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Uruguay leads world in cannabis regulation but US law intrudes

  1. Long queues for legal cannabis
  2. War on drugs backfires
  3. Smokers aren't treated as criminals

Small pharmacies don’t usually attract crowds but most weeks in Uruguay thousands of people queue outside the country’s dozen drugstores licensed to sell cannabis.

They gossip with friends and strangers, drink mate, and check their phones for updates – diligently waiting their turn to enter the few farmacias in Uruguay that sell a product that’s illegal in most countries in the world.

“Being able to go someplace open, relaxed, legal, where you’re looked after by someone polite and they sell you a product that you consume from time to time, is something that I really applaud,” says Viviane von Oven, at home after a visit to a nearby pharmacy.

‘Uruguay’s the first country to create a legal nationwide market for adult cannabis use’ – analyst

Demand far outstrips supply. “The amount of demand is visible when you see the size of the queues.”

Wiry, with an easy smile and straight brown hair, von Oven, 41, lives with her partner, with whom she has a pre-teen daughter and founded Del Plata TV, a digital news channel that focuses on uplifting local news.

She says she registered to buy cannabis in late 2017 from licensed pharmacies. The market was first legalized in 2013 but the mechanism for distribution took several years to implement. Now, von Oven is one of almost 19,000 Uruguayans signed up to buy cannabis in pharmacies since it first became available in July 2017.

She doesn’t drink alcohol since a bad bout of hepatitis and smokes one or two cannabis joints three times a week instead. “I dare say it’s similar to how other people have a glass of wine,” she says. Von Oven smokes with her partner and with friends. “You laugh, you enjoy a while, you relax. Like the word says: it’s recreational.”

Uruguay breaks with prohibition

Uruguay was the first country in the world to fully regulate the cannabis market and so break free from a global prohibitionist regime that has prevailed for decades and is now under strain. The South American nation of 3.4 million people justified its decision on public health and human rights grounds, arguing that it was in its citizens’ best interests for the state to step in and regulate an industry run dominated by drug dealers.

“It’s hugely historic, it’s almost impossible to overstate how important Uruguay’s experiment with cannabis is,” says Geoff Ramsey, 29, a researcher with the human rights group, the Washington Office on Latin America (WOLA) who has studied the Uruguay regulation regime. “It’s the first country on the planet to create a legal nationwide market for adult cannabis use.”

A five-gram packet of Alfa II cannabis, one of four government-sanctioned strains. Source: George Engels/WikiTribune

Whereas legalization in several U.S. states almost always had strong popular support, Uruguay’s decision hinged on heavily regulating access to cannabis. Two drug policy experts WikiTribune interviewed said Uruguay’s regulatory regime has the potential to yield valuable data researchers could use to compare against other models and gain a clearer picture of which policies best suit different countries.

According to official figures, there are almost 150,000 cannabis consumers in Uruguay, 50,000 of whom are frequent users (IRCCA, in Spanish). With almost 30,000 registered consumers and thousands more who rely on already-registered friends or relatives – rather than black-market dealers – Uruguayan officials estimate regulation has already taken 20-to-40 percent of users off the black market.

Uruguay hopes to take the cannabis market away from drug-dealers. Regulation could siphon 30 million dollars (BBC Mundo) every year from drug traffickers, according to initial 2013 projections.

Anyone wishing to legally buy cannabis in Uruguay must go through one of three channels. Aside from queueing outside pharmacies, customers may register with the Institute for the Regulation and Control of Cannabis (IRCCA) to grow the drug at home. Almost 8,000 people have chosen this option. They can keep up to six flowering female plants – the ones that produce psychoactive cannabis.

Cannabis social club

The third option is to sign-up to a licensed social club, where cannabis is grown and sold to members. An estimated 1,000-3,000 people have done so. These civil associations must also register with the IRCCA and can have between 15 and 45 members and grow a maximum of 99 plants.

Cannabis in pharmacies is cheap and relatively easy to purchase. It is only available to Uruguayan citizens and permanent residents ages 18 and over. Purchases are capped at 10 grams a week; 40 grams a month; and 480 grams a year. Smokers will, on average, use a third up to a whole gram of cannabis per joint, according to different studies.

Only four strains of low-to-middle potency are available. They are sold in sealed packets of five grams which can be traced by barcodes (JND, in Spanish). Each portion costs $187 (USD6.6), roughly equivalent to the price of a slice of delivery pizza. Uruguay’s minimum monthly wage was set at $12,265 (USD419) for 2017 (EFE, in Spanish).

