What Effect Can the Legalization of Marijuana in Spain Have on the Economy?

Source: spainweedguide.com

A few weeks ago, Íñigo Errejón presented to society one of the few economic proposals outlined by Más País: legalizing marijuana in Spain. Despite the surprise of his tribune, widely shared on social networks, he was not the first Spanish political leader to propose something similar.

A year ago, Unidos Podemos presented a bill to legalize the production, sale, and consumption of cannabis. It was the first time in the history of democracy that a formation openly proposed legalization. More countries have joined the trend. By the way, you can learn more about weedmaps Barcelona at our website – https://cannabisbcn.com/. Thanks to this, you can easily find a cannabis club that interests you.

Marijuana is here to stay.

What to expect?

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Numerous congratulations, according to Iglesias and Errejón. The two leftist leaders have defended their proposal from a political point of view, but also from an economic point of view: the state would greatly benefit from the collection of taxes associated with consumption, and would generate jobs in rural areas. Also, he added, it would have a critical character in the European context, by ensuring Spain a predominant position in an export market.

Both Podemos and Más País propose the legislation in similar terms to those already executed by the Canadian government and parliament. A year ago the country became the second in the world to legalize the production and sale of marijuana for recreational use. Despite arriving several years later than Uruguay, a pioneer nation, its example will be more significant given the size of its economy (Canada belongs to the G7). At the moment, it does not serve as a reference.

To observe the effects of legalization on the economy of a region or nation, we have to travel both to Uruguay and to some states in the United States, the only corners of the planet where cannabis has been legalized for several years (with its consequent economic effect). This is what his experience can teach us.

Does the state collect more?

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Yes. Two reasons: on the one hand, the regularization of buying and selling. Until now, marijuana is acquired and consumed in the shadows of the system, without supervision or control by the State. It is a pure underground economy. In a very simplified way, the regularization would put an end to this: at the very least, it allows imposing a VAT on consumption.

It also forces vendors to open companies, declare income, hire employees, pay contributions, etc. If the Canadian model is followed, moreover, it would be done under the power of the State: most of the operators will be public (a model of concessions and licenses similar to that of tobacconists) and the income derived from their activity will pay directly to public coffers. And yes: the collection has skyrocketed in Colorado or Uruguay.

The fiscal accounts of the former can be consulted here. In 2015, the income associated with marijuana amounted to $150 million; in 2016 to $193 million; and in 2017 to $247 million. Equal growth to the continued rise of cannabis in Colorado (with a market volume of $1.5 billion). Cannabis is already the sixth economic sector that pays the most taxes to the citizens of the state.

Counties like Pueblo have taken advantage of the money to introduce $750,000 in scholarships. In general, most of the money collected by Colorado goes to schools (through special funds), health spending, and social services of all kinds, with a special emphasis on risk prevention. Some studies estimate that the United States could collect some $100 billion euros by 2025 if it legalized cannabis.

Is more work created?

Source: elpais.com

Here the answer is less certain, as it starts from estimates, but it points towards the affirmation. According to a study carried out by the Marijuana Policy Group (an American think tank dedicated to the commercial and economic analysis of the cannabis sector), Colorado has added around 18,000 jobs since legalization. The overwhelming majority would be direct (about 12,000), while the rest would be distributed in auxiliary industries.

The analysis is from 2016, so the figures today could be higher. Where do the jobs come from? To a great extent from the stores. More than 4,400 employees are dedicated to serving customers and working at various locations throughout Colorado. The management and administration of the same (accounting, finance, suppliers, etc.) take another 4,500 positions; cannabis manufacturing and processing, 2,000; and farmers, about 1,500.

To all of them, we must add the posts generated indirectly. Like any large-scale industry, the economic boom has a transversal impact: research is required to improve crop productivity; ships where to store the production; greenhouses and special lamps that speed up the processes; machines that help speed up harvesting and planting; carriers that move it through the state.

The United States is also experiencing a small innovative boom in its start-up ecosystem, as our colleagues from Xataka told us. Applications designed to act as a social network among smokers to share and comment on various types of marijuana; others dedicated to generating traceability similar to that of food safety to ensure the quality of the products; and others, among many, to develop vaporizers, pesticides or fertilizers.

At the rural level, California is the most significant example. Before legalization, it was estimated that the regulated marijuana market could generate between 80,000 and 100,000 direct and indirect jobs (it is a more populous state than Colorado). Many of them would come from the countryside, where local farmers have found a small mine (and where the demand for labor is very high and much in demand on the internet).

If we talk about a market with a potential volume of $75,000 million, yes, it seems logical to think that it will have an impact on the job offer.

Do you export?

Source: cannaconnection.com

This is where you can be more skeptical. If Spain hypothetically legalized the production of marijuana in 2019, it would run into a basic problem when exporting it to the rest of Europe: in no other country would its consumption be regularized. It could only get part of the production destined for medical marijuana, something more or less common in America (both North and South) but much rarer in Europe (only the Netherlands, Germany, Poland, or Italy stand out).

Iglesias defends it from another point of view: Spain would gain a key market in Europe by being a pioneer. However, it is likely that cultivation and production remained in the hands of the private sector. Although regulated, it is not Colorado, Uruguay, or Canada that grow marijuana themselves, but rather open the market to for-profit operators. Spain as such would not produce and sell cannabis, its companies would.

And what would they be? Nowadays marijuana enjoys interesting health. Our colleagues at El Blog Salmón have analyzed the bubbly nature of their financial reality. The truth is that since the end of the summer the market value of giants such as Aurora Cannabis, Canopy, or Tilray has multiplied, sometimes in an unstable and dangerous way. However, the interest of other large industries in the growth of cannabis is more than evident.

All of them are taking over the market. Aurora, for example, bought ICC in September, the main producer of marijuana for the South American market (medicinal in Mexico and Colombia; recreational in Uruguay). The acquisition skyrocketed its market value. In the long term, the industry is likely to centralize: growing, processing, caring for, and distributing on a national or global scale favors the emergence of larger and more efficient companies.

Hence, the big names in tobacco have shown their incipient interest in entering the cannabis market. It’s something they already know how to do, only with another product. And that is very profitable. Spain would indeed have a preferential position in Europe if it were the first, in the same way as Colorado in the United States.

The large companies in the sector would invest here, and their economic activity would have repercussions on employment and income benefits for the public coffers (similar to any other large industry, such as the automobile industry). However, predicting what the local economic impact will be like is complex. The conditions of Uruguay are not those of Spain.

What experience says, in any case, is that the marijuana sector moves a lot of money. And that it will move even more as it expands legally.