26 Ene Paraguay Reigns Over the Latin American Hemp Market

The largest producer and exporter of hemp in Latin America, Paraguay is an example to neighbouring countries of public-private partnerships for the industry’s development

One of the largest producer of cannabis – illegal and for recreational purposes – in the world, Paraguay began cultivating hemp in 2019 and is already among the three world leaders in this new and promising market. Currently, the country is the largest producer and exporter of hemp in Latin America, a position achieved mainly through the hard work and collaboration of both entrepreneurs and the government, so that consolidation of the industry was possible.

Paraguay’s successful formula for managing hemp has been attracting the attention of other Latin American nations, such as Panama and Costa Rica, which continue to advance their laws smoothly. And speaking of laws, Paraguay doesn’t actually have a law per se that regulates hemp for industrial or medicinal purposes.

Both permissions were granted through a decree signed by the president, Mario Benítez (2018–23). Although there are no political currents against the decree, a bill is being drafted and, as long as all goes well, it should be approved by the second semester of next year, when a new candidate is expected to assume the presidency of the country.

In addition to intense collaboration between public and private institutions, the secrets to the successful management of Paraguay’s hemp industry include being ahead of or on a par with the developments of the global main players; also, the involvement of indigenous and low-income communities in the production and sale of plant derivatives and the participation of various government agencies – such as agronomy, health and public security – in decisions about the future of this commodity.

‘It is possible that we were pioneers worldwide in involving indigenous peoples in the cultivation of hemp,’ says Santiago Bertoni (Minister of Agriculture and one of the key figures involved in establishing hemp within the country) about the integration of seven indigenous communities – with more than 4,500 people impacted by the hemp-generated economy.

Strategy

Interested in taking advantage of the knowledge of farmers who originally cultivated cannabis illegally for recreational purposes, the government has offered better conditions than these communities have ever known. First, by working on a legal cannabis farm, the farmer doesn’t need to leave home for six months to go and live in the mountains while growing the plants. Now these men, who used to spend half the year away from home, are able to remain with their families throughout the year.

Second, if income is the main influence, the gains in the new business model, according to official data, are eight times greater, made possible by the sale of not only the flower but also all parts of the plant, including the leaves and the stem. In the programme, the government, in association with private entities, provides the seeds and guarantees the purchase of the entire production. As it is a new crop for most rural producers, previous experience makes it possible to improve year after year. In 2019, 600 hectares of hemp were cultivated; in 2022, that increased to 5,000 hectares.

Despite the farmers’ rudimentary infrastructure, with obsolete equipment and a lack of specialist machinery – not to mention the soil, which is far from ideal – the government, together with business entities, counted on the processing expertise of farmers for harvesting and seed separation, flower and fibre, and their respective drying and storage.

One of the government’s goals is to go from being the largest illegal producer to the largest legal producer of cannabis, and there is open talk that the federal push for hemp plantations is a surefire strategy to reduce the THC content of illegal crops. The theory is that female cannabis strains – which produce the therapeutic and psychoactive cannabinoids – will be pollinated with male strains, in the case of crops no more than 90 kilometres away.

Without confirming that it is a strategy, the government claims that some studies on pollen resistance are being carried out under certain circumstances. Some say that pollen, depending on the wind, can travel between 50 and 90 kilometres. For example, some of the hemp growing areas legalised by the government are between 40 and 70 kilometres away from illegal crops. Until the results of the studies are known, it is worth keeping an eye on the cannabis bricks imported from Paraguay by neighbouring Latin American countries to see if there are any changes in their recreational potency in the upcoming months.

Win-win

Currently, from each of the 5,000 hectares planted, an average of one ton of hemp is harvested. They haven’t always been so productive. The first crops yielded just 300 kilograms of hemp per hectare. The improvement in productivity also reflects a maturing of the industry, which, with the grain and food sector well established, dreams of raising funds to build the necessary structure for the processing of hemp fibres for the textile market – a considerable investment, around US$ 40 million.

From the same 5,000 hectares of hemp, 310,000 tons of positive carbon are generated per year, which contributes to Paraguay also being distinguished by a smaller carbon footprint compared with most countries in the world. To become carbon neutral within this decade, the country will need to put into practice the expansion plans they have for the 100,000+ hectares that are mapped out for hemp cultivation. Currently, hemp is grown in 14 of the 17 Paraguayan provinces.

More than 80% of the hemp produced goes to the United States, Canada, Australia, the Netherlands, the United Kingdom and Costa Rica, which are Paraguay’s main importers, and were already its long-time customers in the purchase of other types of grains, such as chia. ‘Paraguay is the third country worldwide [behind China and the US] to export hemp-derived foods and supplements into the European Union,’ states Marcelo Demp, president of the CCIP (Paraguay Industrial Hemp Chamber).

Also CEO of Healthy Grains S.A, one of the largest grain processing companies in the country, Demp prepared the company’s infrastructure over eight years so that when the processing of the hemp seed finally commenced, the company had already been modernised and was ready to hit the ground running. Currently, the company dominates the market alongside International Market and Irupe Paraguay, both are part of CCIP, which has a total of 32 affiliated companies, all nationals.

‘Some multinationals question the legality of importing hemp in countries where the legislation is not yet fully clear. And as Paraguay is small, there is no demand that justifies these companies selling hemp products only for the Paraguayan market,’ explains Diego Barros, ambassador of the Latin American Industrial Hemp Association and CEO of medicinal cannabis company Koba. In a competitive and hyper-regulated niche, Barros underlines the importance of gaining international prominence by adopting certain quality standards.

Guarantee seals, sanitary control and certificates of good practice are the big bet of the hemp industry in Paraguay. The country’s hemp products are more certified than hemp products from anywhere else in the world. It is true that several distributors, who were previously afraid of selling a product without registration, have felt more comfortable marketing products with different certifications. The most recent of these is CBD cigarettes to help stop tobacco addiction, the only ones in the world approved by a health agency, the Paraguayan Dinavisa.