On January 28th Harris Bricken hosted the webinar Cannabis in Mexico. That webinar covered the basics of what stakeholders can and can’t do right now in the Mexican medical cannabis industry, what lies on the horizon for adult use, and how Mexico treats industrial hemp and CBD.
Due to the high number of follow-up questions we received before, during, and after the webinar, we decided to host a second webinar to answer the pressing and popular questions we were unable to address during the program.
Learn more about cannabis legalization in Mexico, including:
- current medical cannabis laws
- current hemp laws
- the status of enacted and proposed regulations
- expectations for adult use cannabis program roll-out
- markets analysis
- insights on how businesses and investors can best position themselves in this industry, now and in the future
Adrián Cisneros Aguilar, our lead Mexico cannabis law attorney, joins Roberto Ibarra López to answer questions on these and other topics from our January 28th webinar. The panel is moderated by Harris Bricken’s cannabis practice chair, Hilary Bricken.
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Hilary Bricken 00:02
Good afternoon, everybody. Thanks for joining us today wherever you are in the world. Today we are talking about cannabis in Mexico. Part Two, the q&a session. I’m hoping that many of you joined us the last time for the very first webinar to discuss the broader view issues and customer more business developmental concerns with legalization and medicalization hitting the country of Mexico. This is not an insignificant development, some of the largest countries in the world maybe the largest based on population. It’s a very exciting time in Mexico for this emerging market. And it’s not just medical cannabis, adult use is also on the horizon. Plus lots of discussions about cannabidiol commonly known as CBD, as many of you know, and hemp and industrial hemp products and import and export. My name is Hilary Bricken. I’m going to be your moderator today. I’m an attorney here at Harris Bricken.
And it’s Los Angeles office. And licensed to practice in the state of California, Washington state and the state of Florida. And in the past decade of my practice, then lots of cannabis regulatory corporate work and transactional work and all three of those states and of course in the United States, we still have an issue with total federal illegality. With a patchwork quilt of regulations, basically cobbled together by all of the states and at this point, more than half the states have some form of adult use medical use, or low THC, high CBD products in their marketplaces and more contemplating it all the time. And for our American listeners, it may very much shock you. The State of Virginia is even going to legalize fully by 2024. And here in America, that’s a fairly big deal, because we all know who comes from Virginia, big tobacco, and we finally may see some of these interests that are normally parallel to each other unite to create some very interesting business opportunities here in the United States. Now, for our attendees that are watching today, as a moderator, what I’m going to do is push questions, obviously to Roberto and Adrian and I’ll let them introduce themselves again in a couple of minutes. And we’re just going to have a discussion and some of that discussion is going to incorporate lots of the questions that people had last time and I’m going to pepper in some of my own questions. And we’re basically going to dialogue with each other but during the webinar, please do not hesitate to ask questions as we go along because I am positive that new content is going to come up as we discuss this over the course of an hour. And believe me I will be checking for your questions. And again, at the end, I’ll be looking to see if anybody’s contributed anything new but please do ask as we go along. Now without further ado, I will let Adrian and Roberto introduce themselves accordingly and then I’ll kick it off with our questions.
Roberto Ibarra 02:36
For you, Adrian, thank you Carrie. Well, my name is Roberto Ibarra, I’m in Mexico in one of our Office of our Lawgic law firm with offices in the south of the country. Capital of Mexico capital and in glad to be here with you today to talk about Mexican cannabis legalization industry and glad for this invitation.
Adrian Cisneros Aguilar 03:11
Good afternoon everyone. My name is Adrian Cisneros. I’m head of the Harrisburg in Mexico practice. We done includes of course calories, which has indeed become the backbone of the Mexican practice thanks to what is what we’re seeing on the horizon. Now that medical cannabis is legal. Thankfully, that expectation well we’re more than happy to, to, to answer your questions here today.
Hilary Bricken 03:42
Okay, fantastic. Now, Leonard, let’s kick it off with you. Can you just give a very brief maybe two to five minute overview of currently where the law stands. Honestly, the business opportunities but where does the last stand relative to medical cannabis? What’s on the horizon for adult use? And what’s going on with hemp and hemp CBD?
