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There's little doubt that the U.S. is going to be the most lucrative legal cannabis market, once it's fully up and running, and assuming pot is legalized federally. And while the No. 2 spot has typically belonged to Canada, it may not end up that way. While Canada certainly has a head start, having been just the second country to fully legalize marijuana (Uruguay was first), it hasn't exactly been a smooth ride for the cannabis industry there in the period since.

Supply issues have been a big problem, and restrictions on advertising have made it difficult for companies to build their brands. However, even if those issues are addressed, the potential for the Canadian market may still not be all that big, if for no other reason than its relatively small population of 37 million people. 

Results so far have been so disappointing that researchers from BDS Analytics recently cut their revenue forecasts for the Canadian market: Where they previously expected it to hit $5.9 billion in 2022, they now are predicting it will hit $5.2 billion by 2024. The managing director of BDS Analytics, Tom Adams, blames the "very cautious approach" that the country's government is taking to cannabis for the slower growth of the market.

Another market that could prove to be a better option for investors: Asia

One research company, Prohibition Partners, believes that the market for legal cannabis in Asia could be worth more than $5.8 billion by 2024, eclipsing the $5.2 billion that Canada would have by the same time, if both figures prove to be correct. Researchers estimate that nearly 86 million people on the continent use cannabis every year. 

The big advantage for Asia is certainly its size -- there are vastly more potential cannabis consumers in that part of the world. The disadvantage, however, is that the effort to get it legalized for adult use in the nations is likely to be more of an uphill battle. There's still a lot of opposition to marijuana in the region, and penalties for using it or selling it are still extremely stiff in some counties.

While it's unfair to compare the Canadian market to an entire continent, the reality is that the bulk of the sales in Asia are expected to come from just two countries, China and Japan, which Prohibition Partners anticipates could make up 90% of the market. 

Great opportunity for companies to expand into Asia today 

One company that could benefit greatly from a strong Asian market is GW Pharmaceuticals (NASDAQ:GWPH), maker of Epidiolex, the first cannabidiol (CBD)-based treatment to be approved for use by the U.S. Food and Drug Administration. The U.K.-based company has already set its sights on other international markets. Epidiolex has been approved for clinical trials in Japan; if it is successful and approved by regulators there, that could lead to greater acceptance of CBD treatments across the continent. 

GW is still growing, and after recording $72 million in sales in its most recent quarter, the company is poised for a big improvement this year. In all of 2018, GW generated just $29 million in revenue.

However, the opportunity isn't limited to just pharmaceutical products, as any cannabis company producing CBD products could have an incredible opportunity to grow in Asia. And with many of the world's largest cannabis producers focusing on North America and Europe, now could be a great time for a company to establish a strong position there.

The United States is suffering from an epidemic that is estimated to have claimed 400,000 lives. In what is now known as the opioid crisis, drug manufacturers have been raking in huge profits over the past two decades by mass prescribing a diverse class of addictive painkillers known as opioids.

Now, about 130 people in the United States die every day after overdosing on opioids, making it the nation’s biggest accidental killer, while millions more continue to suffer from the dependence and addiction that the drugs cause. 

Things reached a boiling point this week after drug-maker Purdue Pharma filed for bankruptcy and agreed to a $12bn settlement for its role in fuelling the crisis. 

Before that, a landmark case saw pharmaceutical giant Johnson & Johnson pay $572m in compensation for its role in the epidemic of addiction in Oklahoma alone.

It’s a crisis that has been described as a “uniquely American problem” – a phenomenon that could only really emerge from the US healthcare system, where insurance companies seek out cheap solutions and many doctors who prescribe the drugs receive payments from the manufacturers to do so. 

In 2012, this crisis peaked, when more than 255m opioids were prescribed, at a rate of 81 prescriptions per 100 Americans. 

The trouble is that many aspects of the problem have a wider relevance too, and not least in the UK, where a government review recently revealed that almost 12m people (about one in four adults in England) are now taking medicines that are addictive for pain, depression, or insomnia. 

The majority of these are antidepressants, which doctors issued nearly 71m prescriptions for in 2018, a 97 per cent increase compared to 2008. What’s also worrying is that prescriptions of opiates have risen 22 per cent from a decade earlier to 40m. Both of these medicines can be difficult to withdraw from and are easy to abuse.

