Almost six years after Uruguay fully legalized cannabis, investors are eyeing the South American nation as an export hub for medical pot.
Silverpeak Life Sciences Uruguay is in talks with investment bankers to raise $35 million in order to increase production fourfold this year. Silverpeak, which is one of the country’s largest medical cannabis companies, also plans to build a larger extraction laboratory in 2020.
According to Silverpeak Life Sciences CEO and U.S. cannabis investor Jordan Lewis, their planned and desired expansion involves about 25 tons next year. He said that they are expecting this expansion to generate over $100 million in revenue.
Investors have been pouring funds into Canada and the U.S. as they seek to take advantage of more favorable cannabis regulations, which have created a very promising legal marijuana market. Uruguay’s cannabis economy, meanwhile, has been slow to develop despite the country being the first in the world to legalize recreational cannabis.
Lewis noted that Fotmer Corporation SA, Silverpeak’s wholly owned subsidiary headquartered in Uruguay, has asked the country’s cannabis regulatory agency Ircca to increase its allowed annual production to 400 tons of cannabis flowers.
He added that Silverpeak will have to raise about $150 million between next year and 2023 if the demand for cannabis products warrants increasing the production of cannabis flowers to that level. The needed funds will be raised possibly from public capital markets or by forming a strategic alliance with a bigger corporation.
Silverpeak and its rival, ICC Labs, are among a handful of companies that have invested in Uruguay, putting up greenhouses and extraction laboratories in order to supply medical marijuana to other countries in Latin America, as well as to Canada and Europe. This year could mark the beginning of commercial-scale exports as cannabis producers apply trade permits and product certifications.
Ircca has already approved $57-million worth of cannabis projects since 2015. The agency is currently reviewing other permits for 21 projects with an estimated total value of $40 million.
The current pace of investment in Uruguay might change as large American and Canadian cannabis producers start to consider the country as a destination, Lewis said. With enough government support, Uruguay could become the first country to hit $1 billion in annual medical cannabis exports in as early as five years.
He added that based on their projections, Uruguay’s cannabis industry could be a $100-million-plus industry as soon as next year.