Mexico: The world’s largest market
By Esteban Rossi I., Special Contributor to New Frontier Data
In November, Mexico’s Senate of the Republic approved an ambitious bill to regulate adult–use cannabis. The legislation weaves together three pillars of public policy: human rights, public health, and economic development. Since Mexico’s population exceeds 127 million, in regulating home cultivation, associations, and commercial sales, Mexican legislators will create the world’s largest market for adult–use cannabis (Figure 1). The lower chamber of congress, “camara de diputados”, is expected to vote on the bill before the end of April, though legislators could once again delay the process should they see fit.
The bill, titled “Ley para la regulación del Cannabis”, draws heavily from the experience of other countries, incorporating user insights and a growing body of scientific evidence regarding the therapeutic properties of cannabis. The bill leverages crucial lessons from Uruguay, Canada, and Colombia to reconcile public needs with business interests. With the Mexican legislature’s initiative, and support from the executive branch, the proposed law seeks to protect the rights of users and rural communities, reduce violence, and create meaningful economic opportunities for Mexican firms.
The regulatory approach chosen by Mexican legislators reflects industry maturation and a deeper understanding of successful business models. Rather than focusing on crowded international markets with robust barriers to entry, Mexico is choosing to begin with a domestic adult–use market that can quickly generate revenues. Moreover, by allowing production and distribution of cannabis by associations (i.e., clubs) and firms, the government will create numerous jobs nationwide.
In its current version, the bill defines four types of licenses, for adult use, research, medical use, and industrial use, respectively. Adults would be allowed to grow cannabis for plants personal consumption, commercial purposes, or within associations. Individuals could cultivate and maintain up to four plants and no more than 20 plants per household; similarly, associations would be afforded up to four plants per member. Licensed firms or individuals could distribute commercially, but remain under close supervision while the state monitors production and distribution.
Initially, the bill aimed to prevent vertical integration and the formation of large conglomerates, but the senate commission removed that provision at the last minute. Such tensions illustrate the dual mandate of the government: establishing a market and a regulatory framework for it. Following the Uruguayan experience, the bill mandates creation of a specialized agency dedicated to setting technical guidelines and supervising their implementation. The creation of a cannabis agency (resembling Uruguay’s IRCCA) should effectively reduce bureaucratic hurdles and ensure that a group of qualified and dedicated government officials can focus exclusively on the nascent industry.
Critics claim that despite its well-placed focus, the bill nevertheless falls short on commitments to promoting and protecting human rights. On one hand, the bill effectively decriminalizes possession and proposes affirmative action to compensate rural communities affected by the prohibitionist regime. Conversely, the bill allows for punitive action against users exceeding allowed amounts, and provides full autonomy to law enforcement. Consequently, law’s implementation will predictably raise a significant number of challenges. Ultimately, it will be up to the new cannabis agency to ensure that guidelines follow the spirit of the law, while yet serving to benefit both consumers and firms.
Regardless of the regulatory pathway, it seems prudent that Mexico exercises the same caution and discipline exhibited by the Uruguayan state. Regulation must be accompanied by strong measures to prevent underage use, while providing clear guidelines to manage cannabis tourism, and maintain adequate safeguards to prevent any linkages between the unregulated and regulated markets. Moreover, policy makers should take precautions to ensure that cannabis reforms remain grounded in the three policy pillars mentioned above, and to keep the public well informed. Consensual legislative advances, albeit slow, tend to succeed in the long run.
Regulating adult–use cannabis provides a unique opportunity for Mexico specifically, and Latin America at large. Simply put, adult–use markets can provide dividends for public health, the economy, and domestic security. While consumers will benefit from improved access to quality products at affordable prices, law enforcement stands to benefit from a decline in minor criminal offenses. And as a bottom-line result, governments will in turn collect more taxes.