everything Oily Labs received Jamaica’s first processing licence, and plans to set up an extraction plant and operate as a bulk supplier of cannabis oils from its 6000-square-metre facility.

Epican, meanwhile, is at the forefront of cultivation under its slogan 'Medicate, educate, elevate'. The 4000-square-metre facility is currently waiting for permits to hire 20 employees, and will also have an outgrower programme that brings local farmers into the value chain. It plans to open its first retail outlet in the Jamaican capital, Kingston.

Going mainstream

Medicanja is not the only medical marijuana company going public. Canadian start-up Canopy Growth Corporation – currently the world’s biggest pot stock with a market value of $5.6bn on the Toronto exchange – announced in May that it would also list in New York, following on the heels of the Cronos Group. Its ticker? WEED, of course.

“Five years ago, as a small Smiths Falls [Ontario]-based start-up in the cannabis sector, we could have never imagined this historic moment,” says Bruce Linton, Canopy chairman and CEO.

In a clear sign that the stigma against investing in cannabis is falling away, Constellation Brands – owner of Corona beer – took a stake in Canopy in 2017. Canopy has already forged links with the Jamaican market, taking a 49% stake in Tweed Ltd.

The opening up of North American markets figured “significantly” in the push for legalisation across the Caribbean, according to Mr Caesar in Saint Vincent. “We are part of the hemisphere… and the cannabis revolution in North America has been very trend-setting,” he says.

Recreational use

Indeed, these markets are only set to grow. So far, 29 of the 50 US states have legalised medical marijuana while 13 have decriminalised – though not legalised – recreational use.

In Canada, registered medical marijuana users nationwide exceeded 250,000 in September 2017, up 40% since March. Markets are poised for recreational legalisation (originally slated for July but many now expect delays), which would make pot available to consumers in much the same way as alcohol or cigarettes.

Canadian investors are taking note of the long-term trends, and many are looking to the Caribbean for opportunities. Two of the four board members of Kaya Inc, a Jamaica-based medical marijuana brand, are Canadian; a third has worked extensively in the Canadian industry. The company announced in April that it will list in Toronto, while still retaining 50% Jamaican ownership and directorship as required by law.

“We will continue to work with all governing bodies as we continue to build a Jamaican brand that can extend beyond the shores of our island. This will give all Jamaicans access to invest and participate in a transparent regulated industry,” CEO Balram Vaswani told local media.

Local misgivings

Even as industry development blazes ahead, some observers have misgivings. Socially conservative groups in the Caribbean are not all pleased by the new, free-wheeling attitude towards marijuana. Meanwhile, Rastafarian communities that have been cultivating the plant for centuries are concerned that they will not have a place in the new industry.

For locals, the licensing and regulatory processes can be onerous. A basic licence costs about $300 in Jamaica while further taxes and fees per hectare can rise into the thousands of dollars. Requirements including fencing and security cameras, which the government says are required under international law, can be prohibitively expensive.

Governments still hope that local opportunity will follow in the wake of investment. In Saint Vincent and the Grenadines, after the failure of its banana crop failed in 2010, finding new opportunities for farmers was a main impetus behind the government’s decision to re-examine its marijuana legislation.

Companies agree. “Cannabis has been an integral part of our culture and society for decades and it is necessary for our locals to play an active part in the industry,” says Mr Lowe at Medicanja.