June 25, 2018
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Uruguay’s strategy for breaking into the pot-dealing business

By Park MacDougald, Foreign Policy

Last week, the lower house of Uruguay’s legislature passed a bill providing for the establishment of a fully legal, regulated marijuana market. If the bill is approved by the Senate — a likely outcome, given the ruling Broad Front’s sizeable majority in the chamber — the tiny Latin American country will become the first to fully legalize the growth, sale and distribution of the world’s most popular illegal drug.

The passage of the bill has been controversial inside and outside the country. Polls consistently show that the majority of Uruguayans are opposed to legalization, and last week’s vote only succeeded by a narrow majority of 50 votes to 44. Less than 24 hours after its passage, the legislation drew criticism from the United Nations’ International Narcotics Control Board, which warned of “serious consequences for the health and welfare of the population” should the bill become law. But the move has also drawn support from some drug policy activists, who praise its creation of a legal market as an important step toward a more sensible law enforcement paradigm.

Uruguay’s marijuana bill differs from liberal drug laws in other countries like the Netherlands and Portugal in that it provides not only for decriminalization of personal possession and use, but also for the legalization and regulation of every aspect of the production and distribution process. The law establishes three categories of cannabis production: home cultivation for personal use, “membership clubs” where small numbers of individuals can establish growing and sharing cooperatives, and licensed private enterprises that will be allowed to grow marijuana commercially. All sales are to be conducted through state-run pharmacies, and a new government agency, the Institute of Regulation and Control of Cannabis (IRCCA), will be established to monitor and regulate consumption, production, and distribution. And — sorry stoners the world over — legal purchase is limited to Uruguayan citizens.

The downside (or upside) of creating a market for marijuana, however, is that in order to attract consumers, officially sanctioned marijuana will have to compete with the old illegal stuff in both price and quality. Which means — you guessed it — for this bill to work, the Uruguayan government is going to have to start distributing some quality weed on the cheap.

According to an excellent report from InSight Crime, most marijuana in Uruguay is imported from nearby Paraguay. To significantly cut into the traffickers’ business, “the [Uruguayan] state will have to make the marijuana sold in pharmacies more attractive to users than the imported product.” This shouldn’t be too much of a problem in the capital of Montevideo, where 25 grams of smuggled marijuana can cost upwards of $100 — more than four times the estimated pharmacy price of $22 per 25 grams (or about $0.88/gram). But undercutting the black market’s prices will be considerably tougher in the rural regions near the Argentine border, where prices are already astoundingly cheap. To break into this market, the government is instituting some major quality control. The legalization bill specifically bans “pressing” marijuana — a technique that dries out the plant in order to facilitate longer storage and is a common practice among drug traffickers, but which is also “believed to make cannabis less potent.” The legal cannabis, on the other hand, will be the narcotic equivalent of artisanal goat cheese — fresh and local. And, of course, for those with, er, “green” thumbs, there’s always the option of growing your own.

While this is all great news for Uruguay’s small community of marijuana users (an estimated 120,000 in a country of over 3 million), the country’s Snoop Doggs might still be driven to the black market by the individual consumption cap of 40 grams per month, not to mention the requirement that users place their names on a state registry. And private growers will no doubt face a host of regulations that could be passed on to consumers, making it difficult to maintain a competitive price point. All of this means that the companies that produce the official stuff will face an uphill battle in converting users who are already accustomed to the black market. Nevertheless, if successful, Uruguay’s legalization could not only provide an early Christmas for its cannabis connoisseurs, but also provide a model for countries looking for a way out of the U.S.-led, decades-long drug war.

Park MacDougald is a writer for Foreign Policy.

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