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The Future of Marijuana Legalization in Mexico, the US?

  • Written by Alejandro Hope*
  • Wednesday, 19 December 2012
A medical marijuana dispensary in the United States A medical marijuana dispensary in the United States

Mexico security analyst Alejandro Hope* looks forward 25 years after the legalization of marijuana in Colorado and Washington to find a world where experimentation with drug legalization has become common place, though not without its perils.

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It all started where it had to. Marijuana. The United States. From the margins to the center. In 2012, the states of Oregon, Washington and Colorado presented to their voters initiatives to allow the legal production and commercialization of cannabis for recreational use. In the first state (Oregon), the disappointment of California from two years before [when the public voted against the initiative] was repeated. But in the other two, thanks to the energy of the presidential election, the majority voted in favor.

However, there still wasn’t much to celebrate. After much hesitation, the United States federal government launched an offensive on multiple fronts in order to sabotage legalization measures. The Drug Enforcement Administration (DEA) deployed hundreds of agents in Colorado and Washington, and launched a ferocious persecution against all those who applied for licenses to produce and commercialize marijuana under the terms provided by state legislation.

But, in the end, the lawsuit was settled in the courts. At the end of 2014, the US Supreme Court, against all precedent, ruled in favor of Colorado and Washington against the federal government. In a simple and unusual act, the Court returned to these states the powers to regulate the production and sale of marijuana.

The judicial ruling became a stream in a torrent story. By 2016, a third of the states had adopted legislation similar to that in Colorado and Washington. Those states that still resisted were flooded with cheap marijuana produced over the state border. At the end of the year, following the presidential elections, a Congress with a Democrat majority and bolstered by a minority libertarian movement from the Republican Party, approved the removal of marijuana from the federal list of controlled substances. President Barack Obama, in one of the last acts of his administration, enacted the legislation within a few weeks. After 80 years of prohibition, cannabis was finally legal.

For Mexico, the decision became simple. The legal production in various states of its neighbor devastated Mexican exports. By the end of 2016, from Badiraguato (Sinaloa state) to Santiago Papasquiaro (Durango), and from there to Urique (Chihuahua), the production of marijuana in the Golden Triangle had dried up. (...) The issue became entirely national. With the American example set, the Mexican Congress didn’t delay in acting: in April 2017, an initiative to declassify marijuana from the list of controlled substances and allow its production and commercialization as a legal substance was passed in both houses. With the initiative passed, President Enrique Peña Nieto enacted it in a low-key ceremony, while announcing the start of negotiations to establish an international convention for the control of cannabis that would replace previous treaties on the matter.

Amid all the euphoria surrounding the end of prohibition, there were still problems in the regulatory details. Despite the recommendations of the greater part of activists, a cooperative model similar to that seen in Spanish cannabis clubs hadn’t been adopted. Neither had any of the states opted to create a state monopoly in the production chain of marijuana: the business elite had rebelled against the idea, the Federal Competition Commission expressed its disapproval and the technocracy decided that it would be no good to create a new state monopoly when they were dismantling others (for example with oil).

No, no cooperatives or monopolies: a model had been imposed that was similar to tobacco and alcohol, with production, distribution and commercialization in private hands, subject to a fairly rigorous regulatory framework (zero open advertising and anti-marijuana captions on packaging) and a system of taxation similar to that of cigarettes (160 percent ad valorem).

With this model surged a highly efficient industry: the production moved from the sierra to irrigated valleys in Sinaloa state. Large plantations, economies of scale, modernization of processes, industrial dryers, fertilizers and pesticides: in two years, the production cost had plummeted from around 800 Mexican pesos ($62.7) per kilogram of dried marijuana during prohibition to around 50 pesos ($3.9). Producers formed a trade union, the National Cannabis Industry Chamber (CANICA for its Spanish acronym), and obtained a subsidy program for marijuana production.

Manufacture and distribution levels in the tobacco industry naturally relapsed. With the industrial capacity already installed and a marketing network that reached thousands of retail outlets, tobacco businesses could offer marijuana to the consumer for less than 60 Mexican centavos ($0.05) per gram before taxes. With taxes this meant that the price was a little less than 2 Mexican pesos ($0.15) per gram (or 40 pesos per packet of 20 cigarettes). That represented a fall of 80-90 percent with respect to the prices seen during the time of drug traffickers and prohibition.

Of course, some niche producers, small urban or semi-rural agriculturalists, still existed, producing in greenhouses -- some hydroponically -- high-quality marijuana: varieties such as Purple Kush, Cinderella 99 or NYC Diesel. The gourmet marijuana was favored by hipsters from the neighborhoods of Roma and Condesa in Mexico City (...) In order to satisfy that demand, boutiques appeared selling marijuana to smoke or vaporize, edibles of all kinds (brownies, pastries, empanadas) and designer paraphernalia.

