How US Cannabis Legalization Delays Could Favor the Mexican Cannabis Market

How U.S Cannabis Legalization Delays could favor the Mexican Cannabis Market

(And compete with the legal cannabis trade in the U.S)

mexico is ready to legalize weed while the us delays

It can be difficult to keep up with all of the global cannabis developments, especially since the industry is still trying to find firm ground to stand on. As laws continue to change, so will the industry evolve until we finally drive the last nail into the coffin of cannabis prohibition.

I for one have been particularly interested in the Cannabis developments in Mexico for several reasons;

Mexico has one of the biggest potentials as a Global Cannabis Economy
Mexico has more favorable environmental conditions for cultivation on a global scale
The North-Atlantic Cannabis Trade will become a thing

I believe the legal Mexican Cannabis market will change the way you buy cannabis everywhere in the world, especially if they manage to pull it off right. We’ll have to wait and see what happens on the 23rd of October of this year – because this is when the government will vote on the type of cannabis regime they will have in the country.

Nonetheless, there are certain things about the developments of cannabis in Mexico that are worrying some US cannabis companies. Primarily, those in cultivation fear the delays of the US government in terms of legalizing cannabis on a national scale.

Why do US cultivators fear the Mexican Cannabis Market?

Most consumers would agree, we don’t want Brick Weed. Mexican cannabis has long been associated with volume and lack of quality. The legal cannabis trade in the US virtually dethroned cannabis as the main revenue supplier for cartels because consumers much rather preferred to spend more money on higher quality buds.

As a result, the average kilo in Mexico(meant for export) dropped roughly 90% in value. This made generations of cannabis farmers switch crops to Poppies since heroin was on the rise in the US.

However, what happens when Mexico legalizes cannabis? What happens when technology and international investment influences the quality of cannabis in Mexico?

Well, for starters – Mexicans would be able to produce more weed for cheaper. The cost of labor in Mexico rivals that of China. You can get away (legally speaking) paying someone the average daily wage which on January 1st of 2020, will be $102 pesos or $5.10 USD per day.

That means, to employ a Mexican minimum-wage laborer full time would cost you no more than $30 per week. In the US, the minimum wage comes out to $7.25 per hour. This doesn’t include additional taxes you’d have to spend, insurance and so forth.

In essence, in employing a single person in the US at minimum wage for an eight-hour shift – you’d be able to have two full-time minimum-wage laborers in Mexico (per week).

This means that the overhead cost dramatically decreases, meaning that the average cost per gram significantly decreases. When this happens, US-grown weed will once more compete with Mexican weed. Especially, if Mexico figures out how to increase potency, yield, and efficiency. Which, under their new legal system – is bound to happen.

Why will Mexican Weed increase in Quality?

For starters, there are already a number of international players ready to invest in the Mexican market. Aurora Cannabis is one of them, with several other multi-billion dollars eyeballing the market. With former Mexican President, Vicente Fox, also at the helm of one US-Based cannabis company in Mexico, they are literally only waiting for the final gavel to drop to start production.

Fox himself said that one of his key strategies is to export to the US, and with assistance from international firms it will take only a few years for Mexican Cannabis to catch up to US standards.

When this happens, US cannabis companies will have the option of buying “equally good weed” at a far lower price point. If we know anything about capitalism, we’ll know where they will spend their money.

This will undoubtedly create a problem in the local US cannabis markets, with companies rather spending on cheaper providers. Not to mention, that the US cultivation market simply cannot compete with the Mexican market on a Dollar-to-Dollar measurement system.

But wait – That’s not all!

Apart from the incredibly reduced overhead of producing cannabis in Mexico, the country also has far more favorable conditions for cultivation than the US. Where, in the US, half of the country gets covered in Snow each year – in Mexico, the vast majority of the country is cultivation ready all year round.

This means, that especially during the summer times, the Mexican cultivation game will be a full crop cycle ahead of the US – every year.

When you couple a cheap production cost with rapid crop cycles – you get an oversupply of weed that will need to be unloaded on the global marketplace. Arguably, the US would buy the vast portion of the weed produced in Mexico – however, the longer the US takes to make it legal within its own borders – it will only allow the Mexican cannabis industry to mature and set up international pipelines.

The US won’t legalize until after 2020. This would mean that the Mexican system – if legalized on October 23rd – would have at least 1-2 years head start on the national US market. By then, it might be too late to compete with the wave of green coming from the South.