A number of Mexican Senate committees released draft legislation on October 17, 2019, to be the third country in the world to legalize recreational cannabis after Uruguay and Canada.
Over the past two years, milestones and history have been made with regularity for the cannabis industry. Last year, for example, Canada become the first industrialized country in the world to give the green light to recreational marijuana. Regulations concerning cannabis derivatives (e.g.'s edibles, infused beverages, vapes, topicals, and concentrates) also went into effect last week.
Outside Canada, we've seen 33 U.S. states legalize the use of medical marijuana, to some degree, over the past 23 years, 11 of which have also waved the green flag on adult consumption. The U.S. Food and Drug Administration also approved the very first cannabis-derived drug last year to treat two rare forms of childhood-onset epilepsy.
Here are eight things you ought to know about the revolutionary marijuana bill in Mexico, which seems very close to becoming law.
1. Mexico's Push Toward Adult-Use Legalization Is Really Just a Formality
Mexico's Supreme Court ruled last year that a ban on the recreational use and possession of cannabis was unconstitutional. This was the fifth time that Mexico's highest court had reached a similar verdict. In Mexico, when the Supreme Court reaches a similar verdict five-time, it becomes the set standard. Thus, recreational marijuana has already, in theory, been legalized by the Mexican Supreme Court. It's simply a matter of lawmakers drawing up the rules and regulations that'll govern the industry by putting pen to paper.
2. You Only Need to Be 18 to Buy and Possess Recreational Weed in Mexico
One of the most glaring differences you'll see between Mexico's legislation and select U.S. states and Canada is that the minimum age of purchase and possession is slated to be set at only 18 in Mexico. Mexico has a considerably larger population than Canada, and the fact that adults three years younger in Mexico could potentially become consumers might make the Mexican market all that more attractive to the pot industry.
3. Consumption Can Only Occur in Private
As should be little surprise, the initial draft calls for the consumption of recreational marijuana to occur only in private spaces. This is consistent with pretty much every U.S. state and Canada. Although the first cannabis café opened in West Hollywood, Calif., just three weeks ago, pot cafes and other non-private places of consumption are a rarity, and it's likely to remain that way for the foreseeable future throughout North America.
4. Packaging Regulations Will Be Strict
Also consistent with the message that's being sent throughout legalized North American markets, Mexico's recreational weed legislation calls for packaging to be nondescript, and for no real people or fictional characters to appear on that packaging. Mexico, like Canada and the U.S., is trying to use these tough regulations to weed out illegal production, as well as discourage adolescents from being lured to cannabis products.
5. Edibles and Infused Beverages Are for Medical Patients Only
The most interesting aspect of Mexico's recreational marijuana draft legislation is that it would only allow medical marijuana patients to purchase edibles and cannabis-infused beverages. That's meaningful from an investment perspective given that derivatives almost always bear considerably higher margins for growers than dried cannabis flowers. Medical marijuana has been legal in Mexico since June 2017.
6. The Cannabis Institute Will Oversee the Mexican Pot Industry
Similar to the set up in Canada, a central agency, known as the Cannabis Institute, will be responsible for overseeing Mexico's marijuana industry. The Cannabis Institute would be delegated with setting potency limits for recreational weed, implementing whatever legislation is passed, and issuing cultivation and/or sales licenses. Surprisingly, Health Canada has proven to be more of a crutch than an aide in the early going for the Canadian pot industry, so it'll be interesting to see how well the Cannabis Institute performs, assuming this is, indeed, the legislation that becomes law in Mexico.
7. Big Businesses Won't Have Licensing Priority
Regarding obtaining a license, the draft legislation calls for low-income individuals, small farmers, and indigenous peoples to have licensing priority in Mexico. So, the major North American cannabis businesses aren't going to be given priority. This is likely being done to ensure that Mexico's economy, and not foreign companies, benefit most, as well as keeps the Mexican recreational market as competitive as possible.
8. The Timeline to Pass This Bill May Not Be Met
Although the Mexican Supreme Court set a deadline for lawmakers to pass a recreational cannabis bill, it's possible that, even with this legislation in hand, the passage is delayed. Even though lawmakers are aiming for approval this week, they may need to appeal to their country's Supreme Court for an extension.
Mexico May Have Big Market Potential, but Cannabis Stocks May Look Elsewhere
Assuming Mexico's choose to legalize recreational cannabis before the end of the month, the State of the Legal Cannabis Markets report from Arcview Market Research and BDS Analytics suggests that $1 billion in annual sales could be possible by 2024.
Mexico isn't prioritizing licensing for big businesses, and that it's not allowing adult consumers to buy some of the highest-margin derivatives. That makes the recreational market a less-than-stellar option for Aurora Cannabis and Medical Marijuana. In Mexico, high-margin derivatives can be sold, but it is best not to use entertainment stocks to entertain the entertainment market.
Source: The Motley Fool