Also consider that both countries have been engaged in a longstanding war on drugs that has led to a widespread denial of  the medical properties that exist in banned substances. 

We know that medical cannabis creates important pain-relieving molecules that are 30 times more powerful than aspirin, but that crucially, offers relief without the risk of addiction and fatal overdose that prescription painkillers do. 

While opioids work by blocking the brain’s receptors, the cannflavins in medical cannabis target pain with a different approach, by reducing inflammation. 

If you look first at CBD-dominant strains that have very little or no THC, the World Health organisation has said that “in humans, CBD exhibits no effects indicative of any abuse or dependence potential” and that “to date, there is no evidence of public health-related problems associated with the use of pure CBD”. 

This is crucial because patients now report many benefits of CBD, which include relieving insomnia, anxiety, and chronic pain.

So if CBD can be an effective, non-addictive, and a safe substitute for opioids, then what of medical cannabis that also contains the psychoactive compound THC? 

Critics of the drug say that this type of cannabis is itself addictive. While decades of global conservatism towards cannabis has resulted in a shortage of medical trials, recent studies show it can be particularly effective for the severe chronic pain that plagues millions, and is still far safer than opiates because it’s impossible to overdose on and far less addictive. 

Health Canada, the Canadian version of the NHS, found that while cannabis addiction does exist, the risk is far lower than in tobacco, alcohol, and opioids, while the NHS states that 10 per cent of regular cannabis users are at risk of addiction. 

Pre-clinical studies are also uncovering that certain cannabinoids may even alleviate opioid withdrawal symptoms. In fact, striking recent statistics suggest that prescribing medical cannabis instead of opioids has the potential to prevent around 25 per cent of deaths associated with opioid addiction each year. 

Also bear in mind that in American states where cannabis is legal for medical uses, prescriptions for opioids and anti-depressants has fallen on average by an extraordinary 30 per cent, a rate still strengthening with time. 

The financial burden that these health care crises have on British society each year already runs into billions of pounds, including the cost of lost productivity in the workforce.

Medical cannabis is an inexpensive and effective alternative to many treatments, that is now widely viewed as a non-toxic and non-addictive substitute for pricey prescription drugs. 

This alone should be a good enough reason for the NHS to consider CBD or medical cannabis both as a substitute to prescribing opioids, and as means to alleviate the opioid withdrawal symptoms addiction that already afflicts so many.

The U.S. government will spend $3 million to find out if marijuana can relieve pain, but none of the money will be used to study the part of the plant that gets people high.

Nine research grants announced Thursday are for work on CBD, the trendy ingredient showing up in cosmetics and foods, and hundreds of less familiar chemicals. THC research was excluded.

The federal government still considers marijuana an illegal drug, but more than 30 states allow it use for a range of medical problems, some without good evidence.

The science is strongest for chronic pain, the most common reason people give when they enroll in state-approved medical marijuana programs. But little is known about which parts of marijuana are helpful and whether the intoxicating effects of THC can be avoided.

“The science is lagging behind the public use and interest. We’re doing our best to catch up here,” said Dr. David Shurtleff, deputy director of the National Center for Complementary and Integrative Health, which is funding the projects.

THC has been investigated extensively, Shurtleff said, and its potential for addiction and abuse make it unsuitable for treating pain.

Other federal agencies have supported marijuana research, but much of the focus has been on potential harms. Shurtleff said the grants answer the call in a 2017 National Academies of Sciences, Engineering and Medicine report, which concluded a lack of marijuana research poses a public health risk.

Another driver is the nation’s opioid addiction crisis, with its roots in overuse of prescription painkillers. The crisis has sparked new scientific interest in marijuana’s pain-easing properties.

Dr. Judith Hellman, a grant recipient from University of California San Francisco, said scientists need to better understand pain and to find more ways to treat it. “It’s very exciting to have the opportunity to do that,” she said.

Hellman’s research involves the body’s ability to produce signaling molecules similar to marijuana’s ingredients. Her and Dr. Mark Schumacher’s work involves human immune cells in the lab, then tests on mice.

Human test subjects will be involved in only one of the grant projects. University of Utah researcher Deborah Yurgelun-Todd will scan the brains of human volunteers with lower back pain to see how CBD extract — mixed with chocolate pudding — affects pain-signaling pathways. Half the volunteers will get pudding without CBD as a control group.

