Mexico Moves Forward With Legalized Cannabis. What Will Be The Impact?

As its Senate goes back into session, Mexico's lawmakers finally seem ready to approve adult use cannabis
As its Senate goes back into session, Mexico's lawmakers finally seem ready to approve adult use cannabis | Getty Images

Can Mexico replace cartel violence with a legal cannabis industry? The world is watching as Mexico toes the line toward what could become the globe's most lucrative cannabis market.

In October, 2018, the Mexican Supreme Court ruled that prohibiting the cultivation and possession of marijuana was unconstitutional. In making anti-marijuana laws unenforceable, the Court gave legislators one year to change the law and develop a national framework for the buying and selling of adult-use cannabis.

Since then, lawmakers have listened to the public, consulted with cannabis corporations, drafted bills, and missed deadlines. Toward the end of March, COVID-19 chaos brought legalization hopes to a screeching halt when the Mexican Senate postponed all legislative activity.

The Supreme Court eventually granted a new deadline (the previous one had been April 30th) of December 15, 2020 for lawmakers to act.

With the Senate back in session on September 1st and Mexican President Andrés Manuel López Obrador offering no resistance, it finally looks like cannabis legalization will soon become the law of the land in Mexico, a nation of over 87 million adults.

Yes, they [the legislators] are going to decide freely, listening to the opinion of all the parties. There have already been consultations, and if they are going to decide on this matter, that is, there is going to be a legal reform.”

Mexican President Obrador

Sen. Julio Ramón Menchaca Salazar of the ruling Morena party said that while legislators must still resolve certain disagreements about the legislation, legalizing cannabis could fill treasury coffers at a time when the economy is recovering from the pandemic, according to Marijuana Moment.

Despite the optimism, legislators admit they still are far apart on the issue of restorative justice as drafted in the current bill. Many vocal opponents want to enhance social equity provisions and ensure the market empowers domestic farmers, especially those most impacted by the drug war ( sound familiar?).

Just before the start of the new session on September 1st, Senator Jesusa Rodríguez of the Morena party, displayed a marijuana plant on her desk to show her support of legalization.

“Priority issue in the Senate for this period,” Rodríguez said in a tweet, referring to cannabis reform.

What is in Mexico's Cannabis Legalization Bill ?

Below are the key points of Mexico's proposed cannabis legalization bill.

1. Establish "The Mexican Institute of Regulation and Control of Cannabis" to regulate the industry & award licenses;

2. Adults 18+ could possess & cultivate marijuana for personal use and grow up to 20 registered plants;

3. Medical patients could apply for approval to legally grow more than 20 plants;

4. Personal possession would be capped at 28 grams, but possession of up to 200 grams would be decriminalized;

5. Cannabis sales would be taxed at 12%, with some proceeds going to substance abuse treatment funds;

6. Public consumption would be permitted except in non-designated spaces.

What Will be the Impact of Legal Cannabis In Mexico?

According to Motley Fool, Mexico's entry into the adult use cannabis marketplace would drive total global sales to $104 billion by 2024, a +850% increase when compared to today's figures. At the same time, economists have forecasted that, with a potential base of over 1.4 million regular domestic users, Mexico could receive over $1.2 Billion in new, annual tax revenue.

Beyond sales, New Frontier Data estimates the country could reduce cannabis-related related law enforcement by nearly $200 million per year, while also creating 75,000 new jobs. Tourism may also get a bump from neighboring U.S. states such as Texas, Arizona and New Mexico, where adult use cannabis remains illegal.

How Will Legal Cannabis in Mexico Impact the United States?

Once Mexico ends cannabis prohibition, the United States will be in the middle of two countries with scaled, legalized industries. And, despite every reason for optimism in 2021 at the state level, the timetable for federal legalization remains unclear. Neither presidential candidate has incorporated legalization as part of their agenda.

After it settles on the new law, Mexico will add to its current worldwide trade surplus by being be able to export its product to any country with a legalized medical marijuana program. At least 30 nations have some type of reform in-place including Germany, Poland, Australia, Netherlands and Italy. American companies will, of course, be shut out.

With this significant head start, Mexico will also have the ability to invest heavily in R&D, marketing and distribution, while taking advantage of wider access to investment capital and financial services. They will also have the opportunity to optimize and lower product costs taking full advantage of their cheaper labor pool - a difference that the U.S. may never be able to address.

Sadly, American companies may never be able to catch-up.

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