Roberto Ibarra 04:03
Sure, okay. Well, as of the end of 2020. Mexico was in a similar state as the US is right now. And on a federal level, all of cannabis was illegal. It really didn’t matter if it was medical or produce and of course hemp with some manifestations because our federal health law did allow from some medical activities, but they weren’t really regulated. That changed on January the 12, where we now have the possibility and secondary legislation in order for us to be able to obtain several licenses or permits that will allow us for us or for the licenses to be able to cultivate for medical purposes only in a confined area similar to greenhouses, import of raw materials, vegetable material even and cannabinoids THC CBD in its raw form for medicine manufacturing only import of medicines, finished products. processing in order to obtain cannabinoids are extraction activities of this sort. commercializing of medicines commercializing Magistro formulations for medicines in drugstores and of course export of medicines and cannabinoids we will be able to export vegetable materials but we will be able to export medicines and cannabinoids as our raw materials and medicine development research and research and development is also the path has been already settled and for individual purposes for individual purchase consumption. The law has also flooded and leveled the terrain because now citizens may be able to acquire these kinds of medical products medicines concretely with our medical prescription in pharmacies, drugstores or similar sort of establishments. That’s regarding medical cannabis, which is the big branch that has as of January the top opened completely and fully although with some heavy color vacation, but as you ladies this Latin term for the absence of law. This is the period between the promulgation of the law, January the 12 up to the time it takes legal effect input which will be by the first week of June this year. That’s the general journal view of Mexico, because regarding adult use, we’re still waiting for another law. It is as of right now being discussed. Actually, next week, it will be discussed in the lower chamber of Congress and hopefully if it passes to the Nowhere to Senate, and then it is published, then we might have full completely legal panorama legal framework for Mexico as early as April of this year. But as of right now, only medical purposes, is fully legalized, as I just mentioned, that’s that’s a general view regarding him where it might be as well included in this federal law that is as of right now cooking in Congress, but as of right now, it isn’t legal in Mexico in in any way with also with some monetization that we might comment further on in this webinar.
Adrian Cisneros Aguilar 07:43
Just a complimentary word, what Roberto has us perfectly laid out. I think it’s important that that our attendees understand the importance of medical cannabis legalization here, because basically what the publication what the publication of the medical regulations meant is that finally people were able to exercise their rights because it was late for, for the attention of licenses. It was particularly important for all those who need access to better medication, and when they could do it. They can do that now, safely. Ensuring quality because they because physicians doctors cannot prescribe cannabis medicines and without prescription individuals can purchase and can purchase medicine either here or abroad.
Okay, and on the other hand, di D regulations are weighed, as already stated. They provide for phased implementation of certain areas or certain provisions of the regulations we have reported about that in the catalog. But essentially there’s a framework regulating the whole productive chain for medical use. So we are advocating for all international companies to start getting ready to apply for the licenses particularly International Cannabis companies that they had some connection to the pharmaceutical center.
Hilary Bricken 09:19
In and to be clear, just so that everybody understands the only commercial opportunities right now available in Mexico really revolve around medical until adult use is fully legalized and regulated.
Roberto Ibarra 09:31
That is correct. Medical use medical purposes are the defining lines for any and everyone who wants to come to Mexico and start a cannabis business. It isn’t that different from other countries. Let’s say Canada for example, where medical legalization occurred, choose to three years and in some cases even 10 years before other views. The difference here is that Mexico did it on regulation on one stage and it might have cured the full opening and legalization of abuse also the same the main difference but as of right now, today, March the fourth only medical purposes are…
Hilary Bricken 10:23
Okay. And moving forward. Let’s get into the details of the framework because a lot of clients contact us especially for international work. They want to know because they’re investing where they’re going to be operators. What are the steps one through 10 I must take to get a license and here in the states they could sell them. Well first of all, there’s going to be a state law licensing component with a master regulatory body. But before you can even get through to get a state license. You have to get local approval from the city or county in which your business is going to situate and here where I am the state of California. We have more than 400 cities doing different things regarding local permitting and local licensing. And everybody here knows unless you can get through those legal channels to get local approval you will not get a state license to operate even as a medical operator and of course as an adult use operator is the setup similar in Mexico for medical.
Adrian Cisneros Aguilar 11:22
Well, first of all we have to consider here that the entirety of the cannabis legal framework is going to be federal is and will continue being federal in Mexico. Okay, that means that you have to comply with all laws.
Roberto Ibarra 11:39 or all along.
Adrian Cisneros Aguilar 11:40
The deck the creation of your cannabis business. Now, that does not mean that you have to comply with the state or local regulations down the road. Why? Because once you have your licenses, you will you will have to obtain a certain permits have certain licenses from state and local governments in order to regulate which permits and licenses will depend on the nature and extent of your of your country. Okay, so that’s a that is the main context. That said the very first step people have to consider legally once is to set up a Mexican company. Okay. There is no specific legal mandate as to what type of company that can be. We usually we usually recommend either a corporation or what is known is in Spanish sappy, like a private equity firm. Why? Because those SRP that. The company allows you to raise capital rather quickly without all the red tape required. To increase corporate capital in the regular corporation while permitting you to keep a strong corporate veil and on the other hand, it is also easier to eventually grow and go park Okay, the incorporation they usually Corporation type of a Saturday is one to three months in or experience. Sometimes it goes way longer, particularly now that we’re under a pandemic because for instance, if you want to, if you want to get registered before the Mexican IRS that’s taking a long time, now under the pandemic but usually is one to three months. Once you have a company then then you start worrying about that regulatory framework to apply for a license is not mandatory either to talk to an entity to apply for a cannabis license, but we always recommend that because when you want to sell licenses are non transferable. So when you want to sell your cannabis business, you’re online as an individual and therefore you as an individual or a title holder you’re going to be unable to serve your business as such whereas when you sell the company, a DI T licenses will follow the company they become an asset. Okay, so that is that date is important. That’s why it’s no different to to to continuous being in the regulatory framework to apply for licenses.