Two more human studies may be funded in a second round of grant awards, NCCIH said.

In July, the National Institute on Drug Abuse said it would grow 2,000 kilograms (4,409 pounds) of marijuana this year at the University of Mississippi, which holds the sole federal contract for producing research cannabis. Those plants won’t be used in many of the new projects, which instead will use lab-made versions of the chemicals.

Researchers in Illinois hope to create a library of useful compounds found in cannabis plants.

“We make them from scratch and test them one by one,” said David Sarlah of the University of Illinois. Marijuana contains such tiny amounts of the interesting ingredients that it’s too costly and time consuming to isolate enough for research, Sarlah said.

Sarlah, an organic chemist, will make the chemicals. His colleague Aditi Das will run tests to see how they react with mouse immune cells.

“There are so many beneficial effects that patients report. We need to know the science behind it,” Das said.

Colombia could export $6 billion a year in medicinal cannabis products, making marijuana its third-largest source of foreign exchange, the government said on Thursday, as investors called for simpler regulations for marijuana producers.

Colombian law already regulates the possession, production, distribution, sale and export of seeds and other marijuana products like oils and creams, but investors say the export approval process is tortuous.

“It’s possible to be a very important player at an international level in terms of exports. The estimates show we could effectively be at the level of $6 billion annually,” commerce vice minister Saul Pineda told attendees at the country’s first annual cannabis conference.

Colombia has so far only licensed seed-producing by businesses because of complex compliance standards for everything from sanitation to security, in a country still famous for being a top illegal narcotics producer.

“More forceful action in regulatory terms is needed so we don’t lose the momentum that we have been growing with,” said Gustavo Escobar, head of innovation at Colombian-Canadian joint venture Clever Leaves.

“We’re lacking some adjustments that would allow us to attend to markets as quickly as possible, before other countries get ahead of us,” he added.

Colombia’s hearty sunlight and equatorial climate could make it a major producer of medicinal cannabis, whose cultivation in the country has been backed by the United Nations International Narcotics Control Board.

Beto O’Rourke said Thursday that he wants the federal government to provide “Drug War Justice Grants” to people formerly incarcerated for nonviolent marijuana offenses.

The proposed grants, part of O’Rourke’s plan to legalize and regulate marijuana, would be funded by a federal tax on the industry.

The proposal comes as O’Rourke, an early champion of marijuana legalization, seeks to regain his footing in the Democratic presidential primary. Campaigning in California, he met with marijuana advocates in Los Angeles on Tuesday and planned to hold a similar meeting in Oakland on Thursday.

If elected, O’Rourke pledged to use clemency power to release people now serving sentences for marijuana possession, and he called for expunging the records of those convicted of possession.

He also proposed removing cannabis-related charges as a grounds for deporting people or denying them citizenship.

More than a dozen candidates in the Democratic Party’s sprawling primary field support legalizing marijuana, reflecting a significant shift in party politics in recent years.

But the issue has long been a cause of O’Rourke’s. As an El Paso councilman, he pressed in 2009 for a resolution encouraging the federal government to undertake an “open, honest, national dialogue on ending the prohibition of narcotics,” arguing that legalizing marijuana could stop drug trafficking at the U.S.-Mexico border. He co-wrote a book, "Dealing Death and Drugs: The Big Business of Dope in the U.S. and Mexico," in 2011.

In his proposal Thursday, O’Rourke’s campaign said proposed "justice" grants would be funded entirely by a tax on the marijuana industry and would go to former state and federal inmates for a period based on time served.

O’Rourke’s campaign said a federal tax on the industry would also fund treatment programs, re-entry services and programs in communities disproportionately affected by marijuana arrests. He also proposed tying federal criminal justice funding to a requirement that states and local governments waive licensing fees for marijuana-related businesses for low-income people who have been convicted of marijuana offenses.

“We need to not only end the prohibition on marijuana, but also repair the damage done to the communities of color disproportionately locked up in our criminal justice system or locked out of opportunity because of the War on Drugs,” O’Rourke said in a prepared statement. “These inequalities have compounded for decades, as predominantly white communities have been given the vast majority of lucrative business opportunities, while communities of color still face over-policing and criminalization. It’s our responsibility to begin to remedy the injustices of the past and help the people and communities most impacted by this misguided war.”

