Cannabis in Mexico: Focus on Hemp

Have you heard of cannabis legalization in Mexico lately? Neither have we.

Apart from limited Oaxacan efforts to decriminalize individual recreational consumption and grant a few medical growing licenses, and earlier Supreme Court decisions declaring prohibition unconstitutional, we have not heard about any legislative efforts to regulate a market that is poised to grow globally. That’s a shame.

The 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 the bill. You can find our take on that here.

What is going on with 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. It does not get along well with the other political factions, given the dismissal of 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 more controversial legislation like the Cannabis Law Bill.

The way we see it, the political climate will not allow for the Cannabis Law Bill to be approved in this legislative term and perhaps not in this administration, set to end in 2024. It does not matter that the market is poised to grow, that foreign companies (mainly American and Canadian) have set their sights on Mexico, or that public and private studies forecast a dramatic increase in government revenues should the Cannabis Law Bill pass. It’s time to ask: is the situation really going to change? If not, how do we create or take advantage of the business opportunities brought by cannabis in Mexico? The answer for now is industrial hemp.

How to capitalize on industrial hemp in Mexico

The first step is to form a company. This is a no-brainer. As of now, the only agency entertaining cannabis applications, including hemp, is Cofepris. Licenses are granted to whoever applies, be it an individual or an entity. However, as discussed here, there are requirements that can only be fulfilled by companies.

The second step is to find where to grow and process hemp. Like with any industry, it is necessary to set up functional supply chains. And functional supply chains are usually either close to the production means or their markets, so as to ensure a steady flow of raw materials, customers, etc.

From a biologic standpoint, it will be feasible to grow hemp almost anywhere in Mexico. Logistically and security-wise, try to site close to good intermodal infrastructure and in areas not ridden by violence. Once you find the right place, you will want to ensure you have proper title to the land or, in the case of growers, a proper contract in place. This will be essential to secure an eventual license.

Finally, you will have to decide if you want to process hemp in situ or in a separate piece of land (preferably close to where you/your grower is). Medical cannabis licenses are attached to the land and we do not expect hemp to be any different. Mind your costs.

Industrial hemp in Mexico is legal but not regulated: be prepared to litigate

Keep in mind that though industrial hemp is legal, it is not regulated. Accordingly, neither Cofepris, nor the Ministry of Agriculture (the agency rumored to eventually entertain hemp applications) have any incentive to give you any license to grow or process industrial hemp. Lack of regulation is a great excuse to not answer or deny any application. Expect to go to federal court and even to the Supreme Court if needed, to force the authorities to act and issue licenses.

Promote hemp’s industrial applications

In Mexico industrial hemp is often considered only in the context of fibers, textiles, and the like. But hemp is so much more than that. Its applications cover everything from the automobile industry, to food and beverage, to construction. Hemp can also serve as a substitute for lithium batteries, at a time where lithium is sought to be re-nationalized in Mexico. All these are existing social and economic needs in Mexico, which in turn speak of existing productive chains. Hemp operators can make an impact, without having to go through the uncertainties of creating a new market.

Statewide lobbying to regulate industrial hemp

Remember, the Cannabis Law Bill is national. Politicization of cannabis is taking place at the national level. There already have been attempts by state legislatures to draft bills regulating hemp production. If stakeholders can continue promoting industrial hemp among local regulators, chances to obtain licenses to legally implement your industrial hemp business model will exponentially increase, bypassing Cofepris.

Time to focus on hemp in Mexico

Under the current Mexican landscape, we have only medical cannabis (with difficult compliance requirements) and industrial hemp. Hemp is a clearer path to profitability. It has lower activation and compliance costs, plus customers lined up in existing industries.

In Mexico, it’s time to move forward with industrial hemp. We all just need to go for it.

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