Roberto Ibarra 14:16
Yeah, thanks, Adrian. That being said, although the regulations are federal, each state has certain requisites for any and every business to operate not only a cannabis business, and as lawyers tend to say, don’t worry, because local regulations are easy to comply because they’re not that different from each other. From each state and on a municipal level, and on one hand, and on the other hand, because as rare as it might seem. Setting up a pharmacy, for example, is not that different than setting up a convenience store. With some additional security regulations and such. But that’s not that hard.
The hard part is to obtain the federal permits the federal licenses, that’s where the core of the cannabis industry in regarding the legal very work will be will be the patient will be appointed on a concept race, which takes us to the next issue of this conversation that will be precisely what authority or authorities will be immigrating these in this business in this industry. But that’s the that’s the legal framework that we will have to abide. First of all the licenses on a federal level and on the local level, each and every requisite to setup a business or an establishment a factory. And as I said, it won’t be that different from any other factory or any other small local establishment.
Adrian Cisneros Aguilar 16:00
Yes. Once a company setup the most time and effort should be devoted to complying with the federal cannabis regulations. As Roberta correctly pointed out, and local regulations that have to do with setting up business and operating that business aren’t really that different, but there are certain but there are certain nuances that eventually will have to be taken into consideration when deciding when they were to set up shop so for instance, if not the same setting up same business in Guadalajara, which is a big city or in Mexico City. smaller municipalities, but the issue is about implementation requisites tend to be the same. So you have to be mindful as to how they implement real estate regulations, or perhaps your factory environmental regulations, operating licensing regulations, so on and so forth.
Hilary Bricken 16:55
Okay, and just to kind of recap to the audience, it sounds like some of the highlights with these initial barriers to entry for securing licensure federal is going to have the ultimate say the local barriers to entry will exist but they will be nominal mostly this will be treated like any other business that’s out there in Mexico might be some local nuances regarding environmental impacts, maybe zoning, things like that, but nothing out of the ordinary which for our American watchers. And for those investors, and as American companies they know here in the US. Sometimes we have very competitive licensing regimes, where you have to trot out a whole team of people that can demonstrate lots of business acumen in the cannabis industry. There are very high financial barriers to entry to be able to participate. And I say local states are like this as well, like Nevada and New York and Illinois. That’s a very common template. It does not sound like that is going to be the case in Mexico to secure a license. And just a footnote to that. Adrian, you talked about the corporate structure corporate structure is immensely important for cannabis businesses, especially here in the United States because of the tax implications with the federal government. It’s a very unique situation. It’s a unique situation from business to business anyway regarding normal tax impacts, depending on what you’re going to choose. Very helpful to know guys that are watching Mexican entity is very likely to way to go. There is a succinct timeline there for getting set up. Getting your tax ID number for Mexican tax authorities sounds like a bit of a longer time, at least than in the United States. And also know what Adrian said, the licenses are not transferable. This is hugely important we deal with this all the time in the States and in other countries. People think they can take their individual licenses and sell them for cash. Right. And most commonly, we have publicly traded companies coming in. They actually want to sell their stock in exchange for that license. Very interesting securities issue there if that deal does not work out so from the outset, no, the waste is not transferable. You can only buy the businesses that holds them. And that becomes very interesting from an m&a perspective. Good to know that Mexico is going to follow the course of most of the countries that have done this. Now, let’s move on a little bit. I do want to talk about COVID Because we did get a lot of questions. And most people that are in the cannabis industry do very much want to know the regulator that they’re dealing with. Because there’s a statutory component here. That pretty much never changes unless the congressional body decides to make a change. And then we have all this regulatory and to see the issues going on with regulators and those rules can change, depending on industry issues that may arise. If regulators identify something they go through a rulemaking period regarding the medical regulations, not the statute where are we? What’s going on today?
Roberto Ibarra 19:52
Okay, let’s talk about copper please. Cover please will not only be the regulator but inspecting entity licensing entity, the federal government organism that will be in charge of it is as of right now in charge of any and everything that takes that comes in, in the medical sphere or in Mexico, and cannabis will be the exception. Well with one exception, which is the primary stage of the industrial process. Regarding cultivation, there is another entity that will be participating the department’s of agriculture or Ministry of Agriculture. He will be through Santa SICA. Which is one of these organisms who will be the one taking care of licensing of cultivation, permits or licenses and certification and…
Adrian Cisneros Aguilar 20:51
Testing Certification and qualification agency. That’s it.
Roberto Ibarra 20:55
Thank you. Thank you, Adrian. And so we’ll have to deal with Asika for any activities regarding the vegetable part of cannabis, right before transformation or extraction, and they will be the ones regulating for example, a second thing one of the questions the mechanisms of tracing a traceability as we call it and they will work hand in hand with CafePress that then will take place in all the major stages of the process. Transforming extraction, selling, even giving away permits for commercialization. So, we’ll have two government entities with which we will have to deal with plant or in the plant state or vegetable state. We will have to comply with roughly every regulation that has to do with agricultural practices, good practices, good manufacturing practices, good growing practices, which are international standards and on the medical process. Really there is a complete framework because we have to think of cannabis. As of right now here in Mexico as a raw material for producing medicines. So the medical production process commercialization process, quality processes are already in the law.