O’Rourke's campaign said he would seek to regulate marijuana similarly to how alcohol is regulated, including limiting sales to adults and conducting advertising focused on deterring use by children and driving under the influence.

O'Rourke proposed limiting smoking of marijuana to “private residences and nonpublic spaces” and keeping marijuana-related businesses apart from “schools, daycares, churches and other incompatible land uses.”

Although marijuana has been legal in California for nearly two years, black market weed is still a booming business in the state.

Illegal sellers outnumber legal and regulated businesses almost 3-to-1, according to a startling analysis of California cannabis sellers released this month. Some critics blame the website Weedmaps for letting thousands of rogue stores advertise.

But cannabis regulators are cracking down. This week, they put publications, including Weedmaps, that advertise unlicensed marijuana businesses on notice that doing so is against state law.

"Failure to comply with the requirements for advertising may lead to significant financial penalties," the Bureau of Cannabis Control said in an email to the industry Tuesday.

The sellers analysis, which was completed by an association of legal marijuana businesses in the state, punctuates a tough year in an industry that launched with great promise in 2018 but soon faced heavy challenges including, a lockout of legit sellers in most of the state's cities, enforcement challenges and high retail taxes.

Critics say those hurdles have only emboldened an expanding black market.

The United Cannabis Business Association, a statewide group of legal marijuana businesses, found that about 2,835 illicit sellers, including storefronts and delivery services, are operating statewide. That's more than three times as many illegal sellers as legal ones — 873. The group unveiled the numbers earlier this month in an open letter to Gov. Gavin Newsom and state marijuana czar Lori Ajax.

"We’re the only state to go recreational and see a year-over-year reduction in legal sales," UCBA president Jerred Kiloh said.

When Proposition 64 made buying and holding cannabis legal for those older than 21, many in the industry expected a green rush; it opened sellers to perhaps the world's largest legal marijuana market.

But as the first licensed stores started welcoming customers in 2018, rogue operators claiming to have permission to sell cannabis were also setting up shop in such places as Los Angeles and San Diego County.

Signs advertising medical marijuana prescriptions outside an evaluation clinic on Venice Beach in Los Angeles on Oct. 9, 2009. Before recreational marijuana sales were approved by California voters in 2016, this was the way many consumers made their way to legal cannabis.Mark Ralston / AFP - Getty Images file

Bay Area cities haven't struggled as much with black market storefronts, and some experts say that's likely a result of plenty of legal stores and diligence from local officials. "The Bay Area has been ahead of the curve on licensing for many years," said San Francisco-based Dale Gieringer, director of California NORML.

"We’ve yelled it from the mountaintop," Kiloh, who owns a licensed shop in Los Angeles, said. "We want better enforcement."

In making the results of its illegal-shop analysis public, the main focus of the UCBA's ire, however, wasn't City Hall or even Sacramento. It was the international website Weedmaps, which lists cannabis sellers in major markets like Los Angeles, regardless of whether they're state-approved.

In 2018, the state sent Weedmaps a cease-and-desist letter because the site allows unlicensed sellers to advertise, which violates California's cannabis regulations that require advertisements to display license numbers. "You are aiding and abetting in violations of state cannabis laws," the letter stated.

The site could be liable for $30,000 a day in fines, under state law.

In July, Weedmaps announced it would phase out ads from illicit shops.

Chris Beals, the website's CEO, said that the rogue advertisers would be gone by the end of year. But for some in the industry, that's not fast enough.

"We don’t want to let Weedmaps dictate when they’re going to stop breaking the law," Kiloh said. "That doesn’t make sense."

Weedmaps, which operates in nine countries and the majority of American states that have legalized some form of cannabis, says it's not the problem when it comes to California's black market.

No other recreational marijuana state has seen the black-market issues California has, site CEO Beals said. The main problem, he says, is there aren't enough legal retail locations to meet the market demand.

Many of the same black-market operators on Weedmaps can also be accessed on Google, Yelp and other platforms, he said: "This is really superficial. The real underlying problem is that there’s insufficient licenses address market demand."

That's an issue even state regulators have recognized: When California voters made recreational marijuana usage legal, they gave cities leeway to outlaw sales or limit them locally as they saw fit.

