The Supreme Court of Mexico has extended a deadline for the House of Deputies to pass a law to legalize marijuana for recreational use.
135 Paseo de la Reforma Ave in the heart of Mexico City is a building that houses the senate of Mexico. Adjacent to this building is a protest garden from marijuana advocates. Marijuana plants grow freely next to the senate where elected officials debate the legality of recreational marijuana use in Mexico. The implications are strong. The worlds biggest marijuana market could become legal in less than a year. Is this good for Mexico? Is it good for investors? There’s a lot to unpack here but a historical event could take place very soon and the USA is literally caught in the middle.
In this small blue marble filled with 195 sovereign countries only two have legalized a plant that makes you hungry and mellow. As of 2020 only Uruguay and Canada have legalized marijuana for recreational use. By default that makes them the coolest countries in the world. In 2021 Mexico might be joining the list of the cool kids on the block by becoming the third country to legalize marijuana. While on the surface this looks like progression of an outdated prohibition law but it is not without it’s complications.
The Supreme Court Ruling
Due to Covid 19 Mexico is actually behind on it’s marijuana legislation. In 2018 the Supreme Court of Mexico ruled that banning marijuana for personal use was unconstitutional and the Mexican legislature was to make a law to reflect this. Now that the Mexican Senate has re-visited this issue it has passed a bill to let users carry up to 28 grams and grow as many as four plants at home according to Reuters. This bill was passed in November 2020 and now the bill has gone to the lower House of Deputies. While there are a lot of expected opposition to the law, it is expected to pass in 2021 due to the Supreme Court ruling.
The Case Against Legalization of Marijuana In Mexico
To most citizens in the free world who enjoy the occasional marijuana cigarette, legalization may seem like a no-brainer. “Canada did it” can be a valid argument in some cases but it’s important to point out that Mexico is not Canada. Mexico is good at soccer and Canada is good at baseball. Facts are facts.
All joking aside it’s important to view what is going on with this historical legislation because it can have global ramifications. Here are some arguments against legalization in Mexico:
- Public opinion doesn’t support it: According to polls the majority of Mexican citizens are against the legalization of recreational marijuana use. Medicinal use was heavily favoured at 86.6% with 12.8% against. Recreational use is 71.1% against and 25.2% for with 3.7% unsure. Industrial use was split 47.4% in favour and 44.8% against and 7.8% undecided. While it might seem surprising that marijuana is not seen in a positive light it’s probably due to its ties to organize crime and the cartels that have terrorized the country for decades. It is important to note that unlike legalization in Canada the bill passed by the Mexican senate was not due to public opinion but the Supreme Court ruling.
- It does nothing against the cartels and the black market: The cartels we know today got their start with selling marijuana. While it doesn’t represent the majority of their revenue today it’s still a sizeable amount that will shrink due to legalization. Legalizing marijuana in Mexico will not stop the cartels or the black market. Marijuana prohibition may have given birth to the cartels but their other businesses such as cocaine, meth, kidnappings, extortion etc bring in the majority of their cash flow.
- Current proposed law requires people to get government certification to grow plants: This model for legalization can hurt farmers especially in rural parts of Mexico with no access to Internet. They want to copy California’s model of tracing “seed to sale” which will require a database system that will require users from the farmers in rural Mexico and the federal government. Opposing parties to marijuana legislation would argue that these farmers could be hurt by big corporations who have the money to pay for the technology and infrastructure to adhere by the law. Small time growers would be tempted to stick with the black market because the cash flow would be easier to come by and less red tape to deal with. In essence this problem can strengthen the cartels which is the opposite desired effect of legalization.
The Case For Legalization of Marijuana in Mexico
The most important argument for the legalization of recreation marijuana use in Mexico is money. Yes the moral implications are important as argued by the Supreme Court of Mexico but in order to convince law makers of the advantages usually money talks. With Mexico and Canada now legalizing marijuana North America can become a massive market for recreational cannabis. There are over 120 million people in Mexico, 350 million in the United States and over 30 million in Canada. That’s almost half a billion people between three countries that can have a massive cannabis economy.
In our previous blog series Know Your Pot Stocks we’ve covered the pros and cons of different companies. So far in 2021, four years after legalization in Canada it’s safe to say stocks have not performed to expectation. Multiple states in America have legalized weed and but it is still illegal on the federal level. One would think if marijuana is legalized in Mexico these stocks should start to become bullish especially in 2022.
According to CannabisStockTrades.com Aurora and Canopy are already looking to tap into Mexico’s market. When (not if) recreational marijuana is legal in Mexico it’s predicted to generate 2 billion dollars USD in revenue. Mexico’s climate is perfect to grow marijuana but at first it will rely on imports in order to fulfill demand.
If you are an investor or looking to invest in pot stocks I would look to the Mexican legalization with great interest. Use caution though. I remember not so long ago a few of my friends talking about pot stocks before legalization in Canada. Now that we’re here their stocks did not skyrocket as much as they thought it would. We were all supposed to be rich when legalization happened. Obviously that didn’t happen and today those same friends aren’t saying much about pot stocks. I still think there is a very big opportunity when it comes to marijuana investments but patience is key. It was presumptuous to predict huge gains from legalization. Those gains can still be had but the market needs to grow and establish itself. I am not a financial advisor or a stock guru but if you have pot stocks I would go long because of new developments like Mexico legalizing marijuana.
Nothing is a guarantee so be sure to do your research and don’t invest an amount you can’t afford to lose.
History will have a heck of a time looking back at marijuana prohibition and how legalization came to be. The ironic thing is a lot of hurdles and arguments against the legalization of marijuana is due to the problems that came from prohibition. If a commodity has value large organizations (legal or otherwise) are going to take it over that’s just a fact of life. It doesn’t mean that the little guy can’t have a small slice of the pie which may seem miniscule to a big corporation but might provide a family with financial freedom. We are not there yet because prohibition has set us back countless years. I am not in favour of farmers or lower class income citizens getting the short end of the stick because of red tape and corporations bending the rules. I am in favour of less incarcerations and organized crime syndicates going out of business. It seems like we can’t have one without the other but I don’t look at it that way. Legalizing marijuana in any free country is the right thing to do. We need to take that first step before perfecting the system in which anyone no matter their financial situation can participate and more importantly profit from this new industry. In order to get there and to make the market fair we have to let it grow. That means taking the bumps in the road but we keep going. That is how society progresses not just in the marijuana industry.
Estamos listos para hacer negocios con usted México. Mucho amor de Canadá.