As I recently reported on this blog, the Mexican Senate passed an amended bill on the cannabis law last November. This bill has been sent to the Lower Chamber for discussion and approval. The lower chamber duly received the bill on November 24th and has already held public hearings with various stakeholders in the country which we have been following closely. It really seemed like Congress was doing its part to legalize cannabis.
We were quite disappointed to learn of the Lower Chamber’s recent decision to postpone the discussion of the cannabis law until next year and to officially ask the Mexican Supreme Court to extend the December 15th deadline for legalization to take effect. We were even more disappointed when we learned on December 10th that the Supreme Court had granted the extension to April 2021 (the end of the Spring Congressional debate), citing COVID and “giving Congress time to exercise its powers “.
As a result of these delays, the debate will be close to the 2021 congressional elections, which – as the Marijuana Business Daily rightly pointed out – could mean that “not only could this distract the House of Commons lawmakers, but also means that some MEPs will wish to avoid the risk of supporting controversial issues ”. Let’s not forget that, as a quick look at the Mexican media shows, after decades of banning, a vast majority of the average Mexican population is not a big proponent of legalization.
Aside from the official reasons for the postponement (which are implausible to us anyway), schedules and market forecasts have been postponed, not to mention the image of uncertainty Mexico projects for economic actors and markets alike. Even so, at Harris Bricken, we think this situation could be a blessing in disguise. Below are five reasons why.
First, we are not seeing any significant changes to what the Senate has passed on, while the lower chamber debate continues to promise to revolve around changes and new proposals to be included in the bill. While we cannot overlook proposals of concern (e.g. the creation of a government body that not only develops guidelines and rules but also acts as the sole purchaser of supplies of cannabis and finished products), we cannot be sure be what will happen until the actual debate takes place in the lower chamber.
As soon as the lower chamber discusses and approves the bill, it will be sent back to the Senate, which will discuss the aforementioned changes for passage and readjust them so that something like the “single payer” proposal could still be put down. The approved version is then sent to the executive, which can either veto or order publication in the Federation Official Gazette to enter into force. We do not expect such a veto right to be exercised.
Second, the cannabis law itself is being discussed in the lower chamber. We mentioned earlier that this law will regulate adult and industrial use of hemp and related research. Medical use is provided for in the medical regulations. These regulations are expected to come out at the same time as the Cannabis Act, but they are not a matter of approval by Congress and have certainly not sparked the same controversy as the corresponding adult use law. In fact, we’ve heard that a draft has been ready for months (in fact, it should have been published under a different mandate from the Supreme Court since last September). In any case, medical use has been legal since the amendments to the General Health Act of 2017.
Third, and in relation to the point immediately above, the longer it takes Congress to legalize cannabis, the longer it will remain unregulated and the longer companies will have to apply for licenses. As mentioned earlier, the Cannabis Act is expected to provide that any administrative or judicial remedies submitted prior to its entry into force will be processed and resolved in accordance with the law in force at the time of filing. The same criterion applies to medical purposes, and in fact licenses can be applied for as we write this. Keep in mind that medical use is already legal (though not regulated), which is not the case in adults, except for self-cultivation / consumption. The real benefit of an earlier filing for any company is that it could potentially get a less restrictive license, allowing it to do more, while the filing would have fewer requirements than what we would expect after medical regulations go into effect.
Fourth, given the postponement of the cannabis law discussion, it is possible that the Mexican government may decide to publish the medical regulations earlier and separately. Regardless of when the release takes place, companies dealing with medical use will be able to establish and establish themselves much earlier than their peers with adult use. Contrary to what we reported under the Cannabis Act and with the exception of those related to cultivation, licenses / permits for medical purposes can be requested the day after the medical regulations come into effect. There is already a demand for medical devices in Mexico, so one of the reasons for legalization is to give patients access to the drugs and cannabis-based treatments they need.
Fifth, as noted by the Mexican Federal Regulatory Improvement Commission in its Medical Prescription Draft Recommendations, Mexico has a competitive advantage over other more developed economies when it comes to developing and manufacturing pharmaceutical products. This is due to both over-regulation in these economies and cheaper local labor. The proximity to the two largest cannabis markets in the world (USA and Canada) should also not be underestimated. This reality should lead overseas companies to seek partnerships with potential Mexican companies and investors to obtain cannabis licenses, acquire land, and take appropriate action to secure their place in the links in the value chain they need. This dynamic also paves the way for a mutually beneficial transfer of technology and know-how.
Conclusion: postponing legalization is not necessarily a setback. Apply NOW If you’re following your business plans, focus on hemp and medicinal uses. That definitely gives you a head start in the Mexican cannabis market. Contact us to stay one step ahead of the crowd!
For more information on cannabis in Mexico, see the following sections: