How Mexico could turbocharge ASX cannabis shares

Mexico is a long way from Australia. But select ASX cannabis shares could see a big boost as Mexico reforms its drug laws.

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If Mexico moves forward with legalising recreational marijuana use, the ripple effects could boost cannabis shares across the globe. ASX cannabis shares, especially those with international markets in their sites, could enjoy a fresh tailwind for years to come.

What’s going on with Mexico and cannabis?

It wasn’t long ago that Mexican authorities still diligently pursued and prosecuted people for breaking the nation’s cannabis laws. Even minor possession could incur a heavy fine or jail term.

That changed in 2009, when the nation decriminalised the possession of small amounts of cannabis. Nine years later, in 2017, Mexico gave the green light to select medicinal marijuana products. The medicinal market is likely to expand this year.

But even more importantly for ASX cannabis shares, the country could soon join the growing cadre of nations to fully legalise its recreational use.

According to Bloomberg:

With a population approaching 130 million, Mexico is on the cusp of becoming the largest legal recreational market in the world. That could pressure the US to follow suit, since it will be sandwiched between Mexico and Canada, countries that both allow cannabis use.

Emily Paxhia, managing partner of Poseidon Asset Management, points out why Mexico’s move to legalise recreational use could be especially impactful to the global cannabis industry (quote summarised by Bloomberg):

Mexico’s move is particularly significant for global cannabis. Because many multinational pharmaceutical, alcohol and consumer products companies are already there, it could make the country an attractive place to export cannabis and related products from.

And it’s not just Mexico looking to legalise recreational use. Although the measure recently failed in New Zealand by a narrow margin, Curaleaf Holdings Inc (CNSX: CURA) executive chairman Boris Jordan says, “Countries like Poland, Ukraine, South Africa – there are even rumours of Egypt – are also moving toward legalisation.”

And as the world marches towards legal cannabis use, well-placed ASX cannabis should benefit.

Two leading ASX cannabis shares

There are a number of ASX cannabis shares that stand to benefit as Mexico and the rest of the world move to legalise both the medicinal and recreational use of marijuana.

We’ll just have a quick look at 2.

Creso Pharma Ltd (ASX: CPH) develops and commercialises pharmaceutical-grade cannabis and hemp-based nutraceutical products and treatments for humans and animals.

Flat in intraday trading today, the Creso share price is up 17% year-to-date and up an impressive 250% over the past 12 months. By comparison, the All Ordinaries Index (ASX: XAO) is up 39% over the past full year. Creso has a market cap of $200 million.

Althea Group Holdings Ltd (ASX: AGH) grows, supplies, imports, and exports pharmaceutical-grade medicinal cannabis in Australia and the United Kingdom.

The Althea share price is also flat in afternoon trading. So far in 2021 shares have gained 17%, while over the past 12 months the Althea share price has soared 222%. Althea has a market cap of $135 million.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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