(Q24N, Insightcrime.org) Three years after Uruguay became the first South American country to create a legal market for marijuana, seven out of every ten cannabis consumers still acquire the product on the black market.
The delays in the implementation of the legalization law have left the door open for drug trafficking, and it appears that the illegal marijuana trade will remain a lucrative business for at least the near future.
Marijuana was initially to be sold legally in pharmacies and under the government’s purview beginning in July 2016. But faced with reluctance from small business owners as well as other unforeseen events, President Tabaré Vázquez’ administration was forced to push back the date to some point in 2017.
The regulation of the marijuana business — a decision taken in 2012 by then-President José Mujica that took aback the international community — has three objectives: undercut the criminal profits of an industry whose annual worth is estimated to be between $30 and $40 million; keep regular consumers away from illegal sales places known as “street selling points”; and provide drug users with a product absent of harmful substances through regulated sales in pharmacy.
Despite the aforementioned delays, some production and consumption of marijuana has already been legalized. Frequent and chronic users can now legally home grow the plant for personal use, or become members of registered clubs that constitute a separate legal access point from those planned in pharmacies. The only legal requirement to access the regulated drug market is to be a citizen or resident of Uruguay, thereby by blocking out drug tourism.
Uruguay’s Marijuana Market
Data varies on the demand for marijuana, the street price and the overall worth of the Uruguayan market.
In 2013, Interior Minister Eduardo Bonomi from Mujica’s administration said Uruguay’s marijuana trade represented “between $30 and $40 million a year” in profits for organized crime. These figures have become the point of reference for analysts.
But in June 2012, then-Defense Minister Eleuterio Fernández Huidobro had estimated that the number could reach $75 million, double the figure cited by Bonomi.
Similarly, there is no official data on the quantity of marijuana smuggled into and sold illegally in the country, but estimates generally vary between 20 and 40 metric tons. According to Congressman Sabastián Sabini, one of the co-authors of Law 19.172 concerning marijuana legalization, the record for marijuana seizures was set in 2011 at 2 metric tons, equivalent to 5 percent of the annual demand of 40 metric tons.
That record was broken when authorities seized 2.5 metric tons in 2015. But authorities seized more than 2.5 tons in just the first six months of 2016, according to the Interior Ministry’s data. Authorities admit that “street selling points have multiplied in recent years, along with criminal acts related to micro trafficking.”
Consumers and Prices
The total number of marijuana consumers in Uruguay could hover between 135,000 and 200,000, out of a total population of 3.3 million.
Possibly the most reliable data was compiled by the National Drugs Committee (Junta Nacional de Drogas – JND), which estimated the number to be 161,000. The figure, published in the Sixth National Household Survey concerning Drug Consumption, includes the core nucleus of consumers, regular users and sporadic clients.
For the first time, the study contains a section dedicated to analyzing “the current marijuana market and the new regulation” initiated in December 2013. According to the study, 66 percent of users still obtain their marijuana from the illegal market. The product is of lesser quality, grown with fertilizer and without buds. Grown in the eastern region of Paraguay, it is dubbed the “pressed Paraguayan,” as it is compressed in order to be shipped and sold throughout the Silver River basin, which comprises parts of Argentina, Brazil and Uruguay.
The price of a gram, or a “palanca,” on the black market can hover between 15 and 50 Uruguayan pesos (50 cents to $1.60), while 10 grams can be bought at around 200 pesos ($7). But the cost of high-quality marijuana can reach as high