Mexican Cannabis: Legalization is Happening! Are you Ready?

mexico cannabis

The Mexican Senate just passed a bill containing a draft federal law for the regulation of cannabis (the “Cannabis Law”). The bill includes amendments to the General Health Law and the Federal Criminal Code and is amended by a helpful Annex. The Cannabis Law is being sent to the Mexican Lower Chamber (Cámara de Diputados) for discussion and hopefully, approval. This is very big news for the Mexican cannabis industry.

Though the bill originally put on the floor for Senate approval has features we had seen coming (and perhaps some other, more disquieting, restrictions), the Annex is truly encouraging. If the Cannabis Law passes in the Lower Chamber we expect it to be published in tandem with the Medical Regulations discussed below, thereby legalizing the whole cannabis market for all uses in Mexico.

A bit of context here: as we previously reported, in 2017, amendments to Mexico’s General Health Law and Federal Criminal Code allowed for the following:

       1. Limited cannabis use and consumption for qualified patients.

       2. Possession of cannabis for undertaking medical research.

       3. The import and export of medical cannabis products.

In 2018, Mexico’s Supreme Court declared Mexico’s general prohibition against adult use cannabis unconstitutional and required Mexico’s Ministry of Health, COFEPRIS (Federal Commission for the Protection against Sanitary Risks), and various other Mexican governmental agencies issue regulations establishing a commercial cannabis chain for cannabis distribution.

A Mexican Supreme Court ruling last year mandated the Ministry of Health publish regulations for medical cannabis use and make the 2017 amendments effective by September 2020. However, this has not yet happened. But Mexico’s Cannabis Law that has just been approved by the Mexican Senate seeks to comply with the 2018 mandate and this new law is expected to go into effect by December 15th.

The Cannabis Law will regulate recreational and industrial (hemp) use in Mexico but it does not address medical cannabis use which is already legal and will be regulated by draft Medical Regulations which we expect will be published in the Federation Official Gazette at or around the same time as the Cannabis Law is approved — early December, 2020.

The below are are the game changers contained in the Cannabis Law:

  • The 1% and above THC content standard to deem cannabis as psychoactive is further cemented, so Mexico will follow the international and not the American/Canadian standard. Adult cannabis use will be legal for those 18 years and older.
  • Possession of up to 28 grams of cannabis will be fully legal.
  • Individuals can apply for growing and consumption permits for adult use of up to 6 plants per permit holder or 8 plants when more than one permit holder lives in the same dwelling. There will be no need to install physical barriers at home to consume; it will be enough to ensure smoke does not reach minors or passive smokers.
  • The concept of “consumption associations” (asociaciones de consumo), is introduced. Thes asociaciones de consumo are non-profits made up of a group of individual cannabis permit holders who will be permitted to conduct cannabis adult use-related activities together, provided they are at least 500m away from any recreational area, school or smoke-free area.
  • The Cannabis Law provides for licenses for the following cannabis-related activities: cultivation, processing, merchandising, import/export and research. These licenses will also include authorization to conduct ancillary activities, such as transport, storage and, in the case of cultivation and processing, sale to the next link down the production chain, provided the cannabis buyer also possesses a license.
  • License verticality is allowed and there will be no restrictions for related parties to apply for other licenses. This means you can create partnerships to cover the entire production chain, though this may be restricted by the Ministry of Health or the Federal Economic Competition Commission on social and antirust grounds.
  • Each cultivation license will cover 1 acre for open-air farming and 1000 square meters for indoor farming. License holders will be limited to 8 licenses for open air farming and 2 licenses for indoor farming, for a total of 8 outdoor acres and 2,000 square meters indoors. Population groups deemed vulnerable or impacted by the war against drugs (indigenous peoples, farmers, etc.) will have license preferences.
  • Foreigners can set up a Mexican company and apply for cannabis licenses just like any other Mexican company. 
  • The Mexican Institute for the Regulation and Control of Cannabis, will be created to oversee industry controls. This will include defining and refining license issuance policies and guidelines.
  • Hemp will be regulated, albeit superficially.

When the Cannabis Law passes, it will (thanks to its geographic location and climate) pave the way for Mexico to become a cannabis powerhouse, both for production and as a market.

It is important to understand three things about cannabis in Mexico.

First, cannabis use is already legal in Mexico, thanks to the 2017 amendments and recent Mexican Supreme Court binding precedents. It is though essentially unregulated right now, which keeps the industry in a legal gray area

Second, cannabis regulation in Mexico will involve more restrictions than the current unregulated situation.

Third, although cannabis will be fully legal once the Cannabis Law and the Medical Regulations are published, that does not mean you will be able to apply for licenses immediately upon passage of these laws. The Mexican Institute for the Regulation and Control of Cannabis must first be created and become fully operational. Then, a full 90 days after that happens, you will be able to apply for a research license, but you will need to wait 6 months for licenses for activities involving non-psychoactive cannabis and 18 months for adult use permits and licenses. Cultivation licenses may only be applied for once testing and traceability guidelines are published.

Due to the long waiting times and the current situation, our advice to our clients is typically that they should apply RIGHT NOW for cannabis licenses. Though securing these licenses before legalization is somewhat complicated, these current licenses are broader than the licenses that will issued once the Cannabis Law and the Medical Regulations enter into force. Indeed, as I have written previously, securing a Mexican cannabis license now will give you a jump on market knowledge and business acumen.

Bottom Line: A cannabis market boom from legalization is coming to Mexico and your best way to take advantage of this is to act now.

 

We will publish a version of this post in Spanish later in the week. Until then, for more on cannabis in Mexico, check out the following: