Investors in the CBD market are beginning to take a sharp look at the international arena as restrictions loosen and usage of CBD products grows in Europe, Latin America and beyond.

As with all investments, there are risks to be considered when participating in the overseas cannabis market, along with the potential for generous returns. Because the industry is so new in most countries, the legalities can be fraught, with governing, banking and financing regulations not firmly in place.

Debate is raging in and out of court between government entities like the World Health Organization (WHO) and the European Industrial Hemp Association (EIHA) about whether or not CBD should be labeled a narcotic.

The EIHA believes labeling CBD and related products as narcotics would deprive farmers and food business operators of much-needed revenue as they grapple with an already precarious market due to COVID-19. European Union regulators, on the other hand, have said that cannabinoid extracts such as CBD are subject to a 1997 provision called the Novel Food Regulation, a set of guidelines for evaluating consumer safety before putting new ingredients in food. This means any product containing CBD requires pre-market authorization.

And, an adviser to the European Union Court of Justice recently stated that France’s blanket ban on the marketing of all hemp-derived CBD products contradicts EU law on the free movement of goods. One thing most parties agree on is the need for regulatory harmonization of the CBD industry in Europe and beyond.

For those who may be considering entering the potentially lucrative waters of international cannabis investing, the following is a list of a few promising countries to consider.

The Netherlands

Unlike most other countries, coffee shops in the Netherlands are outlets for the sale and on-site consumption of recreational cannabis, which naturally sets the stage for a favorable investment environment. Licensing takes place on the municipal level and starting in 2021, 10 municipalities will take part in a four-year study called the “closed supply cannabis experiment” where coffeeshops will only be supplied by regulated growers.

One hurdle to be aware of is that currently more than two-thirds of Dutch municipalities do not allow coffee shops to sell recreational cannabis. And because commercial cultivation of cannabis is still illegal there, a lot of shops are forced to rely on the “back door” illicit market to stock their shelves.

Colombia

In 2016, Colombia decriminalized small amounts of cannabis and legalized medical cannabis. Many large North American cannabis companies view Colombia as a great opportunity for investments in cultivation because of its tropical climate, relatively inexpensive labor and skilled workers. Canopy Growth, a North American company with a market cap of over $13 billion, is currently preparing a cultivation site in the country.

Total investment in medical cannabis farms and laboratories in Colombia stand at approximately $600 million currently, much of this from Canadian investors like Toronto-based Khiron Life Sciences.

Mexico

Cannabis is technically illegal in Mexico at present, but the law prohibiting its use was declared unconstitutional by the Supreme Court of Mexico in 2018. In March 2020, three senate commissions acted together to pass legislation to legalize all forms of cannabis. The bill is expected to be approved in the next legislative session at the end of this year, hopefully opening the door to foreign investing. In fact, predictions are that by 2024, recreational marijuana sales in the country will total $582 million.

Uruguay

Uruguay was actually the first country in the world to fully legalize cannabis in 2013 with official sales beginning in July of 2017, which makes the path to investment there inherently less fraught. Currently, all legal sales take place through pharmacies, home growing and/or not-for-profit cannabis clubs. Customers are allowed a maximum of 10 grams per week and must be registered in a national database.

The country has been extremely careful with the legalization of cannabis and has placed strict limits on who can be granted licenses to grow, but this is likely to change in the future. As of now, only two companies currently have licenses to grow high THC medical marijuana, but at least a dozen are licensed to grow hemp and at least a dozen more can perform cannabis research.

Israel

A huge cannabis research hub, Israel appears to be one of the fastest-growing export markets globally. Last year, the government made it legal for licensed growers to sell on the vast export market, including via partnerships with U.S. companies.

Israel is also one of the oldest marijuana research and business centers in the world, with clinical studies pioneering how the plant can be used to treat cancer, epilepsy, PTSD and other conditions. Because of this, Israel has seen significant international investments. Just this year, Israel surpassed Germany to become the largest importer of the flower in the world, helping establish a trend towards positive investment opportunities, such as Canadian company Nabis Holdings’ agreement to purchase a 49% stake in Israeli cannabis biotech company Cannova Medical.

On the downside, cannabis is still illegal, albeit partially decriminalized. Home use and possession of up to 15 grams and below is not enforced by the authorities. Signs indicate the country is moving toward legalization for adult Israeli citizens but no one can say when with certainty.

Canada

Canada is probably the most familiar market for many U.S. investors. Still, even before COVID-19, its legal cannabis market was not the dream many envisioned because of complex government regulations, onerous taxes, inadequate retail outlets, and both over- and undersupply dynamics. Nonetheless, Canada is still a promising market with public possession of up to 30 grams of cannabis, dried or the equivalent in non-dried form, declared legal in October 2018.

Dried or fresh cannabis and cannabis oil may be purchased from provincially licensed retailers or online from federally licensed producers. And in October 2019, the production and sale of edible cannabis by provincial and territorial retailers and federally licensed sellers of cannabis for medical purposes was legalized. All of this points to a hopeful investment market.

On the other hand, marijuana has not been approved as a therapeutic product by Health Canada, as traditional prescription drugs have been. In addition, because there are such low barriers to entry in the recreational marijuana industry, competition is high. Finally, since nongovernmental medical marijuana suppliers have only been able to receive licenses to manufacture and sell since 2013, they have a fairly limited operating history.

Foreign-market investing in an emerging product like cannabis with its considerable uncharted legal and regulatory territory is not for the faint of heart, and it’s advisable to seek guidance from a legal or industry expert in specific markets. But for those willing to take the plunge and navigate the risks, there is an opportunity to potentially reap rich rewards.