Pacheco: Some Questions To Consider On Effort To Legalize Cannabis In Mexico
COMMENTARY: When I lived and worked in Mexico City, illegal drugs were shunned by the “gente decente” (decent people) in virtually all classes. Being known as a drug user carried a very bad stigma. At the time, I had the unfortunate luck of having my name be Pacheco, which in Mexico was used as slang equivalent to “stoner” in the U.S. Asking somebody, “Eres muy Pacheco?” meant, “Are you really stoned?” However, even joking about smoking marijuana or other drugs was generally frowned upon.
Therefore, I have been very interested in seeing Mexico inch closer and closer to legalizing marijuana as a recreational drug. On March 10, Mexico’s lower house of Congress voted in favor of medical, industrial, and recreational legalization of marijuana. The bill, which would allow adults over 18 to possess up to 28 grams of marijuana, now goes to Mexico’s Senate, which is not expected to begin debate on it until September. Political experts in Mexico are predicting that the Senate will pass this bill and send it to Mexican President Andres Manuel Lopez Obrador (AMLO), who is expected to sign the bill into law. In 2018, the Mexican Supreme Court issued a ruling essentially doing away with the prosecution of people caught with marijuana for personal use. Its stance was that criminal prosecution of users of marijuana was an injustice against their constitutional rights. The current marijuana bill essentially makes the court’s ruling a law on the books.
If signed into law, Mexico will be only the third country in the world, after Uruguay and Canada, to fully legalize the use of marijuana. Several factors need to be considered going forward. First, the legalization of marijuana will probably have little effect in the trafficking of more lucrative and dangerous drugs such as fentanyl, methamphetamines, heroin, or cocaine.
Taxes on the legal sale of marijuana could bring needed money to Mexico, however, the social and law enforcement issues surrounding the legalization of this drug are similar to those in the U.S. One striking difference is what legalization will do to the many marijuana farmers who have depended on growing this crop in order to feed their families. It could have a big effect on families in Mexico’s Golden Triangle region (the Mexican states of Chihuahua, Durango, and Sinaloa) where a lot of Mexico’s marijuana production is based.
To many families in this region, growing marijuana has become as common as growing wheat, corn, or alfalfa, only more lucrative. Typically, growers sell their marijuana crop to the cartels who then move it and sell it at a stiff mark-up. In this system, growers do not normally grow rich. However, for many growers the marijuana revenue has allowed them to feed their families and to remain on the land. The effect of recreational marijuana on these growers is a big unknown. Could they simply pivot and produce legally for the legal market? Will the legal market eventually lead to overproduction, which will hurt their prospects in the long run? The cartels might deem the trafficking of marijuana to be less attractive if it is legalized and may choose to focus on the harder drugs.
Another big unknown is what kind of money recreational, marijuana tourism to Mexican border towns, and destination resorts such as Cancun, Mazatlan, and Puerto Peñasco, will be generated. It is expected that many tourists from Texas and Arizona, the two border states where marijuana has not been legalized, will take trips across the border to purchase and use the drug. Will these places see a surge of marijuana-seeking tourists that could boost economies? One can imagine drunk and stoned Europeans and Americans in popular Mexican party destinations. If so, will Mexico have safeguards in place to prevent potential bad effects of this drug on communities? At present, Mexico severely lacks services to help drug addicts or people who are experiencing the negative effects of a drug.
If marijuana is legalized within the near future, will the Mexican government have time to put in place regulations and policies to properly administer a nationwide, legalized-marijuana program? This is a major challenge in U.S. states that have legalized the drug. Just because policymakers have set a date when legalization will occur does not mean that a government will be fully ready to handle it.
Finally, Mexico’s ability to capitalize on the legal sale of marijuana will depend on its ability to efficiently collect taxes from growers and vendors. Historically, Mexico has always had problems collecting taxes. It continues to rank among the largest countries with the lowest tax revenue in proportion to its Gross Domestic Product. It is anyone’s guess whether it will do better in the collection of marijuana taxes.
Mexico, the country in which the word “marijuana” originated as a reference to cannabis, will have a lot of work to do to roll out legalized marijuana. Even though the bill still has to pass its senate and be signed by AMLO, policymakers and bureaucrats should already be discussing details.
Jerry Pacheco is Executive Director of the International Business Accelerator.