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Colombia 2020 | HEALTH | INTERVIEW

BCA focuses its expertise on sectors with high social and environmental impact, including medical cannabis, helping clients reach their corporate finance and capital raising goals, also dealing with the complexities of M&A.

César Gutiérrez
BIOGRAPHY

César Gutiérrez is a seasoned investment banking and M&A senior executive with 20-plus years of proven track record. In 2013, he founded Bastion Capital Advisors, where he serves as Managing Director. He has been instrumental in closing 100-plus M&A transactions, including corporate finance, valuations, restructuring, due diligence, and structured finance deals in a wide range of industries, with special attention to Latin American, the US, and the Canadian markets. Gutiérrez holds an MBA from IE, a master's in corporate finance, and a bachelor's in accounting and financial management. He has lectured on investment banking and corporate finance at some of the most recognized business schools in Colombia.

What is the profile of companies that BCA serves, and how you are helping them currently?
Over the past years, we have had the opportunity to support clients in different industries across Latin America. However, we are now extremely keen to serve companies in industries with high social and environmental impact, including the emerging cannabis sector. We specialize in helping clients to reach their corporate finance, capital raising, and M&A goals. As a response to the current headwinds, we recently launched a restructuring practice to support harmed companies.

What opportunities do you see in Colombia for FDI during the recovery period?
Colombia is the fourth-largest economy in Latin America and it is expected to be among the countries in the region that recovers more rapidly after COVID-19. Likewise, the country enjoys economic and political stability, with stable growth above 3% over the past 10 years that has gradually attracted unprecedented levels of FDI. A large portion of the economy is driven by agribusiness, given the access to abundant natural resources and labor coupled with excellent climate conditions and 12 hours of natural light all-year round, to mention just a few. In addition, Colombia has 100-plus FTZs that represents a trade advantage with the 60-plus countries to whom it has FTAs in force, especially those with countries where medical cannabis has been regulated. Across the agribusiness environment, Colombia offers a broad portfolio of investment opportunities going from the traditional and well-known products such as coffee, banana, flowers, cocoa, and avocado (haas) to the newly cannabis-derived products. In this regard, Asocolcanna has said that as soon as the area that is being cultivated by different players reaches 100,000sqft, exports of medical cannabis extracts and resins will be in the range of USD180 million. For its part, Fedesarrollo, an economic think tank, has projected revenues from exports of medical cannabis of approximately USD800 million by 2025, with a more optimistic scenario in the long run reaching USD2.3 billion. Colombia is then poised to supply more than 40% of the global production of cannabis with an expected market in Latin America exceeding USD13 billion in annual sales by 2028. It is evident that the country is well stationed to take part in this rising industry that might help speed up the recovery of our economy.

How do you see Colombia maintaining its regional leadership position in the medical cannabis industry?
Unlike Uruguay, neighboring countries are still working on their regulations with some delays expected for this year. Colombia legalized medical cannabis in 2017 and ever since has strived to pave the way with the help of the largest regional players headquartered in the country. As of 2019, more than USD500 million had been deployed in the local cannabis industry, and the industry is expected to finally take off in 2020 and all those companies start to monetize their investments. In Colombia, the production of a gram of cannabis flower costs us between USD0.5 and USD0.8. In addition, companies locally invest around USD300,000 per hectare cultivated and up to USD1.5 million per hectare in laboratory buildout, which could be around 80% lower than construction costs in North America and Europe.

How have you seen the medical cannabis sector specifically get impacted by this pandemic and how do you see its recovery afterwards?
From our view, the industry reacted contrary to what it was expected. To start, exports of non-psychoactive and psychoactive cannabis are expected to continue in 2020, and this has not changed as a consequence of COVID-19. This is the key element for the industry to formally take off. Additionally, several developments in the industry not only in Colombia but regionally have set the course. Khiron became the first company authorized to sell medical cannabis in the country through the patient prescriptions. It was also authorized to manufacture high- and low-THC medical cannabis and to fill prescriptions for low-THC medical cannabis. Clever Leaves secured funds for USD14 million early in April from institutional investors and most recently, announced they entered into a business combination agreement with a special purpose acquisition company (SPAC) intended to trade on NASDAQ once all the required approvals are granted. Other companies in the region also managed to secure funds (Avicanna with USD1.8 million, Canna Eden in Uruguay for USD1.7 million, YVY Life Sciences in Uruguay for USD1.7 million, among other transactions that are not publicly known). All these combined with 250-plus transactions closed in the US and Canada over 1H2020 clearly show a sign that the industry has been attracting investors' attention. We have spent a significant amount of time having conversations with strategic potential investors from different countries interested in taking part in Colombia's attractiveness, and the government must notice this and ease exports in the very short term. We know there is a considerable amount of dry powder of approximately USD3 billion to be deployed in cannabis, from which a third of it could be invested in the region as soon as the players have a clearer path to become revenue generators companies. Main players still must prove their business models work as described in their investment decks and that they have the skills set to deliver as promised.

What are your targets and goals for the rest of 2020 and 2021?
We are seeing industries fully focused in the recovery period to quickly adapt themselves to this new normal. Unfortunately, there are companies filing for bankruptcy, distressed enterprises looking at restructuring, and others with capital constraints. We are definitely committed to supporting them in overcoming those challenges with innovative financial and strategic solutions.