Cannabis in Mexico: It Ain’t Over Till the Fat Mariachi Sings

I am writing this now, a month after the Mexican Senate virtually ignored (yes, ignored) the social and business mandate to regulate recreational and industrial cannabis. Yes, it took me almost a whole month to calm myself enough so as to write a post that did not sound like a mere rant. Do not get me wrong, I know full well that Congress’ only obligation under the Supreme Court mandate was to regulate cannabis cultivation and consumption for personal use, but for a long time members of Congress openly stated that they would try to create a framework to provide for the creation of a cannabis industry. More importantly, as I have publicly said before, with these kinds of non-transparent, last-minute decisions, the country projects instability to domestic and foreign businesspeople alike and across various areas of the economy, not just those touching upon cannabis.

At the moment of writing this post, I do not know for certain when the Cannabis Law bill will be discussed again. There are some who say that “there is still political will to legalize cannabis”. Reality tells me otherwise. Even if, as I have heard here so far, the Cannabis Law bill will simply be pushed back to the next legislative period, if the barely concealed disdain for the April 30 deadline taught me anything, it is that we, as industry stakeholders, will have to push the government for what is right, for the benefit of end consumers and the Mexican economy as a whole.

That said, none of the above changes the fact that what happened last April is spilt milk under the bridge. The real question now is, what do we do about it? To answer this question, let us review how things legally are at the moment and how you and your business can make the most of it.

A General Declaration of Unconstitutionality for Mexico Cannabis?

If you ask me – or anyone in the industry – it is clear that Mexican senators simply decided to de facto put the Cannabis Law bill in the freezer out of concern that voting on something deemed highly controversial could cost them votes in what perhaps are the most important intermediate elections in recent Mexican history. Let me say it again, Congress has never been bound to regulate the whole industry. Politicians offered to do so. The issue is that now, by failing to pass the Cannabis Law bill, which among things, provided for adult use, Congress have also failed to regulate cannabis self-cultivation and self-consumption.

In this context, we face three potential scenarios: first, that Congress might ask Mexico’s Supreme Court for ANOTHER deadline extension (highly unlikely: this should have been officially asked and I have never heard of such a request from the Senate). Second, that the Mexican Supreme Court, given Congress’ failure to regulate cannabis self-consumption, might decide to issue a General Declaration of Unconstitutionality that will expunge from the Mexican legal system those provisions that prohibit cannabis cultivation and consumption for personal use and which had already been deemed unconstitutional by the Court via jurisprudencia (binding court precedent). But for this to happen, at least eight Mexican Supreme Court Justices must decide in favor. A third scenario would be that the Supreme Court meets, but does not reach the majority necessary to issue a General Declaration of Unconstitutionality. In that case, it will be business as usual: consumers in Mexico will have to continue applying with COFEPRIS for a self-cultivation/self-consumption permit and filing amparo actions in case of non-response or denial. For our Mexico cannabis team, this will just be business as usual, but what a shame.

Indeed, although the main benefit of the General Declaration of Unconstitutionality is that by expunging prohibitionist provisions it would no longer be necessary for consumers to file amparo actions to exercise their right to consume cannabis, the real problem is the legal void left by the expungement of such provisions and the legal uncertainty this would entail for consumers and cannabis companies that do business in Mexico or seek to do so. In other words, if upon the issuance of the General Declaration of Unconstitutionality there will be no provisions regulating cannabis cultivation and consumption for personal use, how will people in Mexico know what is lawful for cannabis and what is not?

Mexico cannabis business: what YOU can do now

How can your business make the most of the current Mexican cannabis landscape? How can we force the creation of a cannabis industry in a country where the political class appears reluctant to do so? To answer these questions, let us revisit what we can do under the Mexico’s current legal framework.

1. Medical cannabis remains the only thing fully legal (i.e., not only provided for in a general statute, but accompanied by implementing regulations) in Mexico. As we reported here, Mexico’s Medical Regulations deal with the control, promotion and sanitary supervision of cannabis raw materials, pharmacological derivatives and medicines, regulating activities like primary production for manufacturing supply; raw material generation for research and seed production; health and pharmacological research; manufacturing of pharmacological derivatives and medicines; medical activities related to diagnoses, therapeutic care, rehabilitation and palliative care, and; importation, exportation and marketing of medical cannabis products. Individuals and companies can conduct all these activities with the relevant licenses or permits.

