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2 Under-the-Radar Stories That Could Be Huge News for Marijuana Stocks

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This article was originally published on Fool.com

Canada stood at the center stage of investors’ attention for months during the lead-up to the country’s legalization of recreational marijuana in October. But now there are two emerging opportunities that could be much more significant over the long run.

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In just the last few days, major developments have occurred in Mexico and Thailand that could potentially change the dynamics of the global cannabis industry. Leaders like Canopy Growth Tilray, and Aurora Cannabis just might be poised for additional growth sooner than expected. Here’s what you need to know about these two largely under-the-radar stories — and why they could be huge news for marijuana stocks. 

Marijuana plant in front of a globe.

IMAGE SOURCE: GETTY IMAGES.

Mexico’s monumental court decisions

Medical marijuana is already legal in Mexico. Arcview Market Research and BDS Analytics project that the country will become the fifth-largest international marijuana market in the world outside of the U.S. and Canada by 2022. Even then, though, total medical marijuana sales are estimated to be less than $100 million.

But the opportunity in Mexico could change as a result of recent decisions by the country’s Supreme Court. On Oct. 31, Mexico’s highest court issued two rulings that effectively overturned the country’s prohibition of recreational marijuana. The Mexican Supreme Court stated in a news release translated by drug policy think tank Transform that “the fundamental right to the free development of the personality allows the persons of legal age to decide — without any interference — what kind of recreational activities they wish to carry out and protect all the actions necessary to materialize that choice.”

Technically, recreational marijuana will remain illegal in Mexico for now. However, the country’s legislators have 90 days to revise Mexican law. There are two primary approaches that the Mexican Congress could take. It could opt to legalize only the personal use of recreational marijuana but not the sale of the drug. On the other hand, legislators could also decide to establish a national system for recreational marijuana sales.

The former alternative wouldn’t open up the Mexican market to companies operating in the cannabis industry. But the latter option could very well do so. Even before the country’s Supreme Court rulings last week, prominent politicians, including Interior Secretary Olga Sanchez Cordero, have expressed support for the legalization of recreational marijuana. 

A Thai win for marijuana possibly on the way

While countries in North America, South America, Europe, and Africa have moved forward with the legalization of medical marijuana, that hasn’t been the case in Asia. But this could soon change.

Thailand could potentially legalize medical cannabis, according to international news agency Agence France-Presse. Jet Sirathraanon, who chairs Thailand’s National Legislative Assembly public health committee, confirmed that a draft bill for the legalization of medical cannabis — but not recreational marijuana — is under consideration.

What makes this especially notable is that Thailand is well known for its tough antidrug laws. Individuals convicted of drug trafficking face harsh penalties in the country, up to life imprisonment and even death.

Should Thailand ultimately legalize medical marijuana, it would be the first country in Asia to do so and could possibly lead to more Asian countries following its lead. South Korea is already considering the relaxation of its laws to allow importing of cannabidiol (CBD) drugs that have been approved in other countries.

Potential impact

What would these developments mean for marijuana growers like Canopy, Tilray, and Aurora? All three companies have built operations in countries with medical marijuana markets, notably including Germany. You can bet that they would jump at the chance to enter Mexico and Thailand.

Just look at the population sizes of these countries. Thailand’s population of 69 million is larger than the United Kingdom — and the U.K. is currently projected to be the second-largest international medical marijuana market outside of North America. Mexico’s population of 129 million is roughly 3.5 times the size of Canada’s population.

Mexico would arguably be the easier market for the big Canadian marijuana growers to target. Canopy already has a Latin American subsidiary. Tilray made a key acquisition last month to solidify its presence in Latin America. And Aurora’s string of acquisitions includes South American cannabis leader ICC Labs

However, should Thailand legalize medical marijuana, the big Canadian players would no doubt quickly establish partnerships to capitalize on the potentially lucrative opportunity there. It’s possible that Canopy, Tilray, and Aurora could leverage their operations in Australia to jump into the Thai market. 

All of this is speculation for now. Mexico could legalize recreational marijuana use only and not sales. Thailand might not move forward with its legalization efforts for medical cannabis. But there’s a real possibility that the global cannabis market could quickly become larger sooner than most people expected. If so, it would be huge news for the leading marijuana stocks.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 

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