They have, and wide swaths of the state are dry. Forcing cities to accept cannabis is a long shot in a state known for its strong, not-in-my-backyard politics.

"The bureau would love to be able to license more cannabis retail locations in California," Alex Traverso, spokesman for the Bureau of Cannabis Control, said by email. "Unfortunately, there are a number of factors that prevent us from doing that. It’s not all under our control."

Less than 25 percent of the Golden State's cities allow legal sales, he said.

Gieringer of California NORML said the state's cannabis buyers also must consider that when buying from a legal shop, the price includes state and, often, local taxes that can add up to 25 percent to the cost. "I think the real problem out there is the regulations and the taxes are too expensive," he said.

"It's a sad state of affairs when the prices go up and the array of products goes down when they repeal prohibition," he said. "It's supposed to be the other way around. There are fundamental problems with the way California handles this issue."

On the street, police continue to chase down rogue operators who often undercut price and don't collect taxes.

In Los Angeles, where some observers say more than 1,000 shops operated before licensing was established, police have been scrambling to shut down fly-by-night dispensaries. The city has only 187 licensed shops.

The UCBA analysis found hundreds of illegal stores in L.A., and the Los Angeles Times in May counted 220 illegal stores.

Narcotics Detective Vito Ceccia of the Los Angeles Police Department's Cannabis Support Unit says shutting down rogue storefronts has "always been a whack-a-mole situation."

But he says police have reduced the number of illegal shops to fewer than 175 — less than the number of legal ones for the first time. And the City Council is weighing a measure that would allow authorities to padlock and board up rogue storefronts.

The detective said police use Weedmaps to find illicit business, particularly delivery services that don't always have a boulevard storefront.

"They are a great tool for law enforcement," Ceccia said.

When PharmaCielo, now a publicly traded company, formed in 2014 to cultivate medical cannabis in Colombia, some growers needed convincing. Some came from families that farmed chrysanthemums for generations. Cannabis was largely illegal and stigmatized. Scars from the nation's decadeslong drug war were fresh. A peace deal between the government and leftist FARC rebels was two years away. North America's marijuana stocks boom had not begun.

Talks with indigenous communities, regulators, the military and police took a couple of years. And after all that, PharmaCielo, which joined other marijuana stocks on the Canadian exchanges this year, has yet to report a dollar in commercial cannabis sales. But it is far from alone in its South American aspirations. Other marijuana companies are betting the region will supply the world with outdoor-grown cannabis at a fraction of North America's costs.

The upshot: A flood of cheap weed from the region could force big producers in the U.S. and Canada to rethink massive investments in indoor, climate-controlled grow houses. Some executives and analysts predict they might disappear further down the road or be re-purposed.

North American marijuana companies are already putting down roots in countries like Colombia, Peru, Brazil, Argentina, Uruguay and Chile. Sourcing that product from South America could fatten profit margins and reorder the global supply chain.

"In fact, we don't believe the Northern Hemisphere will be leading the cannabis cultivation industry in half a decade or less," Joseph Lusardi, CEO of U.S. cannabis producer Curaleaf (CURLF), said during a presentation in January. "We will likely be importing cannabis from the Southern Hemisphere and from countries such as Uruguay, where we can't possibly compete with those inputs."

Next Frontier For Marijuana Stocks

Free-flowing international trade of recreational weed is still probably a generation or more away. In the U.S., an act of Congress legalizing marijuana would be necessary. Figuring out the right way to import hemp will be a multiagency effort.

Regulations from nation to nation also seem likely to gum up emerging pathways of commerce. Even in Colombia, where regulations are more developed, few companies have been cleared to produce and sell cannabis products.

In Colombia, pot producers pack five or more outdoor growing cycles into a year. (©StockPhotoPro/stock.adobe.com)

But coffee, cut flowers and other agricultural products from Latin America have become bulk commodities. Pot industry insider increasingly believe cannabis will follow suit as more nations legalize it.

Marijuana companies able to capitalize on the trend could get an edge as the added competition lowers prices.

Meanwhile, Canada's producers are struggling to meet towering expectations. And the heightened interest in Latin America also comes as investors in marijuana stocks seek the next frontier for big returns.

