While cannabis stocks are stuck in a bear market – the global cannabis market continues to expand at a rapid pace.
What’s the next domino to fall?
Mexico is on pace to become the third country in the world to legalize cannabis, and it should happen by the end of the year.
Here are some more details from Marijuana Moment.
The Senate leader of Mexico’s ruling party said that the lawmakers will vote on a bill to legalize marijuana for adult use by the end of the month.
There are numerous pieces of legalization legislation already on the table, but Sen. Ricardo Monreal of the MORENA party said his chamber is nearly done crafting a new reform bill that will be the product of weeks of public forums and open-session debates. Members of the other half of Mexico’s legislature, the Chamber of Deputies, will be invited to weigh in on the bill.
“We’re thinking that we’ll bring the law out, approve it, at the end of October,” Monreal said. “That’s the schedule we have.”
That would mean that lawmakers are expecting to meet a Supreme Court deadline to end federal cannabis prohibition. Last year, the court ruled that the country’s ban on personal possession, use and cultivation of marijuana was unconstitutional and said the government must formally legalize those activities by October. Many key lawmakers have said the country should go even further by legally regulating cannabis sales and production as well.
I expect Mexico to pass this bill – if it happens it would make Mexico just the third country in the world to legalize recreational cannabis.
If cannabis is legalized it will take time for the market to develop and sales to accelerate. The transition from illegal to legal markets can be a bumpy road and we are seeing that play out in both the US and Canada right now.
However, this is still a major win for the global cannabis industry. Analysts predict that Mexico could grow into a multi-billion dollar cannabis market in a few years.
New Frontier Data, a leading cannabis market research firm, expects Mexico’s cannabis market to generate billions in sales every year.
- Mexico is the second-most populated country in Latin America, with more than 1.4 million cannabis consumers, including nearly 850,000 regular (past-month) users.
- Mexico’s total potential market revenues surpass $2.0 billion, supporting between 50,000-75,000 jobs.
Mexico’s big legal breakthrough should create one of the fastest-growing industries in the country.
Today, I am going to share four companies that are making moves to cash in. These companies fall into two categories.
#1 – Big Global Cannabis Companies
Canopy Growth Corp. (WEED, CGC) is the largest cannabis company in the world with headquarters in Canada. In July of 2018, Canopy announced a new division called Canopy LATAM, which owns and operates cannabis operations in Latin America and is dedicated to expanding in South and Central America and Mexico.
Aurora Cannabis (ACB, ACB) is one of the largest cannabis companies in the world with headquarters in Canada. In December of 2018, Aurora bought all the outstanding shares of Farmacias Magistrales S.A., the first company and only company with a license to import THC into Mexico.
#2 – Smaller Regional Players
Khiron Life Sciences (KHRN, KHRNF) is also headquartered in Canada but the company primarily operates in Columbia and South America and South and Central America. This provides a solid foundation to expand into Mexico.
Khiron has the perfect political asset to make that happen. Former Mexican Vicente Fox is a board member. That alone is a big deal. Last year Khiron won permission to import 3 CBD products into Mexico, setting the stage for further expansion.
Pharmaceilo (PCLO, PHCEF) is headquartered in Canada but, similar to Khiron, it primarily operates in Columbia. Pharmaceilo is also making moves to capitalize on Mexico.
In January, Pharmecielo created Pharmaceilo Mexico. Pharmaceilo Mexico has partnered with MINO, a Mexican pharmaceutical distributor and the goal is to commence distributing medical cannabis into Mexico in the fourth quarter of 2019.
The Big Picture
Mexico is in position to legalize cannabis by the end of 2019.
Although it will take a few years for the market to develop and expand, Mexico is projected to grow into a multi-billion dollar cannabis market in the next few years.
Today, these four companies are making moves to capitalize on the opportunity. Expect more volatility from the smaller companies and more stability from the largest companies.
Michael Vodicka owns shares of Canopy Growth Corp (WEED) and Aurora Cannabis (ACB).
About the Author
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.