Cannabis in Mexico: Focus on Hemp

Medical cannabis is legal in Mexico, but not much has been happening lately with legalizing cannabis for adult use.

Oaxaca has made some effort to decriminalize recreational cannabis consumption, and earlier Mexican Supreme Court decisions declared prohibition unconstitutional, but other than these things, legalization and regulation of recreational cannabis has stalled in Mexico.

Mexico’s Cannabis Law Bill has languished in the Senate since last year, ready for discussion and approval. That bill would regulate recreational cannabis, its commercialization and research. It was also meant to regulate hemp, but earlier this year talks surfaced about removing from hemp from this bill. You can find our take on that here.

Cannabis legalization in Mexico

At around this time last year, Mexico seemed poised to pass the Cannabis Law Bill. It had already been approved by the Lower Chamber, the President’s party had a visible majority in Congress, and there was a somewhat functional relationship among all political factions.

Fast forward to May 2022, after the mid-terms. The ruling party lost its visible majority and it recently lost on major presidential bills on issues like energy reform. The President is attempting to advance major reformist bills like the electoral bill, so there is no room for controversial legislation like the Cannabis Law Bill.

The way we see it, Mexico’s political climate will not allow for the Cannabis Law Bill to be approved in this legislative term, set to end in 2024. It does not matter that the cannabis market is poised to grow, that foreign companies (mainly American and Canadian) have set their sights on Mexico’s cannabis market, or that the Mexican government will see a dramatic increase in revenues should the Cannabis Law Bill pass. With all this being the case, what should companies looking to set up a cannabis business in Mexico do? The answer for now is industrial hemp.

Industrial hemp is legal in Mexico

Though industrial hemp is legal in Mexico, it is not regulated. This means neither Cofepris (Mexico’s Federal Commission for Protection against Health Risks) nor the Ministry of Agriculture (the agency likely to eventually process Mexico hemp applications) have any incentive to grant licenses to grow or process industrial hemp, with lack of regulation as the excuse. However, it is both possible (and not as difficult as one would think) to secure a Mexican court order that forces the authorities to issue hemp licenses.

How to capitalize on industrial hemp in Mexico

Your first step should be to form a company in Mexico.

Your next step is to figure out where you company will want to grow and process hemp.

Though it is feasible to grow hemp almost anywhere in Mexico, most companies are seeking sites in safe parts of Mexico that are close to good infrastructure. Once you find your desired location, you will want to ensure you can get proper title to the land or, in the case of growers, a proper contract in place. This is essential to securing a license.

Finally, you will have to decide if you want to process hemp on site or elsewhere or in a separate piece of land.

Industrial hemp is often considered only in the context of fibers, textiles, and the like. But hemp can be so much more than that. Its applications cover everything from the automobile industry, to food and beverage, to construction. Hemp can substitute for lithium batteries, at a time where lithium is sought to be re-nationalized in Mexico. Hemp operators can make an impact, without having to go through the uncertainties of creating a new market.

Statewide lobbying to regulate industrial hemp

The Cannabis Law Bill is national and politicization of cannabis is mostly occuring at the national level in Mexico, though some state legislatures have sought to draft bills regulating hemp production. It is possible local regulators in Mexico will eventually start granting hemp licenses. Should that occur, we expect the national government will do little to interfere.

Mexico right now medical cannabis (with relatively difficult compliance requirements) and industrial hemp. In most respects hemp has an easier path to profitability.

It is time to move forward with hemp.

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Hemp/CBD, Mexico