'Huge Business Opportunities'

At the same time, Latin America is rethinking its drug policies after years of turmoil. Uruguay in 2013 became the world's first nation to legalize recreational marijuana. Colombia, Mexico, Argentina, Brazil, Peru, Paraguay and Chile allow at least some degree of medical marijuana usage or cultivation. But legal frameworks for business remain stiff or underdeveloped.

Legal business within those nations is expected to remain relatively small in the years ahead. The research firm BDS Analytics forecasts that legal spending on medical pot within those nations, excluding Paraguay, will reach $547 million by 2024. Mexico's $441 million will make up the vast majority.

By contrast, BDS expects overall legal spending in the U.S. and Canada to swell to $34 billion over that time. But insiders still see huge potential in Latin America.

"The sheer number of inhabitants, ideal growing conditions in large parts of the region and jurisdictions in favor of production for export signal potentially huge business opportunities," Alfredo Pascual, international analyst at the industry publication Marijuana Business Daily, wrote in a September report.

Colombia Leads The Way For Marijuana Companies

Mexico might have the biggest market inside its borders. But more investors believe Colombia, where medical marijuana was legalized in 2015, offers the best climate. That's literally and figuratively. When asked how much Colombia could export over the next five years, Tom Adams, BDS' managing director, industry intelligence, said in an interview: "More than the world could consume."

The equator cuts right through Colombia's lower half, affording crops a steady diet of warm weather and 12 hours of sunlight. That allows producers to pack up to five outdoor growing cycles into a year on open stretches of arable land and volcanic, organically-rich soil. In areas further north, producers can get around one outdoor cycle a year.

"We do expect to be the breadbasket of cannabis, I think," Kyle Detwiler, CEO of New York-based Northern Swan Holdings, said in an interview. His investment firm backs a cannabis company in Colombia.

Cannabis producers in Colombia can export cannabis oils, extracts and isolates. They can grow cannabis and also sell cosmetics infused with extracts that come from outside the nation. But they can't domestically sell it or export it in dry-bud form.

BDS Analytics, in a report in June, said that as profit-hungry marijuana companies descended on Colombia from abroad, their interest was "clearly shared" by Colombia's government. Regulators had doled out nearly 260 licenses as of the end of July, most for cultivation, according to Pascual's report.

Marijuana Stocks Eye Flower Power

While there's still plenty of red tape, the potential for cost savings for marijuana companies is immense.

In Canada, it costs $1-$2 to produce a gram of dry bud indoors, GMP Securities says. (Canna Obscura/Shutterstock.com)

In Canada, it costs $1-$2 to produce a gram of dry bud indoors, GMP Securities analyst Robert Fagan estimates. Much of that is from expenses to control lighting and temperature as the seasons change outside. But in Colombia, that cost shrinks to 5-10 cents when growing in the open air.

Labor costs in Colombia are also far lower, which keeps those costs lower. They sit somewhere around $15 a day in Colombia, said Dov Szapiro, managing partner at the cannabis-focused private equity firm Cresco Capital. Szapiro said the firm was weighing possible investments in the region.

Colombia already supplies a huge portion of the world's cut flowers. The skills in that line of work, the argument goes, translate well into growing and trimming cannabis plants, analysts say.

Colombia: 'Complete Opposite' Of Canada

Those lower costs have also proven attractive to Canada's most well-known marijuana companies. The likes of Canopy Growth (CGC), Tilray (TLRY) and Aurora Cannabis (ACB) have scattered their investments across Colombia and the rest of the region.

Anna Shlimak, Cronos Group's head of investor relations and communications, stressed that her company is committed to Canada. But Cronos has also found things to like about Colombia.

"It's not a surprise that Canada isn't the best place to grow cannabis — it's very cold," she said in an interview in June. "And in Colombia, it's not only the complete opposite, it's also not humid, which is also quite important."

Cronos in May said that NatuEra, a joint venture it runs focused on Colombia, has a cultivation license in Colombia for psychoactive cannabis, along with licenses to make non-psychoactive products. Cronos CEO Mike Gorenstein at the time said NatuEra would initially put most of its focus on hemp.

He also noted that, "having a low cost of production is going to be something that's going to be really important to drive margins long-term."

