Medicinal Cannabis Industry
Medicinal Cannabis Industry
Business Model Description
Development of industrial sector in the medical cannabis chain, increasing the added value of current production in pipelines of industrial hemp or drug production. Thus complementing the nascent ecosystem of local producers and industrialists with multinational companies and international investors.
Expected Impact
Regularization of cannabis production and developing R&D allows to create an industry that generates employment associated with innovation.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uruguay: Countrywide
Sector Classification
Health Care
Development needs
Uruguay requires an innovative boost in the medical cannabis industry that materializes its role as a regional hub for pharmaceutical products in the Southern Cone and the early development of the cannabis production phases.
Political priorities
Through Law 19,172, the government regulates the production and marketing of cannabis. It is thus intended to address the issues associated with the consumption of narcotics, as well as the promotion of the development of the medical cannabis industry promoted in Law 19,847.
Gender Inequalities
Today, a third of the jobs created in the industry are occupied by women, with an enormous potential for growth in the employment of women in the sector.
Investment opportunities introduction
The health sector requires significant investments to update the instruments, practices and buildings in which health services are provided. The COVID pandemic highlights the need for health systems with the capacity to respond to new types of emerging risks.
Key bottlenecks introduction
The SNIS poses continuous challenges associated with its financial sustainability, the ability to increase and ensure coverage, which in turn includes new challenges associated with improving the quality of care and health prevention of Uruguayans.
Biotechnology and Pharmaceuticals
Development needs
Uruguay requires an innovative boost in the medical cannabis industry that materializes its role as a regional hub for pharmaceutical products in the Southern Cone and the early development of the cannabis production phases.
Political priorities
Through the regulation of the production and commercialization of cannabis, it is intended to address the issues of crime associated with the drug market and health policies for addictions
Gender Inequalities
To date, one third of the jobs created in the industry are occupied by women, with an enormous potential for growth in the employment of women in the sector.
Investment opportunities
External sales that exceeded US$ 7.5 million. (2020), but there is significant growth potential. To date, 50 countries allow the commercialization of medical cannabis, which represents a captive market for medical cannabis by 2024 of 35,000 million.
Bottlenecks
The main obstacles are associated with export permits and regulatory differences between countries and restrictions on the movement of capital in financial markets.
Biotechnology and Pharmaceuticals
Pipeline Opportunity
Medicinal Cannabis Industry
Development of industrial sector in the medical cannabis chain, increasing the added value of current production in pipelines of industrial hemp or drug production. Thus complementing the nascent ecosystem of local producers and industrialists with multinational companies and international investors.
Business Case
Market Size and Environment
< USD 50 million
Based on information provided by CECAM, the investments required in Pharmaceutical formulation laboratories or cannabis-based textile or oilseed production industries, require tickets that can vary between USD 50 thousand and USD 5 million.
Indicative Return
5% - 10%
Based on information provided by CECAM, a medium level of profitability is indicated (5% - 10%), however, the significant volatility in the sector is noted due to changes in regulations that affect this market in continuous development.
Investment Timeframe
Medium Term (5–10 years)
Cannabis cultivation in the open air or in greenhouses in Uruguay is summer, although its indoor production can increase to up to 4 annual harvests. An investment of 5 years (usual term in agricultural investment funds) allows to diversify risks in several harvests and amortize the initial investments in a longer term.
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Business Model Unproven
Market - Highly Regulated
Impact Case
Sustainable Development Need
The growing production of medicinal cannabis is not finding a local outlet and must be exported as a commodity at a low price. It is necessary to move forward in the chain generating added value in industrial production for export.
Despite the technological assets and clusters that the country has built, the lack of more industrial companies in the sector prevents the creation of jobs from the incorporation of technology in the agro-firm sector linked to medicinal cannabis products.
To ensure quality jobs, productive diversification is necessary in urban and rural locations in the interior of the country, these must be associated with new productive activities such as medicinal cannabis. 80% of the workers in the cannabis chain are located in the interior of the country.
Gender & Marginalisation
The cannabis sector has enormous potential for female employability. Currently 1,000 direct jobs, 35% women.
In turn, this type of production is located in urban or rural areas in the interior of the country. 80% of the companies in the production chain are located in the interior of the country.
Expected Development Outcome
Increase in sectoral GVA and increase in export volumes of cannabis for medicinal use in its different forms.
Impact on job creation and especially on female employment.
Increase in local or territorial GDP associated with the growth of the production of cannabis SMEs.
Gender & Marginalisation
More than 60% of jobs in the pharmaceutical industry in R&D are women, so it is expected to create quality jobs with a gender perspective.
Primary SDGs addressed
9.b.1 Proportion of medium and high-tech industry value added in total value added
9.3.1 Proportion of small-scale industries in total industry value added
USD 7.5 million have been exported in 2020 as a baseline
120 companies linked to the sector 80% are SMEs
Increases of at least 20% in the level of exports and/or sales of medical cannabis products.
Increase of at least 10% in the number of companies registered in the industrial phases.
8.5.2 Unemployment rate, by sex, age and persons with disabilities
34% of the total jobs generated are women.
50% of jobs are women.
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Corporates
Public sector
Outcome Risks
Changes in the regulation of the cannabis market that affect the profitability of medical cannabis. These risks remain to the extent that all political parties are aligned on the regulations that enable the production and sale of cannabis.
Problems associated with the lack of security in production establishments are associated with two types of risk. On the one hand, the risk of theft of production (bear in mind that the cannabis plant does not distinguish between the psychoactive and the medicinal); on the other hand, the risk of contamination in the species planted by other types of species.
Impact Risks
The pharmaceutical innovation market is very dynamic and especially the one associated with new developments associated with the use of medicinal cannabis. There is a risk that investment in R&D in Uruguay will not advance at the same time as market needs, disabling most of the impacts that have been mentioned, especially in job creation.
Impact Classification
What
Develop an industry with added value of R&D.
Risk
Lack of investment needed to make a long-term impact.
Impact Thesis
Regularization of cannabis production and developing R&D allows to create an industry that generates employment associated with innovation.
Enabling Environment
Policy Environment
Law No. 19.172. Marijuana and its derivates control and regulation of the state of the importation, production, acquisition, storage, commercialization and distribution.
Law 19,847 for the Promotion of the Production of Medicinal Cannabis
Financial Environment
Financial incentives: Here there is an important restriction for the management of money associated with the sale of medicinal or recreational cannabis.
Tax incentives: COMAP regime incorporates benefits for employment generation, relocation and innovation.
Regulatory Environment
The Institute for the Regulation and Control of Cannabis (IRCCA) was created by Law No. 19,172 with the purpose of regulating the planting, cultivation, harvesting, production, processing, storage, distribution and dispensing of Cannabis.
Uruguay is one of the first countries to regulate the production of cannabis in the territory. Currently the productions are controlled and authorized by the IRCCA, that is to say that the producers are state concessions and the local commercialization is also public.
Marketplace Participants
Private Sector
Chamber of medicinal cannabis companies (CECAM), chain companies, international companies, Technological Pole of Pando.
Government
IRCCA, MSP, MGAP, INASE, Presidency, National Drug Board.
Target Locations
Uruguay: Countrywide
References
- (1) Radio interview: https://www.cecam.com.uy/noticia/795285
- (2) Cannabis sector in Uruguay; Uruguay XXI, September 2021
- (3) https://www.medicplast.net/
- (4) https://www.bbc.com/world/noticias-america-latina-61598965