Last Wednesday, Mexico’s House of Representatives approved landmark legislation to legalize the cultivation and sale of cannabis for recreational use across the country. This historic vote puts Mexico on the brink of establishing the world’s largest legal cannabis market – a move that is likely to increase pressure on the United States to embrace legalization.
With a population of nearly 130 million people, Mexico is now just one Senate vote away from becoming the largest country in the world to legalize cannabis at the national level. By comparison, the populations of Canada (38 million) and Uruguay (3.4 million) add up to less than a third of Mexico’s total citizenship.
The Mexican marijuana industry could be valued as high as $3.2 billion dollars annually, per a January report from cannabis data analysis company New Frontier Data. If voted into law, Mexico’s budding cannabis sector will likely attract much-needed investment to the region and create new jobs in a country that has been ravaged by the pandemic.
An earlier draft of the bill was approved by the Senate in Mexico last November. The Mexican government now has until the end of April to review further changes and sign the bill into law. Several key revisions were made to the bill prior to its floor vote last week, but those changes are expected to move swiftly through the Senate before being sent to President Andrés Manuel López Obrador’s desk for his widely anticipated approval.
In its latest version, the legislation would establish a taxed and regulated recreational cannabis market, with licensing categories related to production, distribution, sales, marketing, research, and vertically integrated businesses. Adults over 18 will be allowed to smoke and possess up to 28 grams of marijuana, and individuals could grow six plants for personal use (although one key change made by the Chamber of Deputies would require home growers to register with the state). The law will also grant licenses to farmers, commercial growers, and other groups to pursue larger-scale cultivation of marijuana and other products derived from hemp.
The business landscape is complex, and many critical supply-chain regulations and enforcement rules remain undefined, threatening to delay any positive economic impacts of the new legislation. The same has been true of medical marijuana, which Mexico legalized in 2017. The rollout of medicinal products remains in its infancy even though it became legal three years ago.
Under the new legislation, medical marijuana will continue to be regulated separately by the health ministry, which just published new rules in January that cover the cultivation and research of medicinal cannabis.
Experts anticipate similar challenges for operationalizing the cultivation and distribution of recreational cannabis, and it will likely be several months before key rules are hammered out, permits are issued, and legal marijuana is actually available for sale.
Despite potential delays, the prospect of nationwide cannabis legalization has many Mexican businesses and investors, both foreign and domestic, preparing for a green wave. Colombian-Canadian Khiron Life Sciences, Canada’s Canopy Growth and The Green Organic Dutchman, and Medical Marijuana, Inc. from California, are among the firms considering investment in Mexico.
“It is important to understand that these new regulations don’t just cover recreational use of cannabis; they also govern the use and manufacture of industrial hemp. That will have a big economic impact because it will allow both Mexican and international companies to invest in that area,” said Raul Elizalde, CEO of Medical Marijuana, Inc.’s Mexico Division (HempMeds).
“[Companies] will be allowed to work with raw materials that are imported, or raw material grown in Mexico. We could now establish legal international trade of hemp between Mexico and the U.S., which is a great opportunity for Mexican companies and U.S. companies looking to invest. With recreational cannabis, however, it will be more of an internal (domestic) market, because the rules don’t allow [cannabis] to be exported at this point,” said Elizalde.
The move toward decriminalization and legalization of cannabis is not without controversy. Recent polling shows mixed support among Mexican citizens: while roughly 50% of people under 40 support legalization, the stigma against marijuana use remains strong among older, Catholic and less-educated populations. Two thirds of Mexican citizens remain opposed to the legalization of cannabis.
Additionally, advocates have expressed concerns about other material changes made to the November draft of the bill. Among the most contentious are the elimination of plans to create a Mexican Institute for the Regulation and Control of Cannabis to oversee licensing and distribution, and the removal of provisions intended to protect and support small and indigenous growers who might wish to enter the market.
The November proposal included a requirement that 40% of growing licenses be reserved for indigenous Mexicans, communal land farmers, and other vulnerable groups. But, it was scrapped. It remains to be seen how easy it will be for small farmers to compete and secure licenses versus larger corporate competitors.
From a human-rights point of view, the bill simultaneously decriminalizes possession of cannabis and proposes actions to compensate rural communities affected by prohibition, while allowing for punitive action against marijuana users who exceed allowed amounts, and giving law enforcement full jurisdiction – creating concerns that recreational users may still be open to prosecution and potential extortion from unethical police in Mexico.
Mexico Unido, a nonprofit think tank and longtime legalization advocate, criticized the proposal last week on those grounds, saying: it still “criminalizes users, puts criminal and administrative sanctions on them and invades their privacy.” This would represent a “lost opportunity to end the criminalization of users” because it would “perpetuate the marginalization and criminal punishment of our peasants, the people most affected by prohibition, who we want to integrate into the market, not maintain in illegality,” according to the group.
Recreational cannabis is currently legal in Canada, South Africa, and Uruguay, 15 states in the United States, and the Australian Capital Territory in Australia. With a final Senate vote on the bill anticipated as soon as this week, Mexico will soon take its place among a growing group of countries that believe it’s high time for a new outlook on cannabis consumption.