How Canada Prepares for Marijuana Legalization, In three months, the country will begin the legal sale of cannabis for recreational use.
Harvest time: Canadian marijuana growers prepare for legalization
With the establishment of a new market, provinces are betting on more tax revenues, and drug companies on high profits. From one day to another, a billionaire market is emerging in Canada.
That is because, soon, the country will become the first industrialized nation to legalize the recreational use of marijuana.
From October 17, How Canada Prepares for Marijuana Legalization means that residents will be able to buy, own and consume cannabis. After tough negotiations, both chambers of the Canadian Parliament passed the bill called Bill C-45 in mid-June.
“We will have a system that will keep marijuana away from our youth and profit from organized crime,” Canadian Prime Minister Justin Trudeau said confidently in announcing the release date.
According to Canadian officials, the country’s population spent more than $ 4.5 billion last year on illegal marijuana purchases.
With Canadian legalization, Trudeau plans to stifle the illegal market – something entirely possible, says economist Justus Haucap of Heinrich Heine University in Düsseldorf. He cites the state of Colorado in the United States, where cannabis has been released since 2014 for recreational use.
“It has not been possible to stifle the black market overnight. This will take some time,” says the economist, who is currently working on a study of possible tax revenues from drug sales in Germany.
Haucap is considered a proponent of marijuana legalization. For him, however, it is important to link such a step with educational campaigns about the negative consequences of consumption.
Whether or not consumers will turn their back on traffickers is the price of marijuana they will decide. “It can not be too expensive,” Haucap says. At the same time, the drug should not be too cheap, after all the government does not want to encourage consumption.
“Legal cannabis will have its quality controlled,” says the economist, pointing out that illegal marijuana is often contaminated with pesticides and other additives. Maybe that’s why consumers in Colorado have agreed to pay a price of 10% to 20% above the black market, he notes.
Patchwork in implementation
The government can regulate the price through taxes. Currently, the plan is to raise a dollar for each gram sold. To this, a value-added tax of 13% will be added.
Three-quarters of tax revenue is expected to flow into the coffers of the ten Canadian provinces, while the remainder will go to the central government. It is not yet known how much central government as a whole will gain from the measure.
The structure of the market, however, is a political commitment. The central government in the capital Ottawa decides on production permits for companies that plant and sell on a large scale, as well as being responsible for criminal matters. Provincial governments, however, are that determine how cannabis can be sold.
Some provinces are likely to allow for sale only in central government-owned stores. In other provinces, municipalities may restrict consumption by referendum again. Because of this peculiar regulation, there is still a lot of uncertainty.
A bet on the future
The online platform for cannabis investors “New Cannabis Ventures” calculates a productive bottleneck at the start of the release. So far, licensed companies could only use their production to meet the growing demand for marijuana used for medical purposes. The rest was exported and will not be available for the local market, the platform points out.
Other analysts, however, see after canadian marijuana legalization the Canadian cannabis industry as overproducing in the long run. In the face of legalization, the Canadian market is in turmoil.
Marijuana companies have been announcing new production capabilities. More recently, the acquisition of a business group has become a headline. The amount paid outnumbered two billion dollars – a record in the industry as a young person.
Such acquisitions hold many prospects for a distant, high-risk future. After all, nobody knows how the branch is developing. However, large marijuana companies are betting on an expansion.
Especially the biggest companies, Aurora Cannabis and Canopy Growth, are accused of using their financial power to push small suppliers out of the market.
Haucap highlights the pioneering spirit of Canadian companies, especially in terms of technology and branded product expansion.
According to New Frontier data analysis firm, per capita consumption of cannabis is higher in Canada than in the US. By 2025, sales can rise to almost six billion dollars annually.
In the United States, it has been estimated that since liberalization in some states – including Colorado, California, and Oregon – about 300,000 new jobs have been created. The same is expected in Canada, where conditions are even better. After all, unlike US marijuana companies, Canadians can also export.
In addition to tax revenues and jobs, the Canadian government must be aware of the growing importance of cannabis worldwide. This is because, from Portugal to Colombia and Germany, more and more countries have liberated the medical use of marijuana.