Canada and Uruguay are still the only two countries that have legalized marijuana for recreational use thus far. Much of the progress that has been made on cannabis legislation has largely been related to medical use. However, there could soon be a third country to legalize recreational marijuana: Mexico.
Although the country has been known for its problem with illegal drugs, there is the potential that Mexico could soon legalize cannabis. A year ago, the courts ruled that the prohibition of cannabis for personal use was unconstitutional.
However, it would be up to Congress to regulate cannabis and provide the framework under which it would be allowed. The problem is, that part may not be so easy.
Too many options could lead to little progress being made
One of the big issues Mexico is grappling with is whether or not a government-run operation is preferable to one where private retailers are allowed to sell pot and are regulated. There are at least a dozen possible proposals on the table looking at how to legalize marijuana, and that could complicate things with not a lot of time left to go.
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However, there's a court-imposed deadline of October 2019, and if Congress fails to pass legislation, it could go back to the Supreme Court to decide what happens next. And given the court's view that it should be the right of citizens to be able to consume cannabis for personal use, it would appear inevitable that legislation of some sort ends up passing in Mexico. It's just a matter of when and how long it would take for it to go into effect.
Huge opportunity that could come with significant risks
Aurora Cannabis (ACB -1.86%) has been eyeing the Mexican market and could be in a great position to benefit from legalization there. Last year, investors learned of the company's Letter of Intent to acquire pharmaceutical company Farmacias Magistrales S.A.
Farmacias is able to import THC into Mexico, the first licensed company to be able to do so. That access gives Aurora a great opportunity to take advantage of what could prove to be the next best market outside of the U.S., once it becomes open for business. With 130 million people, it would be the largest (legal) market for cannabis today. However, it would come with risks, as well, as it could prove to be the most challenging market to stomp out the black market, with cartels in Mexico likely not going down without a fight.
However, with legalization in the U.S. now spanning 11 states and likely to rise, cartels have started to focus on other substances instead.
But until the black market is completely gone from the U.S., there will still be a demand for cheaper, illicit products. There's a great opportunity for Aurora to expand into Mexico, but it won't come easy. The good news for investors is that it could give Aurora a big advantage and head start on its competition, which could add to its global market share and help its sales numbers get that much stronger.
