Last month, the Mexican Supreme Court made a monumental ruling which decriminalized marijuana and hemp under Mexican law. With this shift in policy comes serious questions for potential foreign investors in what may be the newest cannabis market in the world. As we’ve seen time and time again with these emerging markets, getting in at the ground floor can make or break a business. Things are moving quickly, so here’s what potential investors need to know about the new legislation.
Is Weed Really Legal In Mexico Now?
Over the past decades, Mexican lawmakers have made several attempts at varying degrees of decriminalization and legalization without making much of a practical difference. It’s a complicated history, so let’s go back to the beginning.
Starting in 2009, under the leadership of Felipe Calderón, Mexico decriminalized small amounts of marijuana (under five grams) so that law enforcement could focus more of their attention on major drug traffickers.
Six years later, the Supreme Court would make their first of many pro-cannabis rulings. They sided with cannabis advocacy group SMART, allowing four members of the group to cultivate and consume marijuana on the grounds that prohibiting them would violate their human right to freely develop their personality. However, this ruling only applied to the four members.
In 2017 President Enrique Peña Nieto legalized medicinal cannabis with the caveat that it could not contain more than 0.1% THC. The following year, the Supreme Court ruled on two separate cases that banning cannabis violated the constitution.
In Mexican law, when the courts rule the same way on five cases, it becomes a binding national precedent. In addition to the 2015 SMART case, there had already been two other cases in which the courts made similar decisions. As this was the fifth ruling, the court gave lawmakers 90 days to formally legalize cannabis.
This brings us to now—three years later. After pushing that 90-date day back time and time again, congress finally moved on legalization efforts with the lower house voting on a legalization bill that passed by almost 100 votes. However, it seemed the bill's efforts were once again doomed to stagnation.
Lawmakers did not complete revising a final draft of the bill by the end of their legislative session and did not ask for an extension. In response, the Supreme Court voted to completely decriminalize cannabis.
This ruling is still pretty fresh, and it’s unclear how much immediate practical effect it will have. However, getting caught carrying cannabis cartridges into Mexico likely won’t land in a prison cell anymore.
What Does This Mean For Foreign Investors?
Can Americans enter the cannabis industry in Mexico to begin with? The country’s legal and tax codes don’t discriminate based on nationality, so as long as the business itself is legal inside the country, being an American business shouldn’t be an issue.
Many foreign CBD companies have already been conducting cannabis business in Mexico. The 2017 decision legalized medicinal hemp products, but the government didn’t publish its regulations for three years, making it impossible to acquire a pharmaceutical license. As a result, the vast majority of legal CBD products came from foreign pharmaceutical companies that already had finished products to import.
For those interested in entering the Mexican recreational markets, be aware that it will likely be years before regulatory officials create the infrastructure for dispensaries. However, you can still get a jump on the looming competition in some essential ways.
Go ahead and start conducting market research to make sure this is the right investment for you or your business. Mexico will be one of the only countries with complete nationwide markets, and there’s a huge demand among citizens.
You’ll likely want to go ahead and establish your business in Mexico as soon as possible by acquiring all the necessary trademarks and brand names. Consider entering the industry as a medicinal supplier immediately; that way, your company will be better poised to apply for the necessary permits when recreational sales begin.