Seventy percent of the proceeds of cannabis sold in pharmacies is kept by the two companies licensed to grow and distribute it, Symbiosis and Iccorp (JND); drugstores keep 20 percent; and IRCCA takes the remaining 10 percent (JND, in Spanish) to cover administration expenses.

In order to purchase cannabis from licensed pharmacies, consumers must register in person at one of 67 post office branches with a valid national ID and proof of address. Their fingerprints are scanned into a database. Consumers are then free to head to one of the country’s 12 licensed pharmacies as soon as they wish. A successful fingerprint scan to confirm the identity of the buyer is all that is required for a sale.

“I think we are making history. And although maybe 50 percent of the country disapproves of this measure, I will continue to support it,” van Oven said.

A pioneering decision

In 1961, the United Nations’ Single Convention on Narcotic Drugs unified treaties on drug control into one legal framework “to combat drug abuse by coordinated international action” (UNODC).

The Single Convention set out to differentiate between licit and illicit drugs with the aim of creating a regulated international market for drugs. The convention’s assumption was that a well-oiled scheme focused on reducing the supply of illegal narcotics would help reduce non-licit drug consumption.

And for the first time, cannabis – which many societies employed for cultural, medicinal, and religious practices  (TNI/GDPO) – was included into the list of scheduled (regulated) substances whose non-medical use was to be “outlawed everywhere.” (UNODC)

A growing cannabis bud rests atop a female plant in the Museum of Cannabis in Montevideo, Uruguay. Source: George Engels/WikiTribune

The United States, which for decades had championed prohibition of drugs (TNI), saw the convention as insufficiently hardline and only agreed to sign it in 1967 (TNI). Hearst Newspapers, an important U.S. media conglomerate, published editorials in the run-up to the convention that claimed it was a “Soviet plot” to flood the world with opium. (Regulations and Prohibitions: Anglo-American Relations and International Drug Control, 1939-1964.)

It wasn’t until the late sixties – a period which saw a noticeable increase in drug use in the U.S. and Europe associated with the rise of counter-culture movements (TNI) – that international drug policy moved toward prohibition.

Nixon declared war on drugs

In 1971, then U.S. President Richard Nixon declared drug abuse “public enemy number one” and pledged to wage a “war on drugs”. That same year, the Convention on Psychotropic Substances added increasingly popular (and sometimes newly synthesized) drugs – like LSD and MDMA – to the list of internationally scheduled substances. Two years later, the U.S. Drug Enforcement Agency was created.

Despite these efforts, drug consumption rocketed across the developed world and the first multi-billion dollar drug enterprises – first in Colombia and then Mexico – emerged in the late 1970s and early 1980s.

In response to the violence and misery of the illicit drugs trade, the 1988 Convention required signatory countries to take action to combat the drug market. Martin Jelsma, director of the Drugs and Democracy Program at the Transnational Institute, told WikiTribune: “The 1988 Convention was what the whole criminalization and war on drugs and mass incarceration is basically based on and got a huge push from a UN convention, which is very problematic.”

The war on drugs took a toll on Latin American countries like Mexico and Colombia, where hundreds of thousands of people have been killed in the crossfire between authorities and drug dealers (Drug Policy Alliance). Anti-drug policies in the U.S. have led to a dramatic rise in incarceration rates – particularly among African-Americans and Latinos – and cost American taxpayers over USD50 billion annually (Drug Policy Alliance). A 2010 Associated Press report estimated that in 40 years the conflict had cost the U.S. one trillion dollars and failed to meet its objectives (AP via Fox News).

In 2015, the United Nations Development Programme published a report that acknowledged the high costs of prohibition on the war on drugs: “Drug control policies and related enforcement activities focused on reducing supply and demand have had little effect in eradicating production or problematic drug use…in many parts of the world, law enforcement responses to drug-related crime have created or exacerbated poverty, impeded sustainable development and public health and undermined human rights of the most marginalized people.”

‘Uruguay has made virtually every move we have desired’ – U.S. memo

Uruguay was largely spared the drug war’s worst consequences due to its small size and remote location. But despite drug abuse being a relatively minor problem during the ’70s and ’80s  (Marihuana Oficial, in Spanish), the U.S. provided rioplatense security forces with training to combat the domestic illegal drugs market and encouraged national leaders to toe the prohibitionist line.

