Insight: Mexico, plagued by cartel wars, on cusp of legal cannabis 'green rush'

Medical Marijuana

01/10/2020 12:00

* Medicinal cannabis use rules set to be finalized in weeks
    * Recreational use laws expected before Dec - senior senator
    * Global pot companies say they are keen to tap new market
    * Some Mexicans say this will boost economy, curb illicit
trade
    * Others fear new laws will shut out small family producers

    By Drazen Jorgic
    MEXICO CITY, Oct 1 (Reuters) - For Guillermo Nieto, a
Mexican businessman who grew up smoking pot, the cannabis
greenhouse on his family's vast farmlands in Guanajuato state is
part of a bigger dream. One that involves deep-pocketed
pharmaceutical companies.
    Nieto and several Mexican businessmen have spent years
positioning themselves for a time when the country opens up what
would be the world's biggest legal cannabis market in terms of
population, where the drug can be lawfully cultivated and sold. 
    Mexico finally outlined rules in July covering cannabis for
medical use, and the sign-off is expected in coming weeks.
    A bigger prize may also be close for Nieto and foreign
companies; Senate majority leader Ricardo Monreal told Reuters
he expected a law to be passed before December for recreational
use of the drug, allowing regulated private firms to sell it to
the public.
    "It's going to generate a market," said Nieto, wearing a
smart blue shirt, blazer, and bright marijuana-leaf print yellow
socks. "We are expecting to create jobs and revenue for the
government. We think it could really help our economy." 
    Indeed the legal cannabis industry is already a
multi-billion-dollar global trade, and some big players,
including Canada's Canopy Growth  WEED.TO  and The Green Organic
Dutchman  TGOD.TO , and a unit of California-based Medical
Marijuana Inc  MJNA.PK , told Reuters they were eager to tap the
new Mexican market.
    Business aside, Nieto says the new regulations will have a
profound social impact on the conservative nation of 126 million
people, where drugs are a sensitive subject due to a long and
painful history of violence perpetuated by feuding cartels. 
    "The first thing that will happen is that no Mexican will
die or go to jail because of this plant," Nieto said. 
    "With that, everyone wins." 
    Dario Contreras Sanchez aims to set up a business making
products like soaps and pain-relieving oils from cannabis that
he would grow legally near his family's hacienda in Durango
state, where the powerful Sinaloa Cartel has held sway for
decades.
    He believes farmers near him who cultivate the plant for
narcos would want to sell their produce lawfully - if the
government permits them.
    "Most of the people want to work legally," said Contreras
Sanchez, whose sister married into the family of former Mexican
drug lord Amado Carrillo Fuentes.  
    However Mexicans are by no means unified on this issue.
    While a growing cannabis industry promises to be a
money-spinner, it faces resistance from campaigners who are
worried that regulations for both medical and non-medical
cannabis will heavily favor big, often foreign corporations. 
    They fear legislation will shut out small family producers
and fail to offer a path to legalization for many farmers who
make a living by feeding Mexico's illegal narcotics trade.
    
    'GREEN RUSH' FRONTIER
    The initial regulations covering medical use permit
entrepreneurs such as Nieto to grow marijuana on behalf of
pharmaceutical companies and allows foreign businesses to import
medical cannabis products into the country.
    However Mexico's Supreme Court, which has effectively
legalized cannabis by ruling prohibition is unconstitutional,
has given the government until Dec. 15 to draft new legislation
for the recreational use of cannabis. 
    Monreal, Senate leader of the ruling National Regeneration
Movement (MORENA) party, told Reuters that lawmakers were
currently ironing out the finer details of the legislation.
    He said his party, which has a majority in both houses of
Congress with its allies, should have no problems passing the
law, which he added would decriminalize possession of a "certain
amount" of marijuana.
    Monreal said the law would not allow Dutch-style cafes in
the first stage of liberalization, but the public would be able
to buy marijuana from privately run and strictly regulated
"sales and distribution centers".
    However he added the Senate was divided over whether to
allow industrial cultivation of hemp, a cousin of cannabis
plants used in products ranging from food and clothes to
building materials, citing opposition from industries that fear
hemp will displace their goods.
    Depending on what laws Mexico passes, Latin America's
second-largest economy could morph into a hot new frontier in
the so-called "green rush" spreading across Canadian and
American farmlands, spurred by growing global investment buzz
around legal marijuana.
    Globally the legal marijuana industry was valued at $17.7
billion last year by consultancy Grand View Research, and is
expected to reach $73.6 billion by 2027.

