Last night, the Mexican Lower Chamber approved by a sizeable majority (310 votes in favor; 210 against and 20 abstentions) the cannabis bill that the Mexican Senate passed on to it last November. The cannabis law was changed a lot before it was passed.
As expected, the law regulates the production and marketing of cannabis and its derivatives for adults (now openly referred to as “recreational”), research and industrial use. It is said that medical use along with cosmetic uses is beyond the scope of the law. What does the cannabis law do?
First and foremost, it defines many terms that are vital to the development of the burgeoning Mexican cannabis industry: e.g. B. “Psychoactive cannabis”, “Cannabis production for merchandising”, “Recreational use (for adults)”, “Production for industrial purposes”, “Self-consumption” and “Hemp”. These definitions relate to the permitted concepts and activities and will span the entire regulatory structure of Mexico.
The gradual implementation will be significantly accelerated as the transitional provisions of the amended draft law provide that all relevant legislation will be harmonized 90 days after entry into force. A further 90 days thereafter, the National Commission Against Addiction (the “Commission”) is fully operational. Another 90 days later, the Commission has to issue monitoring programs. Finally, 60 days later, the commission should have issued all the necessary rules and guidelines for issuing permits and licenses in 2022. We anticipate that if properly done, the Mexican cannabis market should be fully open by mid to late next year.
Foreign Investment Allowance
As we predicted, there will be no foreign investment cap under the Foreign Investment Act for adult and hemp-related activities. I repeat: there will be no cap on foreign investment. In addition, applicants do not appear to have to be Mexican companies. There will also be no residency requirements.
Rules and permits for personal use
Although the Cannabis Act legalizes possession of up to 28 grams of marijuana and provides that activities involving cannabis are not prosecuted, adult users who wish to grow cannabis for personal use must be given a permit. With these permits, up to eight plants can be grown per apartment. Cannabis use is restricted to those over the age of 18, and cannabis use is prohibited in spaces already defined as “tobacco-free” or near schools.
License / approval differentiation
The Cannabis Act differentiates between “licenses” and “permits”. A “license” authorizes activities for commercial or research purposes, while a “license” authorizes activities for adult personal use. The commission determines the number of licenses to be issued to a single applicant, the maximum number of establishments approved for sale to end users and the permits issued to cannabis associations (see below).
There are now the following six license types:
1. Integrated (ie vertical) licenses. These cover all activities in the cannabis / derivatives supply chain, from seeds to sales.
2. Production Licenses. These licenses authorize the cultivation of cannabis.
3. Distribution Licenses. These licenses authorize the acquisition of cannabis from licensed suppliers for resale to licensed dealers.
4. Retail Licenses. These licenses enable the licensee to purchase cannabis from licensed dealers for sale to end users in authorized facilities.
5. Licenses for the manufacture / marketing of cannabis products. These are essentially processing licenses.
6. Research Licenses. These enable the manufacture or acquisition of psychoactive cannabis for scientific research and research and development.
The application requirements for these licenses are listed in the provisions for the implementation of the Cannabis Act. As expected, vertical, cultivation, distribution and retail license holders can also sell cannabis to licensees in the supply chain. All licenses also cover ancillary activities such as transportation and storage and have an expiration date of between one and five years, depending on the approved terms of the actual license. The Mexican cannabis authorities have three months to clarify an application. If they fail to do so, the application is considered rejected (negativa ficta).
No more cannabis institute
The Cannabis Act requires the conversion of an existing body (the National Center for Addiction Prevention and Control) into a national commission against addiction (“Cannabis Commission”) belonging to the Ministry of Health. The Commission will be the regulator for all non-medicinal cannabis products.
Notwithstanding the Commission’s monitoring, regulatory and enforcement obligations – and contrary to what was originally intended for the Cannabis Institute – the Commission will not be omnipotent. For example, it has to work with the Mexican Ministry of Agriculture to issue mechanisms for the certification and traceability of seeds.
In terms of verticality, the discarded cannabis institute would directly refuse to grant / revoke licenses. The Federal Competition Commission has now been charged with taking the necessary measures to prevent the issuing of additional licenses that could lead to market concentration. The cannabis commission can refuse or revoke a license for violating the cannabis law, but not for market concentration.
It will be possible to form “cannabis associations” for the manufacture of cannabis and its derivatives for the personal use of the association’s members by adults. This facility will take on the legal form of a non-profit association that is subject to the federal code and may grow up to four plants per member.
Import and export bans
Although hemp can be freely imported and exported, psychoactive cannabis and its derivatives are prohibited from doing so. In fact, cannabis law now provides that sales of the latter will only take place in authorized establishments in Mexico. Any advertising or marketing of cannabis in any form is prohibited.
Flexible roofing regulation
The Cannabis Act provides that the Commission will be empowered annually (together with the Ministry of Agriculture) to set the maximum annual approved land extension for indoor / outdoor cultivation per license granted, as well as the national maximum.
The law defines hemp as the cannabis plant and its derivative with <1% THC content that can produce fibers and has no psychoactive effects. Hemp can be manufactured, processed, marketed, imported and exported, as can products made from it. Hemp licenses are issued by the Ministry of Agriculture, not the Commission. The commission is trying (in coordination with other government agencies) to motivate farmers and community owners to switch to growing hemp.
Vaping / edibles
The Cannabis Act legalizes vaping for medicinal purposes, but foods containing psychoactive cannabis are banned. This ban could be lifted in three years if the Ministry of Health has enough scientific evidence on the health effects of cannabis foods.
The law is now being returned to the Mexican Senate, where it is expected to be approved in near writing. From that point on, it will be forwarded to the executive for publication.
We are living in interesting times here in Mexico and will be reporting on the final phase of the cannabis legalization process. So stay tuned and prepare now for Mexico to become the most populous country in the world with a fully legalized cannabis regime.