That’s not new. The only thing that’s new it as it is that now we will be able to incorporate in for example, any given medicine or cannabis component. There was another question regarding a he or she listened well about CBD being treated as a medicine and Yes, unfortunately, unfortunately, yes. And that’s a controlled medicine that that’s going to change but as of right now CBD THC or any other cannabinoid, our raw medicine material components and the such are deemed as psychedelic psychotropics in Mexican law. And so both of them are controlled substances. They’re treated as such.
Adrian Cisneros Aguilar 23:15
This also has very, very specific, very immediate implications for any, any American business looking to export their products to Mexico. So right now, because and this has happened to us directly the diversity shelter traditions would get. People think people tend to think that now that the American regulations are published, they automatically can export any CBD product into Mexico. And that is not the case. If the product in question does not qualify as medicine. The definition of medicine is not even contained in medical regulations. As such, it’s contained in the general health law which prevails over the regulations, then then you will not obtain an import permit or a nor health registration authorization for the product. Regardless of the CBD content, regardless of the percentage if it’s not, if it is not a medicine or a raw material, used to prepare to manufacture medicine, it cannot get into the country.
Hilary Bricken 24:25
Now I just want to ask a couple questions. Let’s back up a little bit because we’re gonna get into CBD because there’s so much confusion around CBD frankly, in all countries at this point, probably at the fault of the United States. There’s lots to talk about there probably in the latter half of the presentation, but to the nuts and bolts of securing cannabis licensure. And specifically, I want to talk about cultivation because even though cultivation and cannabis will be treated as an agricultural product, with existing laws kind of controlling its fate, around manufacturing ultimately into pharmaceutical product, with cultivation is outdoor going to be allowed or is it just going to be greenhouses and indoors you know?
Roberto Ibarra 25:09
Because emotions process data in in the patent regulations, although it doesn’t say specifically or doesn’t talk about greenhouses. It does say some requisites or prerequisites in order for you to apply for a license. For example, physical barriers, isolation chambers, choose double doors in and out and exclusive and anti materials and change and so, although it doesn’t say specifically a closed environment, because of the regulatory studies, that we should interpret that medical integration may only be possible in Mexico in closed environments, either a greenhouse Canada style or any other architectural practice or architectural plan, but closed spaces definitely not in the open. That’s not the case. We can for example, which we can add a little bit further but to be permitted or not regulated, then there might be a space for someone who wants to grow once we have defined it. Furthermore, in this session, but for medical purposes and for agility purposes, definitely one coming to Mexico to cultivate should definitely be having in his business plan, the prohibition of building a greenhouse or a warehouse or a closed environment that provides isolation chambers, or…
Hilary Bricken 26:58
The crops. And then, as far as let’s say pharmaceutical manufacturing. Let’s say I want to get a manufacturing type license to produce filiform cannabis to distribute to pharmacies, is there going to be special additional licensing around that? That’s not already controlled by existing laws and frankly, I’ve seen questions for retail distribution. Our only pharmacy is going to be permitted to do distribution or can a standalone retail facility that looks like a pharmacy but it’s not pharmacy, distribute like we have here in states.
Adrian Cisneros Aguilar 27:31
Well actually discussing one of the one of the strongest criticism signs in your regulations because it is precisely a because of licenses. Processing licenses that people tend to say hey, this, these regulations were tailored for pharmaceutical companies, okay, because since they since medical cannabis products are treated as medicine for the general health law and human natural medicine, Julian do you need additional salutary permits or licenses before being able to apply for processing license? They say a new entrepreneurs on there they have the infrastructure necessary an agent into that pharmaceutical company are going to enable top line. So once you once you have that, those licenses in advance, then you have to secure health registration authorization for the medical product you have to So first you have to you have to be legally authorized to manufacture medicine as such, which is what the pharmaceutical licenses are for and the sanitary licenses are for then you need to be approved in the actual data specific medical products. Once you have that then then you go to the medical regulations and see what you need to obtain medical cannabis products and processing licenses. We proceed to all the logistic steps importing raw materials which in turn in turn invokes applying for an additional license. Again, all the non Canada’s government permits necessary to operate just that. Kind of a factory or business, a private finery manufacturer. This is also why we always advise to get counsel to apply for this license. Even though there is no requirement by law to have an intermediary to apply for this license. It is because of these intricacies. And this interaction we see among these medical regulations and the existing a health framework in Mexico that they will have to be mindful that is not just about cannabis is calories as part of a larger Mexican sanitary framework. Because after all, we’re talking about medicine, just that.
