Mexican cannabis industry looks at potential exports to Canada

Mexico's new government is unwilling to legalize cannabis for commercial, recreational and medical purposes, creating a potentially lucrative industry in a country ravaged by the war on drugs – and a major new supplier to the Canadian drug market. marijuana.

Olga Sanchez Cordero, a senator who will become Minister of the Interior when elected President Andres Manuel Lopez Obrador, takes office on December 1, presented Thursday a bill to regulate cannabis. The administration of Lopez Obrador wants to change the way the government deals with public safety and the extremely high rate of violence associated with drug trafficking. Its main objective is to lighten the burden of marijuana possession on the judicial system and prisons and to end the social exclusion of thousands of Mexicans who have served a prison sentence for crimes such as the transport of drugs.

But many in Mexico – and beyond – are excited about another aspect of the proposed legislation: the creation of the largest market to date for recreational and medical marijuana sales, and a new drug industry. potentially important export for Mexico.

"We will be able to create a new industry based on new regulations, to produce cannabis for the rest of the world – our location and our work. [pool] gives us a major advantage, "said Guillermo Nieto, president of the National Association of Cannabis Industries. He said his office had been inundated with requests from potential investors and partners outside Mexico in recent days.

However, the new Mexican industry will carry significant risks: Organized crime groups involved in drug trafficking control a large part of the territory, including much of the region where marijuana is illegal. The country's security forces are accustomed to a contradictory and heavily militarized dialogue with cannabis producers. Judicial and transparency institutions are weak. And Mr. Lopez Obrador is a member of the Left who will want to maintain the strong involvement of the state in the new industry.

The new legislation will probably be very similar in Canada (Ms. Sanchez studies the Canadian model closely) and issues licenses for the cultivation, processing, packaging, sale and possession of cannabis. Mr. Lopez Obrador's party has a majority in both houses of Congress and should therefore be able to pass the law he wants, but the new regulatory system probably does not have the force of law for at least a year.

Lorena Beltran, director of operations at Mexicannabis, a company specializing in medical research, described the new legislation as "great news for our country and for our patients … we are working on medical regulation, but we have …" "Complete set".

Ms. Beltran said she too had received ongoing phone calls from international cannabis companies since the regulatory process had accelerated here 10 days ago. (On October 31, the Supreme Court of Mexico ruled that the prohibition of recreational cannabis use was unconstitutional in a series of decisions that, combined with previous decisions, set a national precedent and prompted the new government to act quickly on regulation.)

"The international interest is growing up to the minute," she said. "Everyone is ready to come here – [companies from] Canada, Israel, the Czech Republic, Spain and Colombia are ready to come … Mexico will soon become the biggest marijuana producer. "

Canopy Growth Corp., based in Smiths Falls, Ontario, is a company that monitors closely.

"We had people there [in Mexico] and we are interviewing people there, "said Bruce Linton, co-CEO of Canopy. "We think [Mexico] is a real opportunity. When you are on both sides of America with very well positioned products, this could be a very good platform to reflect both sides of the border with the United States and enter a substantial economy. "

Mr Linton warned however that it was still early to invest in Mexican assets. "You want to spot places and people, but you do not want to deploy capital until they have at least one company issued [regulations] and specifications, he says.

Nieto said that the fact that cannabis prohibition remains firmly rooted in Mexico's main trading partner, the United States, would not be a problem. "We see great market potential outside of the United States – Canada will not be able to develop products throughout the year and anything it can develop will be very expensive – we we are also turning to Europe reason. "

Mexico has legalized the use of marijuana for medical purposes in 2017. Ms. Beltran, who is also the founder of CannabiSalud, a symposium on medical marijuana use by Mexican health professionals, predicted that Fledgling industry of Mexico would live an experience "very similar to that of Colombia", which legalized medical use in 2016 and where many of the main players in a new medical cannabis industry are listed in Toronto Stock Exchange, are Canadian-Colombian joint ventures or have significant Canadian investments.

Colombia, the main competitor of the new Mexican industry, seduced foreign investors by promising an ideal climate for cannabis cultivation; an adjoining location in the equator offering the favorite 12-hour day / night cycle of the factory; a low-cost workforce that, in some settings, has a lot of experience with cannabis as a crop; and the social impact factor of turning the page on the dark history of the war on drugs. Mexico hopes to tell investors about the same story.

"We have land to cultivate and conditions that are even better than Colombia," said Beltrán; Mexico will have an added advantage that all forms of cannabis will be legal, allowing for synergies between types of production, she said. Colombia elected last May a right-wing government that should only legalize cannabis for medical purposes. But she and Nieto both said they hoped to see Mexican and Colombian companies forming partnerships, given their shared history with the war on drugs.

Beltran also sees Canada as the logical target market for the new industry. "Canada is short of product and is spending so much money on production when they need greenhouses and we do not have any."

Colombia was able to tell investors good news about its 2016 peace deal, ending a civil war fueled by drug trafficking. The war on drugs in Mexico continues, however; last year, 31,000 murders were committed, the highest number ever recorded. The strong presence of drug cartels is likely to make some potential investors think.

Marijuana is a minimal source of revenue for most cartels, as the price of a kilo has fallen in Mexico in recent years, after US states legalized marijuana, reducing the market that had fallen further with Canadian regulations. last month. However, the security risks in most marijuana growing regions are still significant.

"Many investors … are very cautious because Colombia is already coming out of the drug war but in Mexico we still have one. That's the big question for the new government: how will they help us in this industry to be safe. "The military forces currently deployed to destroy the harvests of campesino Farmers in the Guerrero and Michoacan mountains will need to be redeployed to protect them, she said.

Another key issue for potential business owners will be the responsiveness of the new government: Mr. Lopez Obrador is supportive of domestic industries and has a lukewarm relationship with the business community. The civil society organizations that are advising his government on this bill have emphasized the importance of creating an industry that does not become a monopoly quickly and enriches the elite of traditional Mexican businesses, but on the contrary, enjoys broad benefits. financial.

"How do you encourage a national industry to lift people out of poverty instead of generating income for already rich countries?" Asked Lisa Sanchez, director of a national public safety and security organization. human rights christened Mexico United Against Crime. advise the government on the new law. His organization hopes to see a mutually exclusive licensing system that would mean that a company licensed to grow could not deal, or that a transformed business could not sell.

"If not, you will quickly create a very powerful lobby that will dismantle all the guarantees for public health and the use of taxes. You must put the key under the law so that the predator class does not take advantage of that. "

With a report by Jameson Berkow in Toronto

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