Sep 29, 2013

Why the U.S. Will Become the Main Marijuana Exporter

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Arguably the main producers of marihuana are Mexico, Paraguay, and South Africa, but if, like in the case of Colorado in the U.S., more states start legalizing pot markets, it might well be the case that in a few years the U.S. will become the leading producer of cannabis in the world. The legalization of marijuana in the U.S. responds to many causes, one of them is health benefits. By legalizing marijuana some states have won a "first mover advantage," which means that the producers, call some of them entrepreneurs, will have more time to experiment with new technologies, including marketing strategies and patenting, to place well their products in the world market place. I say more time compared with producers in countries where the product remains illegal, where producers pay a risk premium. 

Think about the case of corn, which was not native of the U.S. Technology and economies of scale made possible for the U.S to become a world leader of corn production. Today even China buys corn from the U.S. 

Another possibility is what happened with chocolate production. Cocoa is produced mostly in West Africa, and it is imported and transformed into chocolate in countries like Switzerland which have become world leaders in high quality chocolate, and they get higher profit margins. 

The same might happen with cannabis. The U.S. and European countries are legalizing its use. And a combination of technology and economies of scale will make them world leaders in the production of the plant itself or/and the final products. 

That will happened because it will be cheaper to produce, not only because of better technology, but also because it is legal to do so. Latin American countries will lagged behind in the legalization of the plant and that will affect greatly their capacity to keep their leading role in production, and more so, of transformation. It will be very hard to LA countries to catch up. 

In a few years Colombians, Mexicans, etc., will be importing different varieties of cannabis products from the U.S., and the drug will appear as  component of the U.S. GDP.  

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