Marijuana Legalization: Mexico Will Seal the Deal

By Sushree Mohanty
Source:  marketrealist.com

Marijuana legalization is a trending topic in many countries. In 2013, Uruguay was the first country to legalize recreational cannabis. Canada followed suit and legalized marijuana in 2018. Now, many countries have stepped up. Meanwhile, Mexico is ready to seal the deal next month.

Mexico is ready to seal the deal 

A Leaf Desk report on September 20 said that Mexico will legalize cannabis by the end of October. Marijuana legalization was set in motion last year when the Supreme Court imposed a deadline to end prohibition. Currently, the Senate’s committees are reviewing 13 proposals.

A US-based Mexican political expert, Jonathon Winterburn, told Leaf Desk that Mexico will legalize marijuana. Now, we have to see when cannabis becomes legal. He thinks that Mexico might pass a law by the first half of 2020.

In August, the Mexican government asked for the public’s opinion about legalization. Public hearings showed a favorable response toward legalization. On September 3, Senator Julio Menchaca Salazar of the government’s ruling MORENA party introduced a bill to legalize marijuana. Last week, there were a lot of discussions about the bill. Also, President Andrés Manuel López Obrador’s administration supports legalization.

In March, New Frontier Data stated that the Mexican cannabis market’s current annual value is $2 billion. Meanwhile, the cannabis industry in Mexico also supported close to 50,000–75,000 jobs.

Reuters reported that Mexico’s Supreme Court asked the Health Ministry to have proper regulations set for medical cannabis use. According to the court’s ruling, the Health Ministry will update its guidelines. Notably, the updates should have happened within half a year after legalization in 2017.

Why did Mexico decide to legalize marijuana?

In the past, cannabis wasn’t legal in Mexico. However, the country legalized medical marijuana in 2017 for THC content of less than 1%. The country decriminalized the possession of small amounts of cannabis in 2009. The US still isn’t sure about full-scale legalization. However, many states have legalized cannabis. Regulatory reforms in the US motivated Mexico to make a legalization decision.

Also, Mexico wants to reduce drug-related crimes. The US started a “war on drugs” campaign to reduce the illegal drug trade in the US. However, the campaign results in a loss of lives and money in Mexico. The country is known for drug-related crimes. A CNN report stated that Mexican drug cartels generate $19 billion–$29 billion annually from drug sales in the US.

Moving the illicit cannabis market to a legal market will likely be a challenge for the Mexican government due to drug cartels. However, full-scale legalization and regulations could reduce crimes.

Senator Cora Cecilia Pinedo Alonso of the PT Parliamentary Group thinks that legalization could help Mexico. He said, “We are talking about a market with enormous potential, which is estimated to amount to $ 12 trillion over the next ten years.”

Illicit and black-market marijuana activities aren’t a problem in Mexico. Even Canada and the US face black-market marijuana activities. Canada is cautious with its marijuana legislation. However, the country still faces a challenge from black-market sales due to supply issues.

Will Canadian cannabis players eye Mexico’s market?

Marijuana is still illegal at the federal level in the US. The current status limits Canadian cannabis companies’ expansion plans. However, most of the companies expanded in US states where marijuana is legal. Since Canada is ready for the second phase of legalization, the companies are getting ready to expand into the edibles market. The market includes CBD-infused products, cannabis-infused beverages, and the vape market. The companies will likely expand more due to upcoming legalization in Mexico.

Aurora Cannabis (ACB) (ACB.TO) might expand into the Mexican market after marijuana legalization. The company has already hit the medical cannabis market in Mexico. Last year, Aurora Cannabis announced the acquisition of Farmacias Magistrales S.A. Notably, Farmacias is Mexico’s only federally licensed importer of raw materials containing THC. The acquisition will allow people to have federal access to Aurora Cannabis’s non-flower medical cannabis products containing THC. The company has generated 247 million Canadian dollars in revenues in fiscal 2019. The stock has fallen 8.7% in September.

Canopy Growth (CGC) (WEED) is waiting on the acquisition of US-based Acreage Holdings. Federal legalization in the US is the only concern. The company already has significant investments from Constellation Brands (STZ). Canopy Growth has a mark on most of the cannabis segments. With Cannabis 2.0, the company will expand further into edibles and vape business. The company might expand after Mexico legalizes marijuana. Canopy Growth has generated 226 million Canadian dollars in revenues in fiscal 2019. The company has gained 8.4% in September.

What can investors expect?

We know that President Trump isn’t fond of Mexico. Recently, he spoke about closing the border if Mexico doesn’t end illegal drug trafficking. Full-scale legalization could boost to the Mexican economy. The country would earn tax revenues from cannabis. Notably, the revenues might support educational campaigns, drug rehabilitation, and more research. Beto O’Rourke discussed the benefits of marijuana legalization for the US in his recent election campaign.marketrealist.com