Mexico Protects Local Market by Limiting Foreign Investment

Mexico Protects Local Market


At the moment, only two countries have made the commercial production of marijuana for use by adults legal. Mexico is currently moving in the same direction. Lawmakers in Mexico are laying the legal framework and adopting legislation to establish a legally guarded market for marijuana. This move by Mexico has been received with great admiration in the cannabis industry.

The legal groundwork moves to make Mexico the world’s largest market for marijuana for adult use. This step places the country way ahead of Canada and Uruguay since the proposed law would similarly make cannabis licit for medical and industrial purposes.

Mexico has a population of over 125 million, making it a massive opportunity for business ventures and cannabis entrepreneurs.

The proposed law is not without challenges; thus, its implementation could take way too much time before the system is fully put in place. Rules put in place to protect the local ownership and market, such as putting quotas on foreign ownership and reselling of licenses, could fail to attract foreign investment.

A preview of what is alleged to be the draft legislation was recently published on the Senate website. The bill is said to be before the commission of health, justice, and legislative studies pending approval, and then late submit it to the act to the Senate for voting in the next few days. Critical points in the draft legislation include:

Social responsibility

The draft bill talks of a somewhat regulated market, that seeks to place public health, human rights and sustainable development as the main areas. It further proposes the need for cannabis and its derivatives to be controlled.

Social responsibility aims at ensuring that weak Mexican communities reap profits from a practiced law.

What’s being legalized

With the passage of the proposed law, the following would be the uses of cannabis:

  1. For pleasure
  2. Industrial
  3. Scientific research and study
  4. Therapeutic, pharmaceutical and medical

Consumption of cannabis by adults in private places would be legal.

The state would go a step further and create awareness based on scientific research on the demerits and risks of cannabis intake for people aged between 18 and 25 years old.

New institute

 The proposed bill called for the creation of an institute, Mexican Cannabis Institute, to control and implement the legislation. The new institute, which is to be created in January 2021 is a significant step forward but also a step backward. This means that even though the draft bill will be passed, it would take at least a year for licenses to be provided. The institute would function as a standard of bureau for cannabis-related activities. These activities would include licenses, potency limits, and even issuing sustainability certificates. A year after the cannabis law is passed, the institute would partner with the public in identifying areas that need to be improved and would later suggest the changes to the lawmakers.

The institute would get its funding from a budget approved by the lower house.


The licenses provided by the institute would serve all marijuana-related activities, from cultivation to export and import, even other services such as transport and storage.

Rules have been put in place to hinder vertical integration. This include:

  • A single person or company would not obtain more than a unique type of license.
  • A single licensee may have more than one license of a particular type

All licenses cannot be transformed from one person to another, making mergers and acquisitions impossible.

A loophole in the draft bill is that it does not present measures to be taken when a business goes bankrupt.

Deadlines for application of a license shall be set by which organizations are expected to comply.

Where the government took down illegal crops, 20% of the cultivation licenses will be handed out to them. To protect the local market foreign ownership shall not exceed 20% of license capital structure. Associations have to meet specific standards for the licenses to be granted.

Commercial sales

Stores within Mexico would be able to sell recreational cannabis to individual adults. However, these licensed stores would be required to comply with specific requirements, such as:

  • Customer care services offering information services to customers in compliance with the Mexican Cannabis Institute.
  • Keep the licenses visible at all times.
  • Prohibition of entry of children into the premises
  • Selling cannabis without other substances that could result in psychotic effects such as nicotine, alcohol, and caffeine.  

Cannabis Associations and Home Growing

For homegrown and cannabis associations, the plants and harvests would remain confined to the house of the grower. Such users would not require a license but must be granted a permit. However, they would be required to prove the origin of the seeds. In such households, the welfare and wellbeing of minors must be considered.

In a house with more than five adults, there shouldn’t be more than 20 plants. The cannabis associations are legally comprised of non-profit-making institutions with a limit of 20 members with each member being granted ownership of 4 plants. In associations, membership is only open to adults.

Brand packing would not be allowed; instead, plain packaging will take center stage. It would be coupled with other restrictions such as the need for the package to be childproof.

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