Paranoia over pot and medical marijuana leaves most countries high and dry

By Nancy Collisson

With all the positive financial buzz related to the medical marijuana industry going on lately, why haven’t Emerging Market countries begun cashing in on it?

Some Numbers

Canada recently legalized medical cannabis and expects $3.4 billion a year in taxable sales over the next decade. 

In 2015, Colorado (where medical as well as recreational marijuana use became legal in 2014) generated $996 million up 42.3 percent from its first-year legalization total of $700 million, when it also earned $63 million in tax revenue. 

In 2015, GW Pharmaceuticals (GWPH) showed a market increase of 113.44 percent with sales of $476 million; American Green, Inc. (ERBB) increased a whopping 806.67 percent with market cap of $33 million; and Cannabis Science (CBIS) of 103.77 % with earnings of $57 million.

If a company can manage to keep all aspects of its marijuana trade in-house, like California-based Terra Tech Corp (OTCMKTS:TRTC) does, it makes out better.

Terra Tech is the only US-based, publicly traded company that cultivates and extracts, and does its own branding, marketing, and retail sales. As a result, its revenues in 2015 were up 35 percent to $5 million. With four dispensaries set to open in Las Vegas by November of this year, those numbers will skyrocket. 

In the US, retail outlets can pay up to $2,500 per pound of cannabis from cultivators and sell it for about $5,000 per pound. But if they can manage on-site cultivation, they reduce that cost to $600-to-$800 per pound. Meanwhile, a company’s retail price can remain at industry levels, which, depending on the strain of the plant, can be as high as $7,000 per pound.

Puerto Rico

EM leaders who’ve been weeding out options should take a look at Puerto Rico, the only EM country taking active steps to turn around its economy by legalizing marijuana for medical use and initiating medical marijuana tourism. 

This American territory that flies the American flag and uses the US dollar as its currency is $72 billion in debt and has an unemployment rate of 15 percent. Because of tax changes unfavorable to employers that were implemented during the Clinton administration, half of its industrial base moved out, along with 55,000 citizens.

The only economic bright spot left in the country is tourism, which employs 63,500, and brings in 3.2 million people each year. 

While tourism alone provides 7 percent ($4.34 billion) of the country’s total GDP of $62 billion, since opening their doors to the medical tourism trend three years ago, Puerto Rico has boosted the amount by $100 million per year, with an average spend of $10 thousand per patient.

As in most EM countries, basic medical and dental care costs in Puerto Rico are 40-to-60 percent lower than they are in the US. This fact in itself attracts mainlanders who, along with those from Latin American countries, take greatest advantage of Puerto Rico’s medical tourism.

Banking on the strong likelihood that the number of these patient-tourists and the spend they bring will increase dramatically with medical marijuana tourism, is PR Governor Alejandro Garcia Padilla. 

As his first step in firing up this industry, in May of 2015, Garcia signed an executive order mandating the Puerto Rico Health Department authorize use of some or all derivatives of the cannabis plant for medical use.

He had little need to justify his decision. In a simple statement he acknowledged the proven health benefits of marijuana everywhere the plant is used to treat – as he noted – pain associated with migraines and illnesses including epilepsy, multiple sclerosis, and AIDS.

“We’re taking a significant step in the area of health that is fundamental to our development and quality of life,” he said, “and I am sure that many patients will receive appropriate treatment that will offer them new hope.”

Garcia’s soft caring words were backed up by hard financial benefits for industry investors.

In Puerto Rico, those initiating new tourism businesses can receive a 90% tax exemption on income and personal or business property. Those who invest in or contribute land to those developing tourism businesses can receive 50 percent in tax credits.

According to Mayra Maldonado, legal adviser to the Puerto Rico Health Department, twenty applications for marijuana cultivation licenses have been received this August, and manufacturing and dispensary applications are presently being accepted.

Puerto Rico isn’t the only EM country with trained medical staff who can sooth the wealthy ill a pleasant climate, sunny beaches, and medical marijuana. And its government is far from the only one that would benefit from a big financial shot in the arm that the medical marijuana industry can bring.

High and Dry

The level of paranoia over a plant with a four-thousand year history of serving as a curative and of being cheap as dirt, not requiring pesticides, and able to thrive in a range of climates is downright laughable.

Failing to get in on this presently highly profitable trade by regulating it through the channel of medical tourism will cause EM countries to miss out on robust tax revenue that could be used to pay down debts and rejuvenate tired communities.

Hashing over what should be a quick decision – as Garcia made it – to meet the staggering global demand for medical marijuana and make good bank while doing so, will only leave perfectly capable EM countries caught in the passive smoke that leaders like Garcia leave behind.

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