As Mexico legalizes cannabis, it is instructive to observe what it is doing right -- and what it is doing wrong.

It has now been widely reported that Mexico is close to fully legalizing cannabis. This process has been slightly delayed as Mexico’s Senate Political Coordination Board has been designated to review and “coordinate” this draft legislation, to achieve inter-party consensus.

Assuming that this Board doesn’t insert recommendations for substantial changes, we have a good idea what the final legislation will look like. An article by Luis Armendariz, an attorney who practices law in Mexico, is illuminating.

In general terms, the legal model will be similar to Canada. Full legalization nationally, including legalizing the recreational use of cannabis by adults. Four types of commercial licenses for cannabis operations will be granted: cultivation, processing/manufacturing, sales, and import/export.

Additional permits are expected to be available for personal cannabis use or for commercial hemp operations. Requirements for such permitting will be much more relaxed.

A new cannabis agency will be created in Mexico, the Instituto Mexicano del Cannabis (Mexican Cannabis Institute) or IMC. This will be a separate government agency. Here we see a clear distinction with Canada’s legalization model.

Canada has put “cannabis policy” under the jurisdiction of the Minister of Border Security and Organized Crime Reduction. In other words, cannabis policy is being determined in Canada as a “crime” issue rather than a health issue. This is despite the fact that it is Health Canada that has been placed entirely in charge of the cannabis licensing process in Canada at the national level.

This  questionable leadership explains the anti-cannabis paranoia reflected in many of the federal rules and regulations created for the legal cannabis industry in Canada. It also accounts for the anti-cannabis mythology incorporated into federal government “education” about cannabis (i.e. government ads).

Mexico is placing an independent agency in charge of cannabis regulation. Hopefully this means less politically motivated regulations and a more rational regulatory structure for Mexico’s cannabis industry.

Conversely, Mexico’s draft legislation is much more conservative than Canada’s model in a key respect. All vertical integration in Mexico’s soon-to-be legal cannabis industry is prohibited.

Similar provisions are seen at the state level in the cannabis regulations of some U.S. states. It’s unclear what the rationale is behind such rules. The effect, however, is to impede the ability of the legal cannabis industry to compete with the cannabis black market (to phase it out).

Black market cannabis operators have no restrictions on vertical integration. They also pay no taxes and enjoy several other advantages versus legal/regulated cannabis companies. Impairing the efficiency of the legal cannabis industry by preventing vertical integration is counterproductive.

Also significant is Mexico’s draft legislation on hemp. Proposed language defines hemp as cannabis with THC content below 1%. This is well above the threshold set in other jurisdictions in North America and Europe, typically 0.3% THC.

This will be a boon to Mexico’s domestic cannabis industry as it creates a relaxed standard that should make regulatory compliance simpler for hemp operations. Conversely, the U.S.’s national threshold of 0.3% THC has already caused problems for law enforcement due to the much tighter legal THC limit.

On the other hand, this means that Mexico’s national standard is out of synch with other jurisdictions. This may make it difficult for Mexico’s hemp companies to be able to reach international markets – which have much stricter regulations on hemp.

Overall, the fact that Mexico is on the verge of legalizing cannabis nationally is a positive sign for the legal cannabis industry as a whole. Each nation that legalizes represents another step toward fully internationalizing cannabis commerce.

However, it is less encouraging to see how little governments are learning from other jurisdictions when it comes to avoiding mistakes in legalizing cannabis. Colorado, the world’s most mature cannabis market, has now shown not only other U.S. states but also other nations the correct way to legalize cannabis.

It has a strong, healthy legal cannabis industry.
It has the smallest cannabis black market.
It has generated over $1 billion in badly needed tax revenues (from a population base of 5 million).
And it has done all of this while there have been zero negative consequences from legalization – only positive benefits.

Monkey see; monkey do.

As a species, human beings are much better at imitating than creating. This is why a single invention can often spawn an entire industry (of imitators).

Yet when it comes to cannabis, politicians seem to be incapable of copying what works. Go figure.
 

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