Hilary Bricken 30:05
Yeah, it’s so very different here. You may see the opposite criticism of the United States that we treat medical cannabis with kind of medical gloves, but it’s not manufactured comparably with big pharmaceutical companies and how they make their products. It really does stand alone. So much so that those existing medical laws don’t really apply to medical cannabis. For example, in the United States. The FDA does not regulate medical cannabis products outside of Epidiolex, which went through drug trials yet medical cannabis persists on a state level. This is very interesting to kind of suss out those issues, because this whole adherence to existing federal frameworks that are very complicated, very comprehensive, that is a foreign concept to lots of operators, at least in the United States. Maybe less so in Canada now because they’ve got federalization. And I guess my other follow up question is, do applications exist yet for these things? The special cannabis side of it, do they exist? Somebody commented that the COVID priests website is garbage they can’t find anything and I believe them. So where are the applications? And I…
Roberto Ibarra 31:17
Know I’m sure they made around but there’s a special regime here in Mexico regarding the coming to affect the enforcement of any regulation, which we call the transitional clauses in every deal in every law in every body of regulations. And here in Mexico we have called the right to be given an answer. So, for example, many of the licenses and permits came into and into an enforceable right for US citizens, citizens to ask for them or to apply for them right in the next day on January the 13th. That’s an exception to the cultivation license, which won’t be enforced up until the first or as soon as the first week of June. The thing is, is as you said, Hilary Calabrese is on one hand very, very well. It has his hands full with pandemic because a federal health regulator is in charge of authorizing anything that has to do with the pandemics and in charge of health policy right as of right now. And they’re not working in roughly any other area that is not COVID. That’s something on one hand, on the other hand, they haven’t created the formulas forms for the for these permits, but that’s, that’s just what I was talking about. In Mexico. We don’t really need for him to do Please work for us to ask for permission. So with where there is no firms, that’s again, as Adrian said, whereas lawyers come, come handy. And so we have actually presented and applied for some of these licenses, the simpler ones, the ones that have less requisites and they’re on its way right now. And CafePress is obliged to answer to us, either with an affirmative and, and affirmative answer and giving us the license we’re asking for are with a negative answer and stating why we can add moment obtain the license, and then lawyers again, will have to fight for affirmative license if the application was fulfilled correctly regarding only the requisites So yes, there is a possibility not a possibility alone. Logic and Harris Bricken logic in Mexico are as of right now applying for some of these licenses, the simpler ones within wait for any waiting period, with the exception of cultivation, and we will be applying for the first cultivation licenses under this new regulations as soon as the first week of June. With or without Calabrese. Having done its homework of creating the farms and publishing them on the website. But just to address that particular issue, yes, you cannot trust. You cannot trust websites or government websites here in Mexico, because this is not about page about a website. They do have many of the forms online, but regarding canneries you won’t see very in the next three, six months. That doesn’t mean you can’t ask for licenses. Yes.
Adrian Cisneros Aguilar 34:58
What is what is what is interesting hilarious is that the way it works here in Mexico, pointed out is that as long as you have a right, provided for in the statute, any statute either a law or regulation, a guideline, whatever is published, you are entitled as a citizen to exercise that right. Okay. Regardless of whether the government is prepared, is prepared to give to give you the means to exercise, if they do not answer in this case of responding your direction for that matter. And this is what we are evading, evading when, as lawyers we have a constitutional right to get an answer from any from any government entity. So we usually don’t have the means which we just we just submit a letter, a letter, you know, as a attaching all the necessary evidence or proof that we are compliant, and they don’t answer well, we exercise, our constitutional right and that usually takes place reticent experts in that a true filing and then parallel action, and then our action is a is a is there’s not there’s not an you file a claim. Contesting before federal courts or the Supreme Court that you have a constitutional right that has been violated in this case. The agency Congress has not answered.
Hilary Bricken 36:41
That is very different than what we see here. And you know, we’re good Little Boy Scouts and Girl Scouts of America where we go to our agencies websites, we find the forms, we fill out the forms, we deal with the online robot. That is why I think people are searching for the applications in the United States. Because they are so very used to that system and accessing that information. But it sounds like in Mexico, what can what can happen. You go to the statute, you compile all of the regulatory requirements, which I assume are things like first and last name of all owners. Any criminal background checking that might be required. Other financial information and you just submit it to Kobe priest because they haven’t provided the form and they provide you an answer yes or no and you move forward accordingly. Is that about sum it up?
