The United States will soon be sandwiched between two nations with federally legalized marijuana. Just days before the Thanksgiving holiday, Mexico moved forward with legislation legalizing the cannabis plant for a variety of uses.
This comes on the heels of Canada’s historic legalization several years ago, which has created a viable international marketplace, channeling funds through the Canadian markets and effectively mobilizing the global cannabis industry.
When Canada legalized, the U.S. missed an opportunity to ensure that NASDAQ and the New York Stock Exchange would have a role in controlling the financial markets and dollars funneling into cannabis. This was expected since Jeff Sessions was in control of the Department of Justice (DOJ). We didn’t necessarily have a pro-cannabis Administration under Trump and certainly not under the leadership of Senator Majority Leader Mitch McConnell, no friend to marijuana. Despite this, what are the implications for America doing business with partners directly to the north and south?
At first, you might think none of this matters as the U.S. has legalized adult-use marijuana programs state-by-state. While this dispensary models still violates federal law, it has garnered bipartisan support from American politicians to prevent the DOJ from interfering with legal, state marijuana businesses. But the issue is much larger.
We’re talking about a global cannabis economy, with Mexico as the largest country in the world, by population, to legalize marijuana. Mexico will boast the biggest consumer market for cannabis products — with a population of more than 125 million people – representing an enormous leap forward for the developing international cannabis marketplace.
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A few steps remain to federally legalize marijuana in Mexico, but the bill has been approved by the Mexican Senate. The bill will establish a regulated cannabis market to allow those eighteen and older to purchase and possess up to 28 grams of marijuana. It also allows a personal cultivation provision for individuals to cultivate up to four plants for personal use. Some technical requirements still need to be hammered out before outright passage, including whether or not personal use cultivation needs to be tracked by the government.
I travelled to Mexico this past February, pre-COVID, to consult with the Mexican Senate on the considerations for hemp and marijuana policy. The timeframe for moving the legislation forward was pushed back by the pandemic. With full passage of the bill now imminent, what can we expect?
Mexico is not the first country with a narco or cartel trafficking history to pass cannabis legalization. It’s happened in numerous Latin America countries that made up part of the black market drug trade. This makes the cartel implications for federal marijuana legalization extraordinarily interesting.
Mexico seeks to regulate and legalize the plant, put strict controls on ownership and the supply chain in place, and to engage in domestic and, most importantly, international commerce surrounding marijuana. The dollars invested in this industry must comply with all forms of financial source verification — theoretically mitigating the opportunity for organized crime to participate in this business.
Something that seems counterintuitive to Mexico’s legalization campaign is that hemp may or may not be included in its final version — as it may pose too much of a threat to existing Mexican industries. I’d argue that this is precisely why hemp is so important – its versatility and multitude of industrial uses go far beyond the singular focus of being cultivated for cannabinoid extraction.
Until late 2019, the Hoban Law Group had registered a number of cannabinoid CBD manufacturers’ products with COFEPRIS, Mexico’s FDA, when things were put on pause to finish up the legislation. If hemp is indeed excluded from the final bill, it would have ramifications for the cannabinoid and CBD industry in Mexico.
Why would those other industries see industrial hemp as a threat? A significant sector of Mexico’s economy is the maquiladoras: local factories run by foreign companies, generally tapping into Mexico’s cheap labor and manufacturing goods for export. Some large maquiladoras have already begun utilizing hemp, including BMW and Levi’s, which have facilities in Mexico. Automotive and textile Industries are major players in the world, but industrial hemp would not displace them. It would complement the existing operations and provide farmers with a more versatile plant requiring less water.
Mexico has a well-documented history of cannabis usage, but will these consumers move their buying habits into a legal, commercial marketplace? The answer is likely yes — if there are medical marijuana distribution outlets selling products created through a regulated system. And will this system displace some of the large illicit cultivation operations across Mexico?
Mexico hopes to join other Latin American countries in becoming major forces in the global cannabis industry and to address the cultural and historically illicit implications of cartel and criminal activity surrounding the plant. How this will roll out and its effectiveness remains to be seen.
Pair the skill set of Mexico’s farmers and agricultural industry with the country’s manufacturing capabilities and an international cannabis marketplace and the pieces could fall into a very favorable place for the nation’s economy and citizenry.
For the now-sandwiched U.S., this will have major implications for American drug policy and cannabis reform moving forward — while perhaps generating hundreds of millions of dollars for the participants. Perhaps this will give U.S. policy makers the push they need to approve federal cannabis legalization, especially in the midst of a pandemic-induced, global economic downturn.
Mexico can show us the way.