The Canadian Connection

Bigger Canadian marijuana stocks have also tried to buy their way into Colombia. Canopy Growth, the world's most valuable weed grower, announced last year that it acquired Spectrum Cannabis Colombia. Canopy said the move would help it serve the Latin American market directly.

Aurora Cannabis last year acquired cannabis producer ICC Labs, which is based in Uruguay but has operations in Colombia. Other smaller marijuana stocks, like PharmaCielo and Khiron Life Sciences, concentrate their operations in Colombia. However, PharmaCielo is technically based in Canada.

For now, PharmaCielo is only cultivating CBD plants, which have easier export regulations, with plans to sell products based on those plants in nations where it's legal abroad. It relies on its own facilities for cultivation but hopes to eventually fatten capacity by contracting with outside farmers.

Under that system, which Chief Corporate Officer David Gordon said was similar to the tobacco industry, PharmaCielo would own the plants. The farmers would grow those plants, harvest them and return them for processing. At least that's the plan. PharmaCielo had zero commercial sales in Q2. But Gordon expected some to trickle in during the second half of this year, with more next year.

Other marijuana companies with a focus on Colombia include Blueberries Medical and Clever Leaves, the company backed by Northern Swan.

A low-cost structure in Colombia, analysts argue, could help those businesses weather any global drop in CBD prices. That risk looms larger as more marijuana companies enter, bearing everything from tinctures to muscle wraps.

Marijuana Stocks Add LatAm To Supply Chains

Other Canadian companies are using Latin America as a node on their global supply network and a springboard into other markets.

Tilray, a top producer of medical cannabis, has pharmaceutical supply distribution agreements in nations like Peru, Brazil, Argentina and Chile. A global partnership with Sandoz, a segment of pharma giant Novartis (NVS), could also put more Tilray products on pharmacy shelves worldwide. The arrangement also saves Tilray from doing that work itself.

"We just have to add our products to their supply chains," Tilray said in a written response to questions. "We don't have to purchase a fleet of trucks and duplicate their sales and logistics teams."

The product flows go in the other direction too. After acquiring its local import and distribution partner in Chile last year, Tilray said it can send its products to Chile from its production facility in British Columbia. The company also said it "may" eventually supply Latin America via Portugal, where it is ramping up a production center intended to serve as the heart of its international business.

Aurora in December also announced that it would acquire Farmacias Magistrales in Mexico. Aurora, in an investor presentation this month, said the deal would make it "Mexico's first and only federally licensed importer of medical cannabis containing over 1% THC."

Marijuana Industry In International Limbo

But rules for the medical market are laxer, while international trade for recreational products is still illegal. Tilray said it doesn't see that changing "in the near future."

Cost saving from using South American supplies could be minimal in products like cannabis beverages. (Elaine Low/IBD)

In an interview shortly before his July ouster as Canopy Growth CEO, Bruce Linton agreed that the days of recreational weed legally crisscrossing the globe are far off.

"I regret to inform you that you and I will probably be dead before that happens," he said.

He also downplayed the prospect of low-cost, commoditized weed forcing an overhaul of Canada's vast indoor grow operations. And he said that as more producers use cannabis as an ingredient to go in other products like beverages, the cost savings might be overrated.

Thus, for cannabis beverages, he said, "If I'm putting 10 cents of THC in, and you can get it to me for 4 cents, does that actually materially improve my margin? No. Like, I'll take it. But it's really about the sales price and the loyalty to the brand and the frequency of sell-through."

Linton also argued that shipping costs could eclipse the value of the substance being shipped. And he suggested pushback could come from already-legal areas, where jobs, pot shops, production facilities and other infrastructure are more entrenched.

'Basic Rules' Of Agriculture

Demand at home and limits on international trade might keep Canadian marijuana companies plowing money into massive indoor growing facilities for now. But Szapiro, of Cresco, said investments in those operations eventually would become less meaningful than investments in intellectual property and technology. Grow operations will ultimately disappear or become research centers, with no major production hubs in Canada, he predicted.

Adams, of BDS Analytics, pointed to the cut-flower industry that went to Mexico and Colombia. Similarly, he said, today's North American cannabis market is "a short-term opportunity created by a regulatory environment that's going to go away."

He added: "But your long-term planning has to face the facts of the basic rules of any agricultural product, which is that Colombia can produce it cheaper."