Mexico City, Mexico – Legal marijuana is entering Mexico, and many foreign investors are chewing on this.

Since the Supreme Court ruled that the drug is unconstitutional in 2018, Mexico has been getting closer to full legalization. In January, the country’s Ministry of Health established regulations for its use for medical purposes.

Now, a bill to legalize entertainment for people over the age of 18 is in the hands of the country’s Senate and is expected to be voted on this month.

There is a lot of money to make: According to a report, the medical marijuana market in Mexico alone is expected to reach $249.6 million by 2025. analyze Provided by the American consulting company Grand View Research.

Major global cannabis companies such as Canopy Growth, Biomedican, and Aurora Cannabis have been closely monitoring the development of Mexico’s legislation in order to profit from the national market after the legalization bill is passed.

Supporters of legalization gathered in Mexico City on July 3 to urge the Senate to approve the measure [File: Ginnette Riquelme/AP Photo]

For Andres Fajardo, president of the multinational cannabis company Clever Leaves, legal cannabis will have a “transformational” impact on Mexico, “creating appropriate paid jobs or creating formal employment”, while providing for the need Of people offer new drug options. Medical, he told Al Jazeera.

Advocates of legalization also claim that sanctions on drugs will reduce the violence caused by drug trafficking.

For a long time, marijuana has been an important product of Mexican drug cartels. People have always hoped that the legalization of marijuana will deprive organized criminal groups of income and reduce the territorial competition for marijuana cultivation.

But it remains to be seen whether the legalization of marijuana can solve the problem of violence in the country. Whether legal cannabis companies can manage the illegal nature of the industry has always been riddled with corruption and extortion.

“Given that cannabis production and subsequent trafficking still account for a large portion of the revenue of many organized criminal groups, the legal cannabis industry may face security challenges,” Eduardo Arcos, a senior analyst at risk management consulting firm Control Risks, told Al Jazeera.

Risk of violence and extortion

It is undeniable that there are risks of violence, theft and corruption in doing business in Mexico. In Transparency International’s 2020 Corruption Perception Index, the country ranks 124th out of 180 countries in the world.

In recent years, for safety reasons, foreign mining companies, food distribution companies and Coca-Cola distribution plants have all closed their operations in Mexico.

A 2018 survey by the American Chamber of Commerce in Mexico surveyed 415 executives and directors from business security-related departments, and found that 42.1% of the respondents stated that their companies had suffered from supply chain transportation in the past 12 months. attack.

Agency report (PDF) It was found that “virtual blackmail, robbery and threats to employees, illegal intrusion into facilities, protests and blockades are frequent security issues.”

The cannabis plant is grown in the Cannativa AC research laboratory in Mexico City, Mexico. Supporters of the drug hope that the country’s Senate will pass a legalization bill this month. [File: Maurio Palos/Bloomberg]

Arcos said companies operating in Mexico are particularly concerned about extortion.

He told Al Jazeera: “The perpetrators target companies based on what they see as a chance of success forcing companies to abandon their requirements. This usually involves one-time or regular payments.”

Coercion sometimes involves threats or acts of armed violence, kidnapping, theft, or robbery of machines, in order to require the victim to pay for “protection” from the perpetrator.

“The core of blackmail is protection, not necessarily violence,” Maria Teresa Martinez Trujillo, a professor and researcher at the Monterey Institute of Technology, told Al Jazeera. “In the workplace, someone protects you from the threats they represent. Therefore, the source of protection and threats are the same.”

The latest data from the annual survey of 33,866 commercial crime victims conducted by the National Statistics Agency of Mexico shows the scope of the extortion problem. Approximately 688 out of every 10,000 business entities are reported as victims of extortion, making it the third most common criminal enterprise after employee theft and theft or damage of goods, money, goods or other commercial inputs.

Arcos noted that “companies operating in remote areas with few law enforcement personnel, such as mining, energy and construction companies, are often targeted by organized criminal groups.”

He said that remote cannabis farms may comply with the bill, which may make them vulnerable to criminal groups that “have extensive control over economic activities in a particular area and have the ability to severely disrupt their operations.”

Arcos added that Mexico’s booming legal cannabis industry should therefore be cautious.

“The security threats to the legal cannabis industry may include the threat of violence from organized crime, extortion and concessions in exchange for permits to operate in crime-controlled areas, and the threat of kidnapping people,” he said. “There may be other security threats in the product supply chain, including distribution channels.”

reduce risk

So, how do commercial enterprises related to the new legal cannabis industry face violence and extortion?

Clever Leaves hopes its experience with Colombia, a neighboring country in southern Mexico, can be helpful. Colombia legalized medical marijuana in 2016 and has its own history of problems with drug trafficking and organized criminal groups.

Fajardo, CEO and co-founder of Clever Leaves, said he believes that choosing the right place to grow legal cannabis is crucial.

Entrepreneurs like the co-founder of Cannativa AC want to profit soon after Mexico allows legalization [File: Maurio Palos/Bloomberg]

“The location we chose in Colombia not only has the correct agro-industrial characteristics in terms of weather, humidity, sunlight, sun exposure, etc. — we also studied socio-political factors,” he explained.

Fajardo said that the company chose to grow crops in parts of Colombia that have had the least violence in recent years, and hired a private investigative company to obtain information about land ownership to ensure that there is no conflict.

“In the areas where we operate planting facilities, the death toll is zero [by homicide] Every 100,000 residents in the past 15 years,” he said.

The facility is located in Boyacá province in central Colombia-Fajardo also pointed out that a military base in Colombia is nearby.

Local partner

Fajardo also stated that strong local partnerships are essential to building a viable legal business.

Clever Leaves recently entered the Mexican market as a partner of local business CBD Life, providing the health company with medicinal cannabis for its consumer products, such as cannabidiol-infused lotions and beverages (CBD, a compound found in cannabis, research Indicated to relieve pain and resolve symptoms of mood disorders).

Fajardo said that in Mexico, like everywhere else, the company believes it needs a local who “understands the market, understands the regulators better, and can better manage the market.”

Luis Armendariz, a cross-border business lawyer specializing in the Mexican cannabis industry, said that this is exactly what he advises his clients.

Armendariz said that there are “criminal threats and even extortion or corruption” in any form of business in Mexico. This is an undeniable fact.

“But, for example, you can find good local partners who can guide you and represent you and bridge the gap between the way the government and Mexican culture operate.”

“These local partners can be anyone from employees or managers to joint venture partners,” he added. “If you find a good local partner, I think this is a way to reduce risk.”


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