Uruguay’s Experience With Its Marijuana Law

Photo Credit: Reuters

Uruguay has always faced some tall hurdles to become the first country in the world to fully legalize recreational cannabis.

The landmark 2013 reform was aimed at taking revenue streams from the sale of the soft drug out of the hands of organized crime while also improving public health by bringing users out of the shadows.

Yet even in the tiny South American nation of just 3.5 million people, polls showed that residents were skeptical of the measure. Meanwhile, the democratic socialist government of President José Mujica also faced harsh scrutiny – and even downright hostility – from many in the international community.

Now, five years later, with the law finally taking effect and thousands of Uruguayans openly and legally purchasing state-approved marijuana, the reform’s greatest challenge to achieving its goal of reaching the country’s estimated 150,000 users comes from an unlikely quarter: a U.S. law targeting international terrorism.

Canada’s Senate last week focused attention on the issue again when it moved the country one step closer to joining Uruguay as the only countries to fully legalize use of the plant. In the United States, meanwhile, after sending mixed messages, President Donald Trump has now said he likely will support a congressional effort to end the federal ban on marijuana.

Yet in Uruguay, the USA Patriot Act continues to represent a major obstacle to reform. That law, passed controversially just weeks after the Sept. 11, 2001, al-Qaida attacks, was intended to close down opportunities for terrorists to harm the United States, including their use of the international banking system to launder profits from heroin and other illegal narcotics.

Ironically, however, the act is preventing producers in the South American nation from legally growing cannabis and pharmacies from selling it while complicating the government’s attempts to shed light on the profit streams arising from marijuana sales.

The problem has arisen because most banks in Uruguay route their international transactions through the United States and thus rely on American banks, which are regulated by the Patriot Act.

As a result, several of those U.S. banks, including Citibank and Bank of America, fearing legal problems of their own, have threatened to cut off their Uruguayan counterparts for servicing the incipient cannabis industry.

Few pharmacies in Uruguay are willing to retail the drug – even though it is legal in their country – and the handful that do have had to move all their operations to a cash-only basis. That has led to a severe shortfall of cannabis retailers in Uruguay, shortages of the drug, and long lines when it is available.

Photo Credit: Associated Press

Uruguay’s official Institute for the Regulation and Control of Cannabis, or IRCCA, says there are just 12 pharmacies nationwide selling cannabis, in just eight of the country’s 19 administrative departments.

John Walsh, a drug policy expert at the Washington Office on Latin America, a research and advocacy organization, estimates that there could have been three or four times that number by now were it not for the Patriot Act’s unintended consequences. “When it becomes a question of either selling cannabis or keeping your bank account, then of course most of these pharmacies are choosing the latter,” he adds.

“There just isn’t enough cannabis,” complains Ignacio Loes, the owner of the Cost de Oro grow shop in Neptunia, a seaside resort town in southern Uruguay. “Too often you have to wait for hours in line. A lot of people can’t do that. Others don’t want to do it. There is a lot of dissatisfaction.

The IRCCA is now looking at ways around what amounts to a U.S. financial blockade, one which seems unlikely to end while Jeff Sessions, the conservative U.S. attorney general, remains in office. He is on the record as stating: “Good people don’t smoke marijuana.”

One possibility is that cannabis sales are taken away from the pharmacies, for which it represents a small fraction of their overall business, and instead given to cash-only dedicated dispensaries. Another is that Uruguayan banks deal with their Canadian counterparts rather than ones in the U.S. With Canada on the brink of adopting its own marijuana legalization, President Trump may likely think twice about severing relations with the financial system of its fellow G-7 economic partner. That hesitation also may come from increasing U.S. investment in Canada in anticipation of full legalization.

“We are working on a solution,” says Martín Rodríguez, who heads the IRCCA. “This needs to work without people waiting an hour or more in line or having to drive long distances to stock up.”

Yet despite all the hiccups, Uruguay’s landmark reform does appear to be working. Indeed, for the first time, there is now a slight majority in favor of the move, 44 percent to 41 percent against, according to one recent poll.

Low prices and guaranteed quality have, by all accounts, seen users flocking to register, allowing them to be digitally identified by their fingerprints at points of sale. They can buy up to 10 grams (just over one-third of an ounce) a week, enough for all but the heaviest users.

Others have also registered as authorized home growers, allowed a maximum of six plants, or joined cannabis collectives, which are permitted up to 45 members and 99 plants.

According to Rodríguez, some 35,000 users are registered in one way or another. He estimates that club members and home growers share with two other people on average, while those who buy in pharmacies share with one other person. That means that roughly half of all Uruguay’s cannabis consumers have now been brought into the system.

And despite the problems, users remain generally happy with both the price and quality of the product, grown by two private companies at sites heavily protected by the Uruguayan military.

The 10-gram weekly limit costs just 400 pesos (roughly $14), a bargain-basement rate intended to undercut the black market. There are four different varieties: one sativa,said to be more uplifting; one indica, supposed to be more relaxing; and two hybrids.

Foreign officials from countries including Canada, the Netherlands, Colombia, Switzerland and the United States, are inquiring about how Uruguay’s model functions, Rodríguez says. He adds: “There is a realization that this is a work in progress and that it will require adjustments. But there already appears to be a cultural change. Some consumers, including seniors, are now more open, even with their own families.”

Walsh, meanwhile, emphasizes that Uruguay’s model still requires time before other countries can decide what elements of it they might want to borrow.

“It’s too early to say if it has worked,” he says. “Uruguay will likely need at least another year to sort out the issues with supply and distribution. Then it’s probably another couple of years after that before you can decide whether it has been a success.”