Roberto Ibarra 37:25
That about sums it up and to be talking about that Hillary because if anyone foreign or domestic citizens or foreign entrepreneurs or investors want to apply for any of these licenses, medical licenses, but following the letter of the law, they might have to wait several months or even a year. Because let me put an example for you. In medical, medical cannabis is permitted in Mexico for since 2017. That’s when our health law was amended. And cannabis became legal in Mexico. We just needed the secondary regulations to know how to enforce this right. And in that the green that law, the transitional clauses stated that we would only have to wait for as long as six months before Kapha freeze immediate and published these regulations more than three years pass. So we have obtained some licenses since 2017. With this process, because the ones who didn’t want to wait and knew where to look for legal advice are the ones that as of right now have a license in Mexico, either to produce to report or to commercialize cannabis. There are licenses already issued in Mexico. But for the ones that are okay, it’s not that much, six months. From 2017 to maybe Derrick 2018. They have waited and might still keep waiting for as long as one or two years prior to come. Please be ready. So that maybe would be one difference between intrapreneurs and people who want to wait. The ones who want to wait might wait a long time and the ones who don’t with proper legal counsel can already start or advance as Pittman…
Hilary Bricken 39:31
Stated Good to know. Yeah, I think a lot of people maybe didn’t catch those details in the first webinar. They were probably looking for a publicly available application to just move forward like they’re used to. But that is very unique. I will say that. Now let’s talk about actually there were lots of questions around THC content in the current products, and it’s not unusual in all of these countries and states to have THC thresholds limitations and just bear with example, here in the states we know that industrial hemp is anything with less than point 3% THC and then the states individually, they will regulate oftentimes, how potent a product can be based on product types of flower can be different than a certain kind of edible. It can be different from adult use customers to MediCal patients who are medical patients potentially are entitled to possess basically cannabis products that have this higher THC content to address their medical needs. What is the current deal in Mexico specifically with the types of products that can be sold now relative to THC content, and I know it sounds like in Mexico, there’s a timeline for implementation maybe to sell more potent products down the road.
Adrian Cisneros Aguilar 40:44
Well, here, it is important to clarify the following because this has indeed been a recurrent, recurrent question. Since the first webinar in the form of questions and so forth. What defines cannabis or medical, industrial or recreational use is the actual use given a given to the plant either raw or processed? So as to find out its product and not just the amount of THC, which by the way in Mexico, is already 1% And it’s likely continue to to be to be so what is the consequence of this that we can have medical cannabis products that are either over and under that 1% the threshold, whereas hemp, or roughly translated as industrial hemp will be all derivatives products that contain less than 1% THC but are also given industrial use in Mexico are live to us we don’t make the distinction between a between hemp derived CBD it’s a one person threshold is mostly used to the to the fight a de psycho activity or decide cooperativeness of the of the raw material or product in question. I am aware that for for many, many American lawyers, these designations perhaps don’t make sense because actually there is no such institution. But by intrapreneurs are people who are in the actual business to make that distinction because they tend to think and perhaps you could elaborate on that but people in my experience tend to think that a CBD can only come from hemp because that’s the only legal source they know in this case, in our case, what if your product regardless of the application contents, fit within the description of medicine, personal health law, then, then the medical regulations are going to be applicable.
Roberto Ibarra 42:58
Yeah, I would simplify it by saying that ham facilities understood in the US is not the same definition as it is here in Mexico. It really doesn’t matter where the CBD or the THC comes from Mexico as of medical industry or regarding the medical industry. Both of them are precursors to medicines, and they are treated as such. And it doesn’t really matter what quantity or amount or percentage is contained in, in medicine or in a product as long as he has a medical activity in the human body or in the animal body. If it’s veterinary medicine, and regarding the use field that might come into effect. On April there will have we will have that distinction, but not as CBD hemp but only as CBD content or sport as THC content and provided the price doesn’t change then on the other use industry and we will have that less than 1% THC content to divide the regulation between products, not medicines. As of right now there really isn’t anything.
Adrian Cisneros Aguilar 44:15
As of now, the only actual issue concerning hemp is is that that is under 1% thc threshold and that as an industrial customer to use in that specific case for him. Well you can commercialize Import Export but that’s about it. It’s about to be more authority regulated in economics.
Hilary Bricken 44:41
Sounds like life will be easier once adult use is on the horizon for some of these things. But let’s talk about the interim right today until that time. Specifically, I think this is a nice segue into hemp CBD. And we have lots of specific questions regarding it’s important export to Mexico, from United States and other countries. Now in the US, you guys probably know that the FDA really is not a big fan of hemp derived CBD here in the United States. Basically if you make any kind of medical claim about it or body or therapeutic claims, they will come after you they have been going after people because it is illegal federally in their opinion. It violates the Food, Drug and Cosmetic Act and it is not considered a supplement. The only cannabis related product as we all know that they have approved the drug trials I mentioned it before is Epidiolex which basically is the cannabis medicine to treat small children with seizures right produced by GW Pharmaceuticals. Nothing else out there is comparable to that, that the FDA will even touch given that that’s the case. What specifically what kinds of products can go to Mexico and what kind of products can come from Mexico, in the CBD space right now at this time.