The Medical Regulations themselves provide for the issuance by incumbent agencies of implementing guidelines. This has not happened so far. Though as we mentioned here, it is not only legally possible, but your right to apply for a permit/license in any of the activities already provided for and for which the incumbent agency has not been granted a grace period to issue guidelines. What we have seen has been most feasible so far is to apply for a) health registration authorization (registro sanitario) for a specialty drug (medicamento de especialidad: that which can be mass manufactured per the specifications contained in said authorization); b) a sanitary license that allows you to merchandise compounding (fórmula magistral: drugs prepared ex professo by a physician for a patient, per instructions set forth in a medical prescription); c) a prescription booklet: qualified surgeons, veterinaries, and dentists can apply for a special prescription booklet that enables them to prescribe cannabis medical products, and; d) research protocols: a document containing a research proposal involving cannabis, for obtaining pharmacological derivatives to be used in pharmaceutical manufacturing. In this latter case, the tricky part is of course finding a reputable individual or institution with the scientific expertise necessary to help your company draft a protocol, but they are out there.

Finally, it is worth noting that cannabis supplements are unlikely to be considered medicine (medicamento) by COFEPRIS, and therefore businesses are unlikely to be able to obtain the health registration authorization necessary for their import and merchandising in Mexico. I cannot stress this enough, given the huge number of times our Mexico cannabis lawyers have been approached with the idea of importing and/or merchandising these products in Mexico.

2. You can also apply with COFEPRIS for a cannabis cultivation/consumption permit for personal use through an amparo action: why do I say “through an amparo action”? Because, in our experience, COFEPRIS usually either fails to answer your application or outright rejects it. Plainly speaking, by filing an amparo action, you argue before a Mexican federal court that Mexico’s Supreme Court has already declared the prohibition of personal cannabis use unconstitutional. Consequently, COFEPRIS’ failure to issue a cannabis cultivation/consumption permit for personal use violates your constitutional rights.

3. You can apply for a hemp permit. As I reported here, Mexico’s General Health Law was amended to provide that any product containing cannabis derivatives in concentrations of 1% or less of THC, with ample industrial uses, can be merchandised, exported and imported “pursuant to the requirements set forth by applicable health regulations.” These regulations were supposed to take the form of the Cannabis Law (yes, the very bill whose postponement has prompted me to write this post). As a result, hemp continues to be a legal, but unregulated industry in Mexico, which  in turn, means hemp-related activities (merchandising, import and export, and production and processing) are lawful in Mexico — even without there being any hemp regulations and without their being any specific licenses for which anyone can apply to conduct such activities. Our Mexico cannabis lawyers still recommend applying to COFEPRIS for a general authorization to conduct these activities. We think this is the safest way to proceed.

In sum, the moral of Mexico’s cannabis story so far remains the same as what we reported last December: if you are interested in getting a head start in Mexico’s cannabis industry, you should start with medical cannabis if possible. This will help you create your infrastructure and gain insight into Mexico’s cannabis market, all of which will almost certainly help when Mexico does finally fully open its cannabis industry.

That said, how should businesses get prepared to actually do something? Keep reading!

Life and Mexico cannabis go on: what you should do now

1. Set up your company in Mexico and register your brand names and logos as Mexican trademarks as soon as possible. I urge you not to delay with either of these things because most government agencies in Mexico are understaffed and underfunded and response times are slow these days. You also need to consider the time it will take to translate and legalize the documents you will need. Since cannabis permits/licenses are not transferrable, it will nearly always make sense for you to have your Mexican company formed before you apply for any cannabis permit or license.

2. Draft a business plan. I know this sounds like a truism but I cannot tell you how many times we have dealt with actual or prospective clients that “just want to do something with cannabis now that it’s going to get legalized”. It is important that your Mexico cannabis business plan account for what is actually legal in Mexico, and for your actual resources and capabilities.

3. Consider hemp, and with this I am referring to more than just supplements, edibles and the like (which will not be legal in Mexico until the Cannabis Law bill is passed). Think of an actual manufacturing industry: unlike the medical or adult cannabis use industries, industrial hemp is far less politicized in Mexico and it is relatively easy to form a Mexican hemp company and get that inserted into existing value chains in Mexico.

Do not forget, the lack of Mexican regulation can be a blessing in disguise if you know how to make this work for you. Mexico’s dearth of cannabis regulations means lower or non-existent application fees, and few government requirements that must be satisfied. No regulation also means no foreign investment caps.

What are you waiting for then? Turn these lemons into lemonade by getting to work on your Mexico cannabis business NOW!

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