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Uruguay Moving Forward with Cannabis Legalization Cautiously

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Back in 2013, Uruguay became the first country to legalize cannabis nationwide. Their top priority, however, was to do it right, which means moving slowly and having a lot of regulations.

The director for drug policy and the Andes at the Washington Office on Latin America, John Walsh said: “They’re very aware that they’re the first in the world to do this. They’ve run with a tightly controlled model to show the world that they have control over the system.”

These strict regulations have led to only 14 pharmacies in the whole country selling marijuana, however. Many of the other pharmacies are apprehensive to get involved in the marijuana industry due to a current financial hurdle.

In Uruguay, there are only two state-licensed companies for supplying marijuana: Iccorp and Symbiosis. Pharmacies around the country serve as the points of sale for these products. Buyers can purchase up to 40 grams per month. The state department that handles the regulation and control of cannabis, IRCCA, there were 24,324 registered buyers by May.

The struggle lies in the financing. Uruguay’s economy runs on dollars, meaning that a lot of the pharmacies use United States banks. United States law currently prohibits those banks from having accounts that “involve the manufacture, importation, sale, or distribution of a controlled substance.” It is for this reason that the United States’ cannabis industry has been a primarily cash-based market.

Walsh said: “The big US banks sent a memo to their Uruguay counterparts, telling them they’d have to close their accounts if they proceeded.”

This leaves the existing pharmacies resorting to cash-only transactions. The situation also deters other pharmacies that likely would’ve jumped on board without this financial headache.

“Had the obstacle not occurred, more pharmacies probably would’ve taken the plunge. Maybe dozens of others. There aren’t nearly as many as was expected by this point,” he said.

While the IRCCA discusses solutions to this struggle, Walsh recommends setting up dispensaries separate from pharmacies. He says this will lead to more points of sale and a more even distribution of products across the country.

Walsh also points out, however, that, were this to be the case, they might experience a shortage of products. With only two government-sanctioned suppliers that are still relatively new to the cannabis-growing scene, production has already been erratic and doesn’t stand to improve with an increase in points of sale.

The regulated industry in Uruguay, as they had hoped, has hindered the black market so far. 55% of marijuana users in Uruguay are purchasing through the regulated market, according to the IRCCA’s findings from May.

The government decides the price for marijuana and has kept it comparable to the price on the black market: around $1.40 per gram. The lower price on the product makes it more difficult for the black market to take hold because there’s not much profit in it. However, the current Uruguayan law prohibits non-residents from purchasing marijuana, leaving an opportunity for the black market to thrive with tourism.

Despite this and the banking issue, experts agree that, so far, all signs are positive. The banking issue may even be resolved soon, as the potential to work with Canadian banks opens up.

Uruguay is well on its way to becoming an international leader in cannabis. Criminal defense lawyer and president of the Michigan Medical Marijuana Association, Michael Komorn predicted that “It’s going to be good for the country. It’s the beginning of the spark of an economic renaissance.”

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