Rodrigo Chaves, the recently elected President of Costa Rica, marked his first 100 days in office this week by announcing an initiative to legalize recreational cannabis.
The president’s announcement to send the initiative to Congress for discussion came on top of reassurances that his administration was nearly ready to publish the regulations for medical cannabis, which were approved by the previous Congress.
“We really did not expect this last announcement about [recreational] cannabis,” said Guillermo Argüello, the president of the Costa Rican Hemp Association. According to Argüello, Costa Rica still has a long road ahead before it will be in a position to compete with the existing Latin American markets.
“If we compare Costa Rica with Latin American markets we are at a disadvantage because we have not yet begun to plant cannabis,” he said. “We do not have large tracts of land. The pandemic and external factors such as the increase in the price of oil and the war in Ukraine have hit the national economy. Farmers and tourism are the most affected.”
Despite the challenges, Argüello believes the fledgling Costa Rica industry could find a path to success through foreign investment and smart commercial alliances.
He also has some advice for other countries looking to join the sector in any form.
“For the countries venturing into this market, I recommend looking [at your own] strengths and weaknesses so you can make strategies that will allow you to compete,” he said. “Look for niche markets and look for added value to products. Cannabis can give you 25,000 business opportunities, look for the one that best suits you.”
Latin America already has a significant number of countries with legal cannabis in some form. Some of these include Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay.
The region is expected to have the second largest growth spurt in value by 2025, with medical cannabis driving that projection. Latin American regions saw 17 percent growth in 2021 and reached a value of $170 million, with Mexico taking the lead as the most important market at $59 million. With Costa Rica’s farmers and tourism hit hardest by external factors including COVID-19 and the Russian invasion of Ukraine, a completely legal cannabis market supporting cultivators and attracting tourism would be a significant boost to the economy and the region’s projected value.
“I think that every time a new country legalizes cannabis for medical or recreational use it helps other countries who have yet to legalize cannabis move forward on their own legalization path,” said Matt Maurer, co-chair of the Cannabis Law Group at Torkin Manes. “Each new country to legalize helps to reduce stigma that may be held in other non-legalized countries and provides those other countries with a new set of rules and experiences which they can observe and use to develop their own regime in the future.”
Maurer added that at the early stages, he believes Costa Rica should concentrate on business at home. “I think Costa Rica is best served by focusing on its domestic needs first. The international industry is still a tricky space given many countries’ reluctance to allow international imports for a variety of reasons,” he said. “Focusing on domestic needs at the outset not only allows Costa Rica to properly supply its own population first — which is the primary reason for legalization in the first instance — and allows the country to find out where its strengths and weaknesses lie and to become, as a country, a stronger producer or manufacturer as the case may be.”
Once Costa Rica has taken care of its domestic cannabis needs, Maurer feels the country will be in a great position for inexpensive export. “The climate of Costa Rica and the cost of domestic labor ought to result in high-quality flower being produced at extremely competitive costs,” he said. “Its location in Central America makes it ideally suited to ultimately export to North America, South America, Europe, and Asia all quite easily.”
The framework for medical cannabis sales and distribution in Costa Rica is expected to be made public this fall. Experienced cultivators, processors, equipment manufacturers, and the rest of the cannabis industry should begin considering Costa Rica as a future home for investment, sales, and consulting opportunities.