“The GOU [government of Uruguay] has made virtually every move we have desired in the narcotics field,” reads a memo dated November 26, 1974, sent from the U.S. embassy in Montevideo to the DEA offices in Washington (WikiLeaks).

It was during the mid-noughties that Uruguay started showing symptoms of increased drug use – particularly of pasta base (cocaine paste). Impoverished Uruguayans turned to pasta base, significantly cheaper and more potent than cocaine, during the turmoil of the economic crisis of 2002.

By 2009, 11 percent of Uruguay’s 8,500 prisoners were behind bars for drug-related crimes (2011 WOLA/TNI report). Most were incarcerated for small-scale dealing or possession – nine grams or less. Meanwhile, prison overcrowding stood at 138 percent.

Although the country has never criminalized the personal possession and consumption of any drugs, a 1974 law (link in Spanish) dictated that the threshold for personal use was up to the presiding judge’s discretion. This created a grey area that led to the criminalization of users.

Fifty-two years after the UN’s Single Convention, Uruguay took the step of regulating the cannabis market from seed to sale. The law squeezed through the lower house by a razor-thin margin (50-49) along party lines on July 31, 2013. The government-backed bill was then approved by 16-13 votes in the senate on December 10. Ten days later, Uruguay’s charismatic then-president, José “Pepe” Mujica, enacted Law 19.172.

The General Assembly in central Montevideo houses the lower and upper chambers of Uruguay’s legislature. Source: George Engels/WikiTribune

The government justified the social experiment by saying regulation would help combat the domestic drug market by funneling cannabis money away from drug-dealers; and would lead to an improvement in the country’s public health by separating the market for cannabis from more toxic drugs.

“We decided that the principle of public health is a fundamental principle when it comes to regulating the cannabis market,” Diego Olivera, secretary general of Uruguay’s National Drugs Council (JND), the body in charge of formulating the country’s drug policies, told WikiTribune in his office on the 10th floor of Montevideo’s Executive Tower.

Strict regulation is at the heart of Uruguay’s effort to control the cannabis industry. Although the state doesn’t tax sales (Article 104, in Spanish) in an effort to undercut the price of black-market cannabis, it bans all forms of commercial advertising, imposes heavy fines on intoxicated drivers, and has promoted mass educational campaigns for responsible consumption.

“They took a very cautious approach in terms of a very controlled regulation model,” Jelsma told WikiTribune.

Breaking with prohibition

The small South American nation, known on the international stage – if at all – for its prime beef exports and its football team, became the first country in the world to formally defect from the global prohibitionist consensus championed predominantly by the United States and monitored by the United Nations Office on Drugs and Crime (UNODC).

In so doing, Uruguay has placed itself at the forefront of an increasingly vocal transnational movement of nations, world leaders, and academics calling for a radical rethinking of the war on drugs.

Uruguay’s decision was initially criticized by the president of the International Narcotics Control Board (INCB), Raymond Yans, who accused the South American nation of breaking international law and putting its citizens’ health at risk.

But TNI’s Jelsma says that three and half years on, the INCB has softened its initial “sharp and condemning” tone, partly because it would have been awkward for the U.S. – the INCB’s main enforcer – to pressure the South American country after several of its own states (including California on January 1) moved to regulate the cannabis industry before and after Uruguay’s decision.

“I think also the INCB has now recognized that this is a process they can no longer stop… There are now already eight (U.S.) states and also now Canada,” says Jelsma.

The road to regulation

Although a small but dedicated group of pro-legalization Uruguayan activists had been fighting for cannabis regulation and a few limited cannabis regulation proposals had already been proposed by Uruguayan politicians, experts agree the current law was prompted by public anxiety over violent crime.

In 2012, opposition lawmakers and sections of the news media portrayed the country as in the midst of a crime wave. According to figures (in Spanish) from Uruguay’s Interior Ministry, successful robberies increased from 13,829 in 2010 – when Mujica came to power – to 15,414 in 2012.

“In Mujica’s administration, insecurity increased massively,” opposition senator and former presidential candidate Pedro Bordaberry told WikiTribune. “Uruguay was the country with the best public security rates in South America and in the last 10, 12, 13 years robberies tripled.”

As violence worsened, 2012 had a 34 percent spike in homicides, which brought the tally up to 267 murders (Uruguayan Interior Ministry). In 2005, there were 190 murders.

