Ask Our Experts 3/03/2019: What are the implications of Mexican adult-use legalization

 

Q: What are the implications of Mexican adult-use legalization; is it all about state revenue and taxes?

By Beau Whitney, Vice President, and Senior Economist, New Frontier Data

A: Mexico’s recent efforts to legalize adult-use cannabis are starting to come to fruition. As the final arguments head to the National Supreme Court of Justice for determination, many questions remain about what lies ahead for medical, adult-use, and industrial cannabis legalization.

The top issues facing Mexican voters are violence, corruption, and economic development. Incoming Mexican President Andrés Manuel López Obrador campaigned on a platform of policies closely aligned with voters, prioritizing social welfare and education while remaining supportive of businesses and fiscal responsibility.

While the recent court ruling affirmed a right to use and consume cannabis, Mexico needs time to set up a regulatory program. In fact, regulations will need to be crafted in consideration of the various socioeconomic areas that could be positively impacted by cannabis adult use legalization.

Violence:

The social influence of the cartels is real and has cast a shadow over the lives of Mexican people. During the presidential campaign, statistics about violence came to light. The interior department reported nearly 16,000 killings in the first half of 2018, the highest total in more than 20 years, and a rate of 320,000 over a decade. One objective of full adult-use legalization would be to establish a legal, regulated framework for cannabis while reducing the economic and social influences of the cartels.

Corruption:

Mexican voters are concerned about corruption at the state and local levels. Deploying a legal, regulated cannabis program would also potentially include a seed-to-sale tracking system to limit the amount of diversion to illicit channels while improving the federal government’s ability to track sales and collect taxes. Related data could show the outliers to more efficiently focus enforcement resources. Deployment of a federally regulated system would also help drive reform and reduce tax avoidance.

Economic Development:

Cannabis legalization can lead to job creation. Based on the analysis performed by New Frontier Data and provided to the Mexican government in 2018, there is a potential for 50,000–75,000 new jobs to be created through legalization of medical, adult-use, and industrial cannabis. Many such jobs would be centered in agricultural areas in southern Mexico, an area not currently benefitting from the recent economic growth achieved by central and northern states through expansion of their manufacturing and petroleum sectors.

Additional benefits would include expansion of Mexico’s export markets via trade to Canada, the EU, and other countries allowing medical use; reduced dependence on food-based imports from the U.S.; introduction of a new industry beyond manufacturing and oil; and a means to help educate lower-income Mexican workers.

For more information on Mexico and other Latin America markets download our free Latin America Regional Cannabis Report 2019 Industry Update: