Mexico and Legalization

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Mexico is one of the most exciting emerging cannabis markets in the world and we believe that the market is nearing an inflection point. Recently, we came across studies that highlighted the potential of the Mexican cannabis market and this is an opportunity that we are excited about over the long-term.w

In 2017, after a separate Supreme Court mandate, then-President Enrique Peña Nieto signed a decree legalizing cannabis for medical use. The government has stalled in implementing necessary regulations, and the drug remains out of reach for many patients. Almost two years ago, Mexico’s Supreme Court ruled that a cannabis ban as unconstitutional and we are favorable on how the topic has been gaining support.

The support that is being shown for the cannabis industry comes ahead of a key date for Mexico’s cannabis market. Under orders from the Supreme Court, Mexican lawmakers have until December 15th to pass cannabis legislation.

Although we are surprised with the amount of time it has taken to advance the Mexican cannabis market, the development is a great example of how much the world has changed over the last few decades. Previously, Mexico had restrictive drug laws that was fueled by deadly cartels wars and we are favorable on the way the industry is trending.

Currently, there is an intense debate on what legalization should look like and whom it should benefit. One side of the group believes that domestic cultivators that are currently cultivating cannabis should be protected from competition from large international cannabis companies. Recently, a bill was introduced that would allow private companies to sell cannabis to the public. Senate leader Ricardo Monreal expects the legislation to pass in the Senate within two weeks and then go to the lower house of Congress.

Although the legislation is supportive of smaller operators, it places major challenges on them. One of the stipulations of the legislation is related to having commercial cannabis be traceable from seed-to-sale. The technology that is needed to satisfy the stipulation is expensive and is expected to be cost-prohibitive for smaller cultivators.

During the last two years, we have noticed a substantial increase in the number of companies that are focused on the Mexican cannabis market. A few years ago, Aurora Cannabis Inc. (ACB.TO) (ACB) announced plans to enter the Mexican cannabis market and this aspect of the business seems to have stalled. We do not blame Aurora Cannabis for the lack of execution and believe that the Mexican government is making the legalization of cannabis more challenging than it needs to be.

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