Today, only two countries in the world have legalized cannabis for recreational use. Canada and Uruguay. Around 26 countries allow marijuana use somewhat, whether medicinally or just through lack of enforcing criminal laws. Some, like Jamaica and Belize, for example, have decriminalized the plant, while still others do not allow it, but have no penalties in place against those who choose to use it.
On a global level, most progress on cannabis legislation relates to medicinal use. Several countries are on the brink of legalizing for commercial purposes, including Thailand, China, and even some Middle Eastern countries, like Iraq, but have yet to actually do so. Now, a third country is likely to legalize recreational use by year’s end. If so, Mexico will be the only country to do so in 2019.
Global Recreational Cannabis
Although Mexico has been struggling with illegal drugs for decades, there is a strong likelihood that Mexico will legalize cannabis within weeks. It is, in fact, imminent. Last year, its courts ruled that banning marijuana for personal consumption was blatantly unconstitutional. However, its Congress would provide a regulatory framework for it, a part that may prove challenging.
For Mexico to legalize before year’s end, it needs to tackle its biggest issues, one of which is deciding whether to regulate cannabis for private sellers, or to give sole monopoly to its government. Several proposals for a legalized marketplace exist already, putting maybe too many options on the table and complicating issues just as time is running out.
The recent deadline, now in October, happened uneventfully. Now, since Congress failed to pass legislation, the Supreme Court will decide the next step. Given that the court feels citizens have the right to use weed for personal use, legalization is now imminent, hopefully in 2019 still. It is now just a case of when it will go into effect, and how long it will take to get there.
The opportunities presented by legalization bring with it significant risk. Aurora Cannabis (NYSE: ACB) is showing interest in investing in Mexican legalization. It wrote a Letter of Intent last year to acquire Farmacias Magistrales S.A., a profitable pharmaceutical company in Mexico. Farmacias currently imports tetrahydrocannabinol, or THC, into Mexico, the country’s first licensed company doing this.
Acquiring Farmacias and its licensed access would give Aurora a massive opportunity, one possibly the next biggest cannabis market outside of the United States. First, however, it needs to open for official business. With 130 million potential consumers in Mexico, the country would become the biggest legal marketplace for marijuana anywhere in the world. However, it has its investment risks.
Mexico, with its history of persistent, stubborn, law-rejecting drug cartels, is unlikely to surrender to a legal market. They may well prove the most trying obstacle of all, willing to fight to keep their black market alive. However, with legalization spreading across the United States with unstoppable momentum, Mexican cartels are now eyeing other, more lucrative, still illegal, substances instead.
This year, 2019, has been a quiet year in terms of countries legalizing. Many have relaxed their laws somewhat, even permitting the use of medicinal marijuana to some extent, but Mexico would be the first to legalize recreational use this year. South Africa, for example, is still in the throes of legalization, with its High Court deeming prohibition unconstitutional. Lesotho allows medical cultivation.
Zimbabwe is toying with the idea of legalization, along with others in Asia and the Middle East. However, none has yet to join the fray, although they will soon enough. Until the U.S. stamps out the black market, though, the demand for cheaper, even if illicit, weed will remain. This poses risk for investors, but the benefits are far likely to outweigh them.