Mexico’s Legalized Cannabis Industry May Be Slow Out of the Gates, But Extend Rippling Tides Internationally
By Oliver Bennett, Special Contributor to New Frontier Data
As producers worldwide jockey for position in the global legal cannabis market, a significant new country joins the fray – Mexico. In a country historically associated with the worst excesses of illegal drug trafficking, home to dreaded crime cartels, resides a significant opportunity to fashion a large national industry legally forward to forge a transitional beginning.
The country’s trend towards legalisation is clear: In 2009 cannabis was decriminalized in Mexico, and by 2017 some medical cannabis use was allowed. In 2018 came a landmark ruling that a ban on adult use was unconstitutional; indeed, in the same year the court ruled that the government’s prohibition on recreational use was unconstitutional. The momentum toward reform came to a head this month when the federal Chamber of Deputies approved a legalization bill which the Senate subsequently is expected to pass by April 30, with President Andres Manuel Lopez Obrador having the final sign-off.
Thus, it is expected this year that Mexico will have legalised cannabis in the world’s 10th most highly populated country (i.e., 129.9 million), for medical and adult use alike. Former Mexican president Vicente Fox has long been an enthusiastic advocate of legalisation, adding weight to the popular demand, and some estimate that Mexico may become the world’s largest domestically legal adult-use market.
While a 2020 survey found that Mexicans opposed legalization by a 58% to 38% margin (with 4% undecided), there is question about how quickly a legal program may become accepted. Whether the stated reluctance suggests a legacy from the violent domestic turmoil experienced during the War on Drugs, or that it attests to an incipient social conservatism in a characteristically religious society, attitudes may turn more welcoming should legalisation bring social benefits and revenue, especially in a rebuilding post-pandemic economy.
Since the edict, much has been made of the implications for Mexico’s northern neighbour, as the United States will shortly become the odd North American country out regarding federally legalised cannabis. Many note the potential for Mexico to become a large legal supplier to the U.S. (given its long history supplying the U.S. illegal market), which could pressure American lawmakers to make legal reform a priority, with pressure applied for the Biden administration to change the federal law.
According to New Frontier Data, the Mexican medical cannabis market has a potential annual demand of $3.2 billion USD globally, while Mexico’s National Association of the Cannabis Industry has estimated the overall cannabis market to reach $5 billion USD within a few years.
As its gates open, Mexico will draw a great deal of international interest and investment, and the European medical cannabis industry will doubtless consider the market with great interest.
Mexico will at once compete with Colombia, itself transitioning from a ravaging war on drugs into a new phase of legal cannabis, with a rivalry bent toward international medical markets. In 2013 Uruguay became the world’s first country to legalize the production and consumption of cannabis, concentrating on an export industry reportedly worth up to $ 1.1 billion a year in medical cannabis products, with companies like Fotmer Life Sciences concentrating on links with the European and Israeli markets. Mexico has a longer tradition of growing cannabis than does Uruguay, and its entry would naturally trigger greater competition across the burgeoning economies of Latin America. Nevertheless, keenest interest in Mexico may come from U.S. and Canadian producers, as Mexico’s production costs are estimated at nearly one-fifth those of either country.
What of Europe? Mexico will expectedly offer significant impact as an export nation, particularly in terms of the Hispanophone corridor through Spain. Moreover, Mexico is an established industrial country that houses many large brands enjoying both its comparatively low cost base and ready supply chains. Bloomberg has reported that Mexico’s legalization of cannabis is a particularly powerful business proposition (with many extant multinational alcohol, pharmaceutical and consumer brands), as it manufactures and exports the equivalent volume of goods as the rest of Latin America combined.
And while intrigue gathers around the recreational trade, Mexico is also expected to become a manufacturing base for CBD products like nutraceuticals and beauty products. To whatever extent that optimism about a Mexican green wave may be premature, there is little doubt that for the importing nations of Europe, the addition of Mexico as a producer of medical cannabis be a welcome addition to potential trade partners for legalized products.