Then, on May 11, 2012  two teenagers walked into a Montevideo branch of La Pasiva – a popular family restaurant chain. One of them pulled out a revolver and killed a 34-year-old employee, a father of five. While one of the teenagers later said that the money they stole wasn’t for drugs (La Nación, in Spanish), in a country which had enjoyed some of the lowest levels of crime in Latin America, this and other killings fed anxiety.

Rafael Paternain, 49, a Uruguayan sociologist who is also a replacement senator for the governing Frente Amplio party, told WikiTribune that the killing at La Pasiva “really put the government up against the wall”. Mujica’s administration responded with a document known as the Strategy for Life and Coexistence (link in Spanish). The plan put forward 15 proposals to tackle public insecurity, among them cannabis regulation.

Attitude toward cannabis

When first faced with the choice of legalizing the cannabis market, most Uruguayans were against it. Back in August 2013, when cannabis reform was being debated, senator Bordaberry said: “This will destroy the lives of many youths in Uruguay. Drugs are harmful, whatever they may be; we must reduce consumption, not increase it”. (BBC Mundo)

He wasn’t alone in his criticism. Perhaps one of the most surprising aspects about Uruguay’s decision to regulate its domestic cannabis market is the fact that it was taken despite overwhelming opposition from the public – over 60 percent, according to a local press article as quoted in a 2016 TNI report.

“Back when the ‘Marihuana Law’… came out, public opinion was against it,” says Alain Mizrahi, CEO of Grupo Radar, a local market research and polling company.

Uruguay’s top-down political decision is particularly interesting given how cannabis reform has been undertaken elsewhere, such as in the U.S. states of Colorado, Washington, California, and potentially this year, Canada. In these cases, policy shifts are backed by a majority of the population (TNI).

‘In no way is it innocuous’ – Raquel Peyraube, President of the Uruguayan Society of Endocannabinology

Although a November 2017 survey conducted by Grupo Radar suggests that public opinion is thawing, 53 percent of Uruguayans (Grupo Radar) still disapprove of recreational cannabis being sold in pharmacies.

“For me, [recreational cannabis] should not be sold in pharmacies because… it seems like what they’re selling is medicinal, and it’s not,” says Raquel Peyraube, 63, a Uruguayan doctor with almost three decades of experience in the drugs field and who also advises the government on cannabis regulation. “In no way is it innocuous.”

But Peyraube, who is also the President of the new Uruguayan Society of Endocannabinology (EFE, in Spanish), warns against the alarmist myths that for decades have been used to stigmatize users. She says that recreational cannabis is the least addictive of any mind-altering substances – including tobacco and alcohol.

Cannabis plants at the Cannabis Conference in mid-January in Punta del Este, Uruguay. Source: George Engels/WikiTribune

Ultimately, she says regulation outweighs prohibition from a public health perspective because it allows for better education and prevention strategies. “It’s about learning what our children are going to consume, with or without us, and prepare them to do so with less risk to their health,” Peyraube said.

Budding problems

Since its regulation, the demand for cannabis has outpaced supply in Uruguay. “When it arrives, it takes a day, a day and a half, or maybe two days to run out,” says pharmacy owner Sebastian Scaffo, sitting at a small table shielded from the gaze of customers by rows of prescription medicines on racks.

Scaffo, 33, owns one of Uruguay’s 12 pharmacies licensed to sell recreational cannabis. He told WikiTribune he sells approximately 400 packets a week, or two kilograms. (That’s roughly equivalent to two bags of potatoes.) Cannabis sales are a welcome additional source of revenue and new clients for small businesses like his, but it has also generated some problems.

“I thought about it a thousand times before I started selling it,” he says, acknowledging that some of his previous clients might have stopped frequenting his pharmacy since he started selling cannabis. “[But] many people have come and… if this continues, I will win more than I lose.”

“It’s good business, but we have to see how this continues,” Scaffo says.

A corner building in Montevideo covered in cannabis-themed street art. Source: George Engels/WikiTribune

One pharmacy in coastal Uruguay – the only licensed store in a departamento one and half times the size of Rhode Island – uses its Facebook page to keep its customers informed: a green Facebook profile picture means that cannabis is in stock; yellow indicates it is running out; red indicates supplies have emptied.

But the most serious problem threatening regulation is the same issue facing other places that have legalized cannabis: being shut out of the international, U.S.-led banking and financial system.

Because cannabis remains illegal in the United States at a federal level, banks that deal with money coming from its commercialization can be charged with money laundering (The Economist). Because of the globalized nature of the financial system, Uruguayan banks that want to do business with U.S. banks must abide by the same rules. This means that every licensed pharmacy in Uruguay has had its bank account closed until it stops selling a product that is legal to commercialize at home.

On February 6, U.S. Secretary of the Treasury Steve Mnuchin told the House Financial Services Committee that the Treasury doesn’t “want bags of cash” and that they’re considering different ways to deal with the issue (Forbes).

But big financial institutions won’t make a move until Congress gives them the necessary assurances that they can operate safely in this sector, says John Walsh, director for drug policy and the Andes at WOLA. “None of this necessarily means a speedy resolution of the banking obstacles that have arisen in Uruguay,” he told WikiTribune via email.

Because of this and despite strong demand, access to legal cannabis in Uruguay has marginally fallen since sales started in July 2017. Six of the first 16 pharmacies no longer sell cannabis (El País, in Spanish), although two have signed up since. Scaffo’s farmacia and eleven others can use only cash for every business-related transaction.

Whereas dealing in cash might be inconvenient for small businesses, it becomes prohibitive for large chains with complex and often international logistical chains and thousands of workers, says Martín Sorrosal, the CEO of Uruguay’s largest pharmaceutical retailer.

With more than 1,000 employees across 92 pharmacies (link in Spanish), Farmashop refinanced its debts last year with the help of three international banks. As part of the deal, says Sorrosal, all three institutions compelled Farmashop to include a specific clause forbidding the company from engaging in the commercialization of cannabis of any kind.

Because the ban extends to all types of cannabis, the company is also unable to cater to the small but growing demand for medicinal cannabis. “It’s a decision that until we have an answer from the banks we haven’t even started considering as a company,” says Sorrosal.

JND’s Olivera and IRCCA Executive Director Martín Rodríguez told WikiTribune that the government’s main aim on regulation in 2018 is to expand access to cannabis to underserved districts. Both insist that the banking issue is not an existential threat to the system since the government plans for cash-only cannabis dispensaries to be set up across the country.

“The objective of this is to partly mitigate the effects of the financial system,” Rodríguez told WikiTribune in an interview at the Punta del Este Cannabis Conference.

“Uruguay may find some relief from the banking obstacles when Canada approves its legislation this year and major Canadian banks begin to actively service the regulated adult-use cannabis sector,” says WOLA’s Walsh.

“Cannabis consumption is just one more thing in life”

Lounging on a worn outdoor sofa on the third-floor terrace of the Montevideo house he rents with two friends, Javier Estrada says cannabis regulation has put an end to an awkward legal situation for cannabis consumers.

“Although one already was relatively at ease smoking on the streets, now we can really start to forget about that feeling of having to become alert when police come round,” he says. “At least among the group of people I hang out with… It’s total freedom.”

Javier Estrada on the terrace of his home in Montevideo, Uruguay. Source: George Engels/WikiTribune

Estrada, 32, works as a freelance video producer  – he grows and buys his cannabis at a social club. He says it’s been over three years since he has had to buy from the black market.

“I’ve never been one to engage in shady dealings, but I did have a few bad experiences,” he says. He mentioned a few occasions when dealers took his money and never returned. On another occasion, they stole his friend’s bicycle.

“It’s really important that consumers aren’t considered as criminals and that they be given an option so that they don’t have to resort to the black market, to the illegal drug trade,” he says. “People who smoke marihuana – and this isn’t a bad thing – should have a way to access it.”

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  • Sources
    • Marihuana Oficial: Crónica de un Experimento Uruguayo – Christian Müller Sienra & Guillermo Draper
    • The Rise and Decline of Cannabis Prohibition: The History of Cannabis in the UN Drug Control System and Options for Reform – Dave Bewley-Taylor; Tom Blickman; Martin Jelsma – The Transnational Institute; Global Drug Policy Observatory
    • Ending the Drug Wars: Report of the LSE Expert Group on the Economics of Drug Policy – The London School of Economics
    • After the Drug Wars: Report of the LSE Expert Group on the EconomicS of Drug Policy – The London School of Economics
    • Systems Overload: Drug Laws and Prisons in Latin America – Giorgina Garibotto – The Transnational Institute / Washington Office on Latin America
    • Cannabis in Latin America and the Caribbean: From punishment to regulation – Alejandro Corda; Mariano Fusero – The Transnational Institute
    • UNODC
    • UNDP

    Some local headlines: El Observador (Uruguay); El Observador (Uruguay); Espectador.com (Uruguay); La Nación (Argentina).

     

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