Last year, Canopy Growth (TSX:WEED)(NYSE:CGC) announced the acquisition of the leading Colombian medical marijuana company, Spectrum Cannabis. According to an SEC filing dated February 14, 2019, Spectrum Cannabis owns 126 hectares of land on which Canopy Growth may cultivate legal marijuana.
Spectrum Cannabis began as a family-owned medical cannabis company in Colombia following medical marijuana’s legalization in 2016. Post-acquisition, Bibiana Rojas, the daughter of Spectrum’s founders, bravely manages Canopy Growth’s Colombian operations, a critical regional production hub.
Canopy Growth chooses Rojas as country managing director Rojas grew up in Colombia and understands Canopy’s regional supply risks all too well. Due to her family’s socioeconomic status as business owners, Rojas was under constant threat from the Colombian Guerrilla. After a failed kidnapping attempt in 2001, Rojas fled Colombia to start a new life in the culturally distinct United States.
Upon finishing her MBA in 2010, Rojas spent a few years at the Boston Consulting Group before returning to Colombia in 2013. Today, she serves a vital role in leading a strategic asset on behalf of Canopy Growth, Canada’s first premier legal cannabis provider. Through Rojas, Canopy Growth boasts sophisticated insight into illegal drug trafficking networks in Colombia — knowledge that will prove to be a competitive advantage.
Cannabis legalization changes the game In 2016, President Juan Manuel Santos approved prescription of cannabis for medicinal purposes. Historically, cocaine and marijuana have financed civil war and armed conflict in the country. Now that medical marijuana is considered a legitimate enterprise, Bibiana Rojas wants to build a less-violent future.
It is unclear how prominent illegal drug traffickers will respond to Spectrum Cannabis and Canopy Growth’s partnership in the newly legal industry. In addition to legalizing medical cannabis in 2016, the Colombian government also signed a peace treaty with rebel groups for which Juan Manuel Santos won a Nobel Peace Prize. Following the agreement, over half of the armed rebel militants disbanded.
Rebel groups threaten legal businesses Despite these political achievements, the remaining rebel groups still plague the country in growing numbers, and farmers continue to produce drugs for illegal sale. Developing economy supply chain risks prompt significant security challenges for global corporations; this is particularly true for Canopy Growth, considering the business model compromises the revenue stream of ruthless criminals.
Market share is a valuable source of economic rents in the shadow economy as it is for formal industries. Businesses unaffiliated with cartels lack physical protection, which compromises the safety of Canopy Growth’s business interests. Legal marijuana producers can only hope that active cartels do not engage in bribery, blackmail, or extortion to preserve the cartel’s monopoly power.
Canopy Growth acquires street smarts No doubt, Canopy Growth will find that Rojas’s experience with the darker characters involved in Colombia’s drug trade is an asset as the company navigates these political realities in international sourcing.
As for Bibiana Rojas, she must be a courageous visionary to transform her life from political asylee to entrepreneur in an industry with such a hazardous history. The adversarial groups that once threatened her life with bombs and violence are once again her competition. Fortunately, she has a better understanding of the political landscape today versus 20 years ago when she was just a young college student.
Fool contributor Debra Ray has no position in any of the stocks mentioned.
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