Roberto Ibarra 45:55
This is just one of many possible interpretations of regulatory body of law that regulates cannabis medical cannabis here in Mexico. But those, those regulations don’t really imply that you need for example, the FDA approval on foreign medical product in order for it to be registered here in Mexico and commercialized. It only states that you can research medical products and the medical definition or medicine as defined in the federal health law. There are parameters and one of them is that you can prove if it’s for example for human use, that he has a medical application and that you can prove it that you have the medical literature the scientific literature, not not. Not necessarily deriving from a research protocol, but but some some kind of study that somehow shows or proves to Calabrese that your product indeed has a medical application and that you have a proof to support it. That being said most I don’t want to use that for many of the CBD derived products or invent products that are produced in the US don’t have that literature because in order for them to be commercialized produce information, listen to us, that’s not necessary. So the ones that do have those kinds of literature of proof of medical application of medical effect on the human body, for example, might have a shot at being registered important and registered here in Mexico. The ones that do not have that don’t even try, you will be wasting your money if you try. That’s that’s a that’s one of the issues. The other issue is because of, of Canada’s not being fully legal federally in the US in order for the export and import and export process. To take place. Mexico cannot bring from the US something that federally you cannot. That’s illegal federally in the US. So even if you have an excellent product and medical product and other literature to prove it, Mexico won’t be able to import it because the US won’t give authorization and that’s one of the requisites to be able to bring it legally to Mexico. So that’s that that barrier between nations doesn’t really concern the Mexican regulatory body of law but rather American or the US regulatory body of law. Maybe you can…
Adrian Cisneros Aguilar 48:41
Yes, it is very important. This latter part of Roberto mentioned is extremely important, because delicious to state that you’re able to import something whose export is prohibited in the country of origin so it is true and this is foreseeable. That’s why we support federal cannabis legalization. That’s going to solve a lot of issues because that’s what we that’s what’s gonna allow the American American and Mexican legal frameworks to match more disciplines the other important thing that I mentioned is that yes, you need actual scientific literature. They will not tell you why but that didn’t get done. Mexican prompting style is like what the way he was talking about the need to build greenhouses for the occupation license. They will not tell you this, but you can deduce from the requisites to interpret the law and you realize that they’re actually they actually, they actually expect you to set up a Mexican entity and in this case, they actually expect you to produce actual steps studies, because if you don’t have that you’re unable to prove that your product has prevented or rehabilitating effect or pharmacological activity and therefore, you do not fit within the description of Miss.
Hilary Bricken 50:11
So basically, if I wanted to import a hemp CBD product from the States to Mexico, if I supplied COVID priests with a letter from my mother, that said, this really helped me sleep well at night. That’s not going to work right?
Roberto Ibarra 50:27 That’s not going to work.
Adrian Cisneros Aguilar 50:28
Unless she’s won the Nobel Prize pricing science perhaps.
Hilary Bricken 50:33
Yeah, my mom’s out there gonna work for us. And we can you give me an example of what would work is there anything other than Epidiolex?
Roberto Ibarra 50:43
Not necessarily. You have to go through stage one, stage two and stage three medical research. Protocols are proof. But you can have, for example, that there are several European, American and Canadian Studies backing up the use of CBD in Sydney, or a combination of CBD and THC quantities that help certain pain, pain derived cancer issues or of course, as epidemic starts in a fixed formula, there are other formulas that also have in some stages for these or other sicknesses or diseases. But the thing is, Mexico does not limit the possibility of patients to access to this medication or to these products. Only to register products we have what we call Magistro formulations which allow for for an establishment pharmacy or a trustor to commercialize specific formulas derived from the medical prescription of a doctor. So an MD can prescribe some formula. You would call it homemade formula of sorts, where the pharmaceutical or the pharmacist reads the prescription and then goes to his doctor of pharmacy and prepares the medical cannabis formulation. They’re in his office and the breaks into the patient. And that is actually allowed in Mexico, as an apothecary would do in the past. Well, actually one or two businesses that we work with us that particular legal way, or strategy to import raw materials CBD and THC to Mexico. And then with one of these permits, it’s not a license, it’s a permit. For for commercializing Magistro formulations. They already are, they’re already making work making a business. So you don’t necessarily need a fixed formula and the registry, you can actually do them yourself. And that’s one of the easiest strategies we have found, as of right now to be able to start now a business company or a business, right? Commercialization business here in Mexico. So now, you might not be able to bring your product from the US but you might obtain a license here in Mexico. To import the raw materials and then to produce them on prescribed and the prescription a prescription. And it would basically be the same when it gets to the general population. And then you might for example, use your label to identify the product and you’re not actually importing it finished or already finished. That’s one of the many legal ways you can use the actual regulations to your advantage. Then again, for that you need proper legal counsel.
Adrian Cisneros Aguilar 54:06
This this this is a very good idea to start getting a getting insight of the export markets and also engaging in more ambitious cannabis projects because that is the very beginning of manufacturing project in Mexico. That’s the very beginning of the production line. So on you can prefer a to eventually sell opportunity and apply for a process in licenses. That is the very beginning you’re already you’re already setting, setting the supply chain to import materials into the country. So, these questions have come up and we have already started entertaining the idea with potential clients. These my data which is our starting point about a raw materials, so while you set up the structure to to create a cannabis factory and eventually develop you’re developing your own your own products.
Hilary Bricken 55:03
Okay, two questions. Number one, what are some examples of raw materials and number two COVID Three Strikes Again, someone was asking in order to register my imports the COVID application on the website to do that.
