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LATIN AMERICA | 18-03-2021 11:52

Mexico prepares for legal marijuana gold rush

Mexican lawmakers are close to approving legalisation that is expected to catapult the country's regulated cannabis trade into a billion-dollar legal marijuana market.

Mexican and foreign companies are lining up for a share of what experts say is likely to become one of the world's biggest legal marijuana markets, worth billions of dollars.

Mexican lawmakers are close to approving legalisation that is expected to catapult the country's regulated cannabis trade past that of pioneers like Uruguay and Canada, whose populations are much smaller.

"Mexico is positioning itself as the biggest market in the world at the country level, ahead of the United States and Canada," said Erick Ponce, president of the Cannabis Industry Promotion Group.

"There's room for everyone," said Ponce, whose organisation includes 25 Mexican and foreign companies.

The legislation is partly aimed at curbing drug-related violence that claims thousands of lives each year in the country of 126 million people.

The bill was passed by the lower house of Congress last week and is expected to sail through the upper house when it holds another vote following modifications.

According to various forecasts, Mexico's recreational and medicinal cannabis market will be worth US$5-6 billion by 2025, part of a global market expected to be valued at US$73.6 billion in 2027, according to consultancy firm Grand View Research.

Legal sales are projected to generate up to US$1.7 billion in annual tax revenue for Mexico, according to estimates by Congress and the Mexican Cannabis and Hemp Council, a non-governmental organisation.

The new law regulates the business from cultivation to commercialisation – not only for smoking but also for other cannabis products such as drinks and sweets too. It allows "vertical integration" so companies can receive licences to participate in all stages of the business, which could result in firms wielding significant market power.

'Social justice'

Although the legislation contains provisions to help small farmers, activists say they are still at risk of being elbowed aside by deep-pocketed corporations.

The regulation also imposes high standards on seeds, production and marketing, which campaigners say could favor a handful of big businesses.

"The Mexican model should be based on social justice. We cannot allow a market controlled by two or three large companies," said Tania Ramírez of Mexico United Against Crime, a non-governmental organisation.

The fear is that small farmers who have traditionally grown marijuana for powerful drug cartels will remain trapped in the illegal trade.

Some believe that legalisation will drive away the cartels because there will no longer be any business for them, said Ponce.

But Zara Snapp, founder of the RIA Institute which promotes public policies on drugs, doubts that legal cannabis businesses will easily flourish in regions riddled with narcotic-related violence.

"You talk to people and they say 'I wouldn't put a dispensary in Guadalajara' because there are other players that have that market," Snapp said, referring to the western city home to one of the country's most powerful cartels, Jalisco New Generation.

Another worry is that if legalisation involves too many procedures it will deter potential entrants, said Eda Martínez, director of the Mexican Cannabis and Hemp Council.

In developed markets like Canada, 40 percent of consumers still turn to illegal suppliers, according to the United Nations Office on Drugs and Crime.

A private study carried out in 2016 and presented to state and academic bodies estimated that the Mexican black market produced between 5,250 and 6,550 tons of cannabis annually and employed 17,200 people.

In 2020, Mexican authorities seized 244 tons of marijuana.

The most recent national survey on drugs carried out in 2016 found that 7.3 million Mexicans between the ages of 12 and 65 years old had tried marijuana at some point.

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by Jean Luis Arce, AFP

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