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Will Mexico’s New President Make Cannabis Investors Rich?

Written By Jeff Siegel

Posted July 3, 2018

Mexico may have just taken a giant step towards the legalization of adult-use cannabis.

Andrés Manuel López Obrador, the leftist candidate from Tepetitán, has been elected to be the new president of Mexico.

It was a landslide victory resulting from a wave of populist anger fueled by violence and corruption, Obrador campaigned on a narrative of social change while promising to reduce violence and confront the country’s poverty crisis.

Although Obrador will likely fall into the trap of relying on increased government spending to instigate new policies, there is one change that some analysts believe will not require extreme government spending, but will result in positive social change and some much-needed economic development …

Ending the war on drugs

In 2005, Obrador was actually a militant advocate of the war on drugs. But over the years, he transitioned away from that stance and eventually became an opponent of the war on drugs. In fact, the president-elect has not only declared the war on drugs “unwinnable,” but he said that the state should stop trying to fight the narcos entirely in an effort to ensure peace in Mexico. He’s even looking to provide amnesty for those who have been growing drug crops.

A controversial stance, to be sure, but perhaps one that makes a lot of sense.

Of course, I wouldn’t be surprised to find out that the cartels helped push Obrador to victory. But if the result of such a thing is the end of the drug war – then so be it.

From a social perspective, such a thing would result in reducing violence. And from an investment perspective, this could be something that sparks an aggressive push towards the legalization of cannabis, resulting in new opportunites for cannabis investors.

Mexican Exposure

Mexico is now the earliest stages of legalization.

In 2009, the state decriminalized the personal use of five grams of cannabis, and last year, legalized CBD for medicinal purposes.

These are not massive changes, but have opened the door for continued legalization efforts.

So if Obrador is serious about ending the war on drugs, he could end up being a strong and powerful advocate for legalization. Certainly this would be great news for cannabis companies that already have positioned themselves to capitalize on the Mexico cannabis market.

Khiron Life Sciences (TSX-V: KHRN) recently announced it was launching a Mexican subsidiary. And through its HempMeds brand, Medical Marijuana, Inc. (OTCBB: MJNA) already has exposure to the Mexico cannabis market.

To be clear, I’m not recommending you buy these stocks just because they could give you exposure to Mexico. In fact, if, under Obrador’s leadership, Mexico does move towards legalization, it is likely that the major cannabis players, such as Canopy Growth Corporation (TSX: WEED), Aphria (TSX: APH), and the Green Organic Dutchman (TSX: TGOD) will be quick to swoop into Mexico with their war chests of capital and take full advantage.

Of course, the reality is that we don’t know how Obrador will move on legalization. But with potential change coming to Mexico in terms of ending the war on drugs, we’d be foolish to not keep a close eye on the Mexico cannabis market. Because if legalization does unfold under this new leadership, there will be a huge opportunity for cannabis investors to take part.