Thread: Legalising marijuana The view from Mexico

Legalising marijuana
The view from Mexico

As a result, it estimates that Mexico’s traffickers would lose about $1.4 billion of their $2 billion revenues from marijuana. The effect on some groups would be severe: the Sinaloa “cartel” would lose up to half its total income, IMCO reckons. Exports of other drugs, from cocaine to methamphetamine, would become less competitive, as the traffickers’ fixed costs (from torturing rivals to bribing American and Mexican border officials) would remain unchanged, even as marijuana revenues fell.

economist.com
Nov 2nd 2012, 21:20 by T.W. | MEXICO CITY



AMERICAN elections are watched closely in Mexico, which sends most of its exports and about a tenth of its citizens north of the border. But Tuesday’s presidential contest is not the only poll that’s sparking interest south of the Rio Grande. On the same day, voters in Colorado, Oregon and Washington will vote on whether to legalise marijuana—not just for medical use, but for fun and profit. Polls suggest that the initiatives have a decent chance of passing in Washington and Colorado (Oregon is a longer shot).

The impact on Mexico could be profound. Between 40% and 70% of American pot is reckoned to be grown in Mexico. According to a recent study (in Spanish) by the Mexican Institute for Competitiveness (IMCO), a think-tank in Mexico City, the American marijuana business brings in about $2 billion a year to Mexico’s drug traffickers. That makes it almost as important to their business as the cocaine trade, which is worth about $2.4 billion.

In Mexico relatively few people take drugs. But many are murdered as a result of the export business. About 60,000 have been killed by organised crime during the past six years. Thousands more have disappeared. Many Mexicans therefore wonder if America might consider a new approach. Felipe Calderon, the president, has said that if Americans cannot bring themselves to stop buying drugs, they ought to consider “market alternatives”, by which he means legalisation. Vicente Fox and Ernesto Zedillo, the two previous presidents of Mexico, have reached the same conclusion.

What would happen if Colorado, Oregon or Washington were to vote for such a “market alternative” on Tuesday? None of those states is a very big drug market in itself. But if it were legal to grow pot in, say, Washington, it’s not hard to imagine that a certain amount of it would illegally leak out into neighbouring states. Would Mexico’s bandits find themselves undercut by “El Cártel de Seattle”?

IMCO reckons they could be. It calculates that the cost of growing marijuana legally is about $880 per kilo. Adding on a decent mark-up, plus the taxes that would be applied, it puts the wholesale price of Washington marijuana at just over $2,000 per kilo. The cost of illegally transporting the drug adds about $500 per kilo for every thousand kilometres that the drug is hauled, it calculates, based on the fact that pot gets pricier the further you get from the Mexican border. So smuggling legal Washington dope to New York, for instance, would add about $1,900 to the cost of a kilo, giving a total wholesale price not much below $4,000.

That would make it more expensive than imported Mexican pot. But home-grown marijuana is much better quality than the Mexican sort. The content of tetrahydrocannabinol (THC), the part that gives you the giggles, is between 10% and 18%, whereas in Mexican pot it is only about 4% to 6%. Once you adjust for quality, Washington pot would be about half the price of the Mexican stuff, even after it had made its expensive illegal journey to New York. IMCO reckons that home-grown marijuana from Colorado, Oregon or Washington would be cheaper than the Mexican stuff virtually everywhere in the country, with the exception of a few border states where the Mexican variety would still come in a bit cheaper.

As a result, it estimates that Mexico’s traffickers would lose about $1.4 billion of their $2 billion revenues from marijuana. The effect on some groups would be severe: the Sinaloa “cartel” would lose up to half its total income, IMCO reckons. Exports of other drugs, from cocaine to methamphetamine, would become less competitive, as the traffickers’ fixed costs (from torturing rivals to bribing American and Mexican border officials) would remain unchanged, even as marijuana revenues fell.

Legalisation could, in short, deal a blow to Mexico’s traffickers of a magnitude that no current policy has got close to achieving. The stoned and sober alike should bear that in mind when they cast their votes on Tuesday.

(Photo credit: AFP)

Legalising marijuana: The view from Mexico | The Economist