    POT GIANTS PLAN MOVES
    Large cannabis companies, which have pharmaceutical
facilities to test products, said they were eyeing both the
medical and non-medical marijuana sectors.
    Canopy Growth, the world's biggest pot company, told Reuters
it aimed to contribute to "the responsible development of this
new market" and would review the upcoming regulations.
    The Green Organic Dutchman said it "looks forward to
participating in the Mexican cannabis market" through its
subsidiary, TGOD Mexico, adding it was monitoring the situation.
    Raul Elizalde, co-chief executive of HempMeds Mexico, a
distributor and subsidiary of California-based Medical Marijuana
Inc, said it had held talks with some Mexican pharmaceutical
companies about a joint venture about, initially, medical
cannabis. However it may launch its own pharma business in the
country should the new medical regulations require it.
    Elizalde said most companies would hold off making 
investment decisions until they see what laws the senate passed
in December, in case they also amend the medicinal rules.
    "It's much better to wait and see if this will change," he
said.
    To start with, big Canadian companies are likely to see
Mexico as a place to export their cannabis products, while U.S.
players, hamstrung by federal laws that prohibit marijuana
exports, may franchise their brands in Mexico, said Avis
Bulbulyan, CEO at cannabis consultancy Siva Enterprise.
    Further down the line, Mexico's inexpensive land, relatively
cheap labor force and favorable weather would likely make it a
top destination for companies to grow and export cannabis raw
materials and products.
    "It's on a lot of people's radar," Bulbulyan added. 

    'NO SOCIAL JUSTICE'
    Not everyone is happy with how the new industry is shaping
up, however.
    The coalition that led the cannabis legalization drive
through the courts, made up of pro-marijuana activists and
parents of ill children seeking cannabis-based pain relief, say
the new medical regulation helps big businesses rather than
patients.
    Lawmakers legalized the use of medicinal marijuana in 2017,
while the Supreme Court ruled in 2018 that recreational
marijuana should be permitted.
    As it stands, the medical regulation would bar people like
Margarita Garfias from growing cannabis for personal use to
relieve pain. Farmers could only cultivate marijuana through
partnerships with pharmaceutical companies that can conduct
product trials, tie-ups which are out of reach for most. 
    Garfias, the mother of a wheelchair-bound 16-year-old son
with multiple disabilities, said families who live in fear and
have faced getting criminal records for trying to help their
children feel short-changed.
    "The regulation doesn't help with this, nor with social
justice nor human rights for patients," added Garfias, who said
her home-grown cannabis-derived medicine had reduced her son's
epileptic fits and hospitalizations.
    Mexico's health ministry referred queries about the
regulation to the regulator, COFEPRIS, which said the rules were
focused on ensuring the population was not put at risk.
    "Medicines must have quality, safety and efficacy," it said.
    Activists say lobbying by corporations could shut small
producers out from both the medical and non-medical markets, and
thus fail to significantly dent the illicit narcotics trade.
    "We are very pessimistic," said Tania Ramirez, drugs policy
director at Mexico United Against Crime, an organization that
spearheaded the legalization drive through the courts.
    Monreal, the MORENA senator, said no law was perfect but
that legalization would transform Mexico, from emptying its
jails of small-scale pot smokers to helping farmers shed the
yoke of deadly cartels.
    "The most important thing for Mexico and its legislators is
that they dare to knock down this decades-old taboo."

 (Writing by Drazen Jorgic; Additional reporting by Frank Jack
Daniel and Diego Ore; Editing by Pravin Char)
 ((drazen.jorgic@tr.com; Reuters Messaging:
drazen.jorgic.thomsonreuters.com@reuters.net))