Four months ago, in the Senate of a country where the war on drug trafficking has left more than 250,000 dead in a little over a decade, a Canadian businessman dedicated to the cannabis business told congressmen: “Its location in the world is perfect, its labor costs are perfect, its climate is perfect (…) Let private companies expand their businesses, do what they know how to do. ” The Erick Factor words, founder of MYM Nutraceuticals, made clear the turn in the drug debate and also the interests at stake behind the project for the total legalization of cannabis in Mexico. The country could become in the next months the largest legal marijuana market in the world. And nobody wants to be left out.
For months, the eyes of the big names in the cannabis business have been on the Mexican Senate. Some companies have lobbyists that walk the halls of the upper house in the hope of keeping a slice of a multi-million dollar business. Some have already spoken with a high profile politician to be the sherpa Let them lead you to the promised land. Other groups review the requirements for small producers in an industry that seemed unimaginable a few years ago. Several foreign investors follow the process step by step, especially from Canada, the first country that legalized recreational cannabis and the one with the largest cannabis industry in the world market.
But while some follow the money, others look suspiciously. Civil organizations warn that a law tailored to large capitals would vanish the possibility of incorporating small producers and peasants into the legal market, and paying a historical debt for a prohibitionist policy that has killed more than the drugs themselves. “As it stands now, the bill favors foreign companies because you would need a multi-million dollar investment to enter that market,” says Zara Snapp, founder of the RIA Institute, dedicated to public policy research. “It’s worrisome, we don’t want another extractive industry that exploits resources and takes the benefits,” he adds.
In 2018, the Supreme Court declared unconstitutional five articles of the General Health Law that prohibited the use of cannabis for recreational purposes and gave the Legislative one year to create a new regulation. Morena – the government party after the elections that year – and the opposition saw the ruling as an opportunity to push for a comprehensive law, which would make Mexico the third country in the world to completely legalize marijuana. But the deadline expired last October without the legislators agreeing to issue the law, criticized for putting insurmountable entry barriers for small producers.
Ricardo Monreal, the strong man of Morena in the Senate, blamed the quagmire on the lack of consensus and the influence of lobbyists. “The amount of lobbyists around here is impressive,” he said. The Supreme Court granted an extension that ends in April and the Senate, which began sessions last Saturday, is already rushing a bill to be discussed in plenary. Meanwhile, the actors involved remain in suspense.
“Mexico is definitely very interesting, the next big event for many cannabis entrepreneurs,” says in an interview Factor, the businessman who participated in a Senate forum last October. Factor says that skepticism is understandable, but that there are fair business opportunities for everyone involved. “I would not rate my visit as lobbying, it was more about sharing the experience and the know how from our country to give clarity to Mexican legislators, “he says.
“In Mexico there is a unique opportunity to have comprehensive legislation that addresses the issue of cannabis from its production to its commercialization,” he says. Canopy Growth, the largest Canadian company in the sector in terms of market capitalization, by email. “We are following with interest the development of legislation and regulation in Mexico,” says the company, but insists that “any analysis of the new legal framework is still very premature.” Canopy, registered in the Senate lobbyists list, avoids ruling on criticism and what he has discussed with Mexican lawmakers.
Canada’s industry sees in Mexico a potential market of 2.250 million dollars that will depend largely on the release of marijuana for recreational use, according to the consultancy Cannacord Genuity. Its analysts believe that the proposal that failed in October offers “feasible, but not ideal” business opportunities because it limited the participation of foreigners to 20% of the social capital of a company and prevented vertical integration; that is to say: that a single company controls several phases of the production and commercialization process.
The consultant considers that Khiron, a Colombian-Canadian company, is the best positioned to enter the Mexican market. He has experience with regulations in other countries of the region such as Colombia and Uruguay, and has the former president Vicente Fox (2000-2006) in its board of directors, a cover letter that includes in practically every statement and financial report. Khiron plans to arrive in Mexico in the first quarter of this year and aims to reach 11.7 million consumers. THE COUNTRY requested an interview, but the company did not answer. Fox declined due to agenda reasons. Aurora Cannabis, another Canadian company that announced in December last year the purchase of Master Pharmacies, the first firm that obtained permission to import raw materials with tetrahydrocannabidol (THC) to Mexico, also did not answer the requests. Like Aphria, one of the largest companies in the Canadian market. Almost everyone interested opts for caution and silence becomes eloquent. Nobody wants to take a risk in the face of a legislative process where many things remain to be decided.
The arrival of Canadian capitals caused controversy in Colombia, which issued in 2017 a law to regulate the consumption and export of medical cannabis. “Khiron and other companies with financial muscle were always one step ahead,” explains Luis Felipe Cruz, a researcher at the Justice organization. “They had the money and the experts, even greater technical capacity than the State, and under the table they dictated how the regulation had to be,” says the Colombian specialist. “The Government did not know how to handle expectations well and did not change anything for producers in general or in illegal markets, which are transnational,” he says. Diana Paola Valenzuela, legal director of the Colombian company Anandamida Gardens, details that “there have been obstacles for everyone, even for Canadian funds that financed local companies and had to make their way.”
Some critical voices describe the practices of Canadian companies as “cannabis colonialism” and others claim that there is room for all kinds of actors. The challenge for the Mexican Congress is huge. At stake is to guarantee the rights of consumers, change the course of a drug policy that has plunged the country into the worst crisis of violence in its recent history, delineating the rules for it could become the largest legal marijuana market so far and achieve a political consensus that resists pressure and interests inside and outside the government coalition. They have three months to achieve it.