But, of course there were problems. From the start, contrary to the predictions of some pious souls, the reinforcement of prevention programs wasn’t sufficient (or even close) to counteract the effect of the fall in prices. In the short run, the price elasticity of marijuana was a little higher than tobacco (-0.7). The increase in demand was 60 percent in the first two years, half of which came from new users. After a decade, the volume consumed had been tripled and the number of consumers had become nearly 3 million.

The amount collected in taxes was disappointing: less than 500 million pesos ($39.2 million) per year, enough to cover the incremental spending on prevention and treatment, but an inadequate amount to compensate the slight increase in car accidents and the small jump in the consumption of tobacco (...) As with the case of tobacco, the tax of 160 percent was enough to ensure the continuation of a black market at a not-so-trivial size (some estimated it to account for 10-15 percent of sales).

Bigger was the disappointment in terms of public security. Production zones had been pacified (partially: in nearly all, there remained illegal poppy cultivations). But on a national scale, the drop in the number of homicides was less than 15 percent. Worse still, resources to combat other crimes were not released. Eradication raids had less soldiers and urban raids against domestic drug traffickers achieved fewer arrests, but continued needing personnel for the suppression of the black market. Some prisoners were released, but cells for illegal producers were still required (those that failed to obtain production licenses) and tax evaders.

The regulations against driving under the influence of marijuana produced an interesting paradox: in the absence of breathalyzers, local authorities adopted a criteria per se, where any driver could be detained if metabolites of the substance were found in their system, even if the driver was not intoxicated at the moment of being tested. The result drew a mocking smile from old prohibitionists: more people were detained for consuming marijuana under legalization than under the old regime.

And, the war continued. Legalizing marijuana had barely rubbed off on the problem of other drugs: cocaine, methamphetamine and heroin were still subject to prohibition. Joaquin “El Chapo” Guzman had died in a failed attempt at capturing him and Ismael “El Mayo” Zambada had died of a heart attack. There were no more big cartels, but rather a number of gangs taking advantage of incentives that prohibitionist politics continued to produce.

Activists now directed their energy toward hard drugs. For heroin, they managed to achieve pushing the establishment of medical heroin maintenance programs and the power for some doctors to prescribe that opioid for pain-relief (used under the scientific name, diamorphine, so as to not scare people). This obtained positive results: a good number of dependent users regained functionality, the number of HIV and hepatitis C cases decreased, and some areas devastated by “picaderos” (areas to shoot-up) returned to a secure state.

However, the initiative soon ran into a problem of scale, such as had happened a generation before in Europe. Expanding access meant reducing the average price to (almost) zero and triggering a consumption epidemic, while also maintaining high entrance barriers that were kept alive by the black market. Another alternative was opted for, with 3,000 users in the program, but two-thirds on heroin bought from the black market. Progress yes, but only moderate.

Lacking, however, was the hardest bone to crack: stimulants. For cocaine and methamphetamine there was no possibility of maintenance programs, except for when you wanted to feed four day binges. In 2027, after a long battle, they started an experiment involving limited commercialization under medical prescription, controlled prices and licenses for use. The outcome was a disaster: prices were low enough to trigger consumption and high enough to continue generating incentives for the black market. Several doctors ended up in jail for trafficking in prescriptions and a secondary market for user licenses was soon discovered that allowed dependent users to exceed their quotas. In 2030, a well-known actor died of an overdose and, after a media storm, the authorities were obliged to suspend the program.

The fiasco with stimulants detonated a severe conservative reaction. At a national level, organizations were activated that demanded a more aggressive policy toward drugs. Something similar happened on the other side of the border and, within months, a neo-prohibitionist international coalition (called the New Temperance Movement, in the United States), was started. Sensing the change in the political wind, the National Action Party (PAN) and a sector of the Institutional Revolutionary Party (PRI) appropriated these movements. Even some from the political left came on board. Marijuana taxation began to climb. In town after town, increasing restrictions were placed on the production and commercialization of marijuana. The cute boutiques gave way to cold dispensaries in remote neighborhoods. Part of the market went back underground.

And today, in 2037, 25 years after the process began, an initiative to reincorporate marijuana back into the list of controlled substances is being discussed. It will be approved with difficulty: the industry relies on enough lobbyists to stop the most draconian measures. However, there is no doubt that a phase of tolerance toward drugs has been completed. We will not go back to the old regime, but there will also not be much regulatory experimentation (at least not soon). The future will be like the past, a permanent debate between conflicting objectives and incompatible moral universes. With drugs, there is no end in the story, only a carousel that turns perpetually.

P.S.: The above is, of course, nothing more than speculation. The future could well be very very different (the details matter). But in this, it is well worth remembering the famous advice from Manuel Gomez Morin: "Let there be no dreamers so there are no disappointed."

P.P.S.: If you want to imagine another scenario, I leave you some literature (here, here, here, and here).

*Translated and reprinted with permission from Alejandro Hope, of Plata o Plomo, a blog on the politics and economics of drugs and crime published by Animal Politico. Read the Spanish original here. Hope is also a member of InSight Crime's Board of Directors.

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