RIO DE JANEIRO, BRAZIL – The first country in the world to legalize the production, sale and consumption of marijuana for recreational use, Uruguay is poised to take another groundbreaking step. President Luis Lacalle Pou’s government is considering extending, to foreign tourists, the authorization to purchase cannabis in pharmacies.
The current legislation allows only Uruguayan adults and foreign residents to officially register to buy up to 40 grams per month in authorized pharmacies, to grow their own marijuana or to access cannabis clubs.
These provisions came into force in December 2013, when the government of President José Mujica passed a law regulating the full cycle of production, distribution, sale and consumption of psychoactive cannabis in Uruguay.
With a market that became controlled by the State, the law establishes that from producers to consumers, including home growers, membership clubs and sales points, must be officially registered.
Under this legal umbrella, the law sets strict parameters. For instance, the product harvested by registered marijuana growers cannot exceed 480 grams per year. Membership clubs must have between 15 and 45 members, and can plant up to 99 cannabis plants for psychoactive use, each taking a monthly maximum 40 grams.
“There are still aspects to be corrected, but many of the goals set out by the law have been met,” says National Drug Board Secretary General Daniel Radío in Montevideo. “Thanks to the regulated market, today there is a large number of users with access to cannabis in Uruguay who do not need to expose themselves or come into contact with the world of drug trafficking.”
In a 3.5 million-strong country, there are 46,375 people registered to buy marijuana in pharmacies, in addition to 12,902 home growers and 6,452 members of 198 cannabis clubs. With this experience under its belt, Uruguay is looking to take another step forward.
With the reopening of borders on Monday, November 1, after being closed due to the outbreak of the coronavirus, the government is considering extending the authorization to visitors, not with the aim of promoting Uruguay as a destination for cannabis tourism, but rather to draw tourists away from the black market and direct them towards the regulated market.
“I don’t like to talk about cannabis tourism because it’s pejorative,” Radío says. “We need to rectify an inequity created from the starting point of the law: people in Uruguay do not all have the same rights given that a foreign citizen in our country is restricted legal access to cannabis.”
If clearance for visitors materializes, the market could multiply, particularly in the upcoming southern hemisphere summer months, when thousands of tourists from neighboring countries visit Uruguay’s coast. In the first quarter of 2020, before the pandemic, Uruguay received 1,000,908 visitors, according to Ministry of Tourism statistics, 63% were Argentines and 12.6% were Brazilians.
“There are two possibilities: one is to change the law, although in that case the processes would be slow, and the other option is to enable some kind of temporary register for foreigners when entering the country, a permit that would automatically expire when they leave,” Radío says. “It will depend on how ambitious we want to be, but if we move forward with the second option, it could be implemented as early as next summer.”
TRIAL AND ERROR
Uruguay’s potential step, in addition to equalizing rights between residents and non-residents, could correct some of the distortions that have been hindering the market’s development. Contrary to expectations when legalization was approved, pharmacies did not ultimately find cannabis sale an attractive business.
In July 2017, when the registry of marijuana purchasers was opened, 16 pharmacies were enrolled, 22 more were completing the documentation and as many others were awaiting to observe the outcome to follow the same path. At that time, it was speculated that over 60 pharmacies would sell cannabis a few months after the law was passed.
However, those expectations were soon dispelled and, currently, only 22 pharmacies, half of them concentrated in the capital Montevideo, are part of the network dispensing psychoactive cannabis for non-medical use.
The first factor distancing expectations from reality was that international banks with subsidiaries in Uruguay, such as Santander, Itaú and Scotiabank, announced that they would close the accounts of pharmacies selling marijuana. Why? By keeping these pharmacies as clients, the institutions could suffer reprisals from their U.S.-based banking correspondents. Following the passage of the Patriot Act in 2001, banks in the U.S. are barred from doing business with distributors of substances such as marijuana.
The second factor is low profitability. The sale of marijuana, at a price regulated by the state, has very limited margins. The retail price of 5 grams is 370 Uruguayan pesos, approximately US$8, between 5 and 10 times less than international market prices.
“The price is a deterrent when it comes to producing and selling cannabis,” says Juan Vaz, grower and leader of the movement for the legalization of marijuana in Uruguay. “How could they think that a gram of marijuana should be worth US$1, at that price only low-quality cannabis can be produced.”
In 2014, Simbiosys and International Cannabis Corporation won an international open public tender to supply pharmacies with 2 tons per year. However, they never reached the agreed production levels. As a result, in October 2019, the Institute for Regulation and Control of Cannabis (IRCCA) granted 3 new licenses to companies for cannabis production.
The low level of production, coupled with the low number of registered pharmacies, led to long lines in the law’s early years to purchase a scarce commodity. However, this scenario has been changing.
Many users have been abandoning purchases in pharmacies because marijuana sold in such stores, despite indicating a maximum of 9% tetrahydrocannabinol (THC) – its main psychoactive component – in practice has between 5% and 6%. This is a substantial difference from cannabis clubs, with over 20% THC.
The gap has also diverted part of the demand to the illegal market. In reaction, the government announced that in the first quarter of next year it will authorize a variant with 9% THC to be sold in pharmacies.
“I think the idea of extending authorization to tourists is excellent, but the problem is that marijuana in pharmacies is not only scarce, but also unsuitable in terms of genetics and quality,” Vaz says. “Temporary registration for tourists sounds good, but they come for what they buy in a coffee shop in Amsterdam, in a club in Barcelona or in a dispensary in California, something they won’t get here in pharmacies.”
In any case, if the initiative to authorize the sale of marijuana to tourists in pharmacies is successful, the government is considering imposing higher prices for foreign buyers. The measure’s main goal would be to contribute to the financing of rehabilitation and addiction treatment programs in the country.
However, should this measure be implemented, it would also represent some relief for the profitability of a business that currently has slim margins. In any case, this adjustment, if implemented, would be limited: one of the main goals of the regulated market is to fight drug trafficking, which requires prices to be lower than in the illegal market.
With advances and setbacks, Uruguay remains at the forefront of Latin America in the legalization and regulation of the marijuana market. In this journey, the next stage could include foreign tourists.
“Experience is proving that this is the way forward, with improvements being implemented as we move ahead,” Radío says. “In addition to respecting the right of users to access cannabis legally, we are eliminating a part of the drug trafficking market, and that is no small achievement.”