Roberto Ibarra 55:21
Sorry, I didn’t quite get the second one. But for the first question, you can import actually any raw material derived from cannabis THC CBD either powdered or in oils or extracts tinctures so long as it is only so long as the application is made for raw materials and raw CBD in any percentage 60% 70% 99% It really doesn’t matter as long as it is not a finished product. And it CBD and any any cannabinoid really and in any particular form, so long as it is asked for as a raw material and that do not try to import it in. I don’t know in small mouths. I mean if it is raw materials in kilos or pounds or pounds or large amounts, pockets, large amounts. But that’s about it. I mean, that’s why isn’t that part it hasn’t been that far to import CBD or THC in that role. And…
Adrian Cisneros Aguilar 56:32
After after me after me, seeds and other types of vegetable material, but that will be after me. You know, bear the transitory provisions mentioned…
Roberto Ibarra 56:48 I didn’t quite catch this.
Hilary Bricken 56:49
Yeah, I’ll repeat it. So another person asked to register imports to get the raw materials and or those finished products that may qualify which are highly unlikely but maybe they do. Where is the application again on the COVID priests website to do that they cannot find it.
Roberto Ibarra 57:08
Sorry, go ahead.
Adrian Cisneros Aguilar 57:12
Because applications are already at risk of having fallen brothers DeForest necessary to limit the provisions in the middle.
Hilary Bricken 57:25
Gonna be the same process. As with the medical licensing…
Roberto Ibarra 57:29
You want to do today or tomorrow? Yes. If you want to wait for the forms to be ready. As soon as June they might be really not sure about that but you willing to wait?
Hilary Bricken 57:42
Okay, that’s no and I’m gonna just do some rapid fire questions with the last two minutes that we have. Somebody emailed ask, What about veterinary medicine? Is there any carve out contingency for that to be able to use cannabis or CBD with their pet patients in Mexico?
Roberto Ibarra 57:59
There’s a legal backing because the cannabis regulations don’t provide for veterinarian activities but the general law does so because of a lawyer key here in Mexico and our legal system. How it works.
Veterinarians can work with canneries can ask for their prescription party if they are returned areas or anyone that wants to work with cannabis on the veterinary area of medical industry can ask for his permission or licenses. But that’s almost for sure he will need legal counsel because because of that absence of veterinarian activity in the specific cannabis regulations. That doesn’t mean they cannot just means that they might need additional health. Okay,
Adrian Cisneros Aguilar 58:47
Because they didn’t have the right exercises, which is why it’s probably the foreign regulations. That’s where lawyers come in.
Hilary Bricken 58:54
Got it. And I guess last question, but probably an important one. Do you anticipate that foreign companies will be able to joint venture with Mexican companies that holds medical cannabis licensing and adult use licensing in the future?
Adrian Cisneros Aguilar 59:07
That’s literally foresee seed but we also encourage. As a matter of fact, when it comes to foreign investment caps for medical user, there are no caps. We also came up in the last webinar. Contrary to what we expect to happen, for adult use, for medical use. entity for the manner that you set up your Mexican entity and comply with all the applicable laws and regulations. The Yes, yes, we’re in. Where why, why is it important to go to the Mexican parliament for No, just like in any other foreign jurisdiction, knowledge or knowledge of the markets, business acumen, they easier setup? Supplier distribution chains the answer to that has been your experience to…
Roberto Ibarra 1:00:01
The only thing they will actually Kevin’s regulations provide that for the cultivation license. It actually is the only license that specifically describes these contracts between the owners of the land and any entity, Mexican or foreign. So and that has to do with a foreign investment capsule Do you won’t have a cap on any corporation that works with cannabis. There is Suffern a percent cap for a foreign entities on cultivation. So it seems nothing it’s not that’s not the word is actually very, very good idea to work with landowners, either. If you’re a Mexican corporation or a foreign corporation, rather than owning directly owning the land. It won’t be that different from any other crops or cultivation vegetables out there.
That’s and that’s only regarding cultivation.
Adrian Cisneros Aguilar 1:01:04
Yes. This is important because most probably the lads will do it. You will intend to use for cultivation purposes. Yes. Is owned in the heat of property is a very Mexican institution. It’s a form of communal property. So, this happens in every industry, foreign companies that made coattails factories or in this case calories processors will have eventually to deal with them. If they’re if the preferred location is owned by ABB sold under such an ownership regime. So it is important to be mindful of that and hence it’s even more important to connect with Mexicans.
Hilary Bricken 1:01:47
Hey guys, well thank you so much for your input and for the answer my very pointed questions and you know, entertaining all of these issues, and it’s a very exciting time in Mexico. That’s very clear. I want to thank everybody very much for attending our webinar today with Adrienne Rico and me and please join us in the future. We ended up coming webinar, march 24. changing tides lobbying on cannabis issues in the Biden administration. Which should get everybody’s ears up pretty much everywhere in the world, but specifically in the US. We’ll see you there next time. Thanks again, everybody. We really appreciate it.