(Adds details on bill, background on marijuana in Mexico)
MEXICO CITY, Nov 6 (Reuters) - Mexico's next interior minister plans to submit a bill to create a medical marijuana industry and allow recreational use, the Congress website showed on Tuesday, in what would be a big step by the incoming government to shake up the country's drug war.
Senator Olga Sanchez, Mexican President-elect Andres Manuel Lopez Obrador's choice for interior minister, told Reuters the bill would be presented this week in Congress.
If the bill passes, Mexico would join Canada, Uruguay and a host of U.S. states that permit recreational use of the drug and allow its commercialization. It would be one of the most populous countries to roll back prohibition.
Mexico, which banned marijuana in the early 20th century, is still a major supplier of illicit weed to the United States. It has been racked by a decade of conflict between cartels over supply routes for heroin, cocaine and synthetic drugs to its northern neighbor.
Lopez Obrador, a veteran leftist who takes office Dec. 1, has promised major changes to Mexico's approach to the war on drugs, suggesting a negotiated peace and amnesty for some of the very people currently targeted by security forces.
In the 26-page bill posted on the Congress website, Sanchez wrote that Mexico's cannabis prohibition has contributed to crime and violence, adding that in the 12 years since Mexico launched a war on cartels, 235,000 people have been killed. (bit.ly/2qxxVDK)
"The policy of prohibition arises from the false assumption that the problem of drugs should be tackled from a penal focus," wrote Sanchez, a former Supreme Court magistrate.
"The objective can't be to eradicate the consumption of a substance that's as prevalent as cannabis is," she added.
Although the coalition led by the president-elect's National Regeneration Movement (MORENA) party has a majority in both houses, it includes a conservative party that has in the past opposed some socially progressive policies, meaning the bill may face hurdles.
"It will be presented on Thursday, without fail," Sanchez said. Legislation in Mexico's two-house Congress often moves slowly, and after being submitted, the bill would have to pass committees before reaching a vote.
The bill would permit companies to grow and commercialize marijuana. Individuals would also be allowed to cultivate plants for private use, as long as they register in an anonymous government listing and produce no more than 480 grams (1 lb) of marijuana per year.
Smoking pot in public places would also be permitted.
Cannabis producers would be banned from hiring minors or selling the drug to them.
Mexico's Supreme Court last week ruled that an absolute ban on recreational use of marijuana was unconstitutional, effectively leaving it to lawmakers to regulate consumption of the drug.
Support for legalization has strengthened in Mexico in recent years as violence soars. Former Mexican President Vicente Fox has been an outspoken advocate for legalization, joining the board of Khiron Life Sciences Corp in July.
Khiron is one of several listed Canadian weed companies. Stocks in the sector have been on a tear over the past year in anticipation of strong demand following last month's legalization.
Fox also joined the board of Hightimes Holding Corp , which owns the marijuana enthusiast magazine High Times, earlier this year.
Since 2006, Mexico has used military might to fight drug gangs, which have splintered into smaller groups battling over trafficking routes and territory.
The country saw more than 31,000 murders last year, the highest total since modern records began, according to government data.
Reporting by Veronica Gomez, Miguel Angel Gutierrez, Diego Ore and Daina Beth Solomon; Writing by Julia Love; Editing by Frank Jack Daniel, Bill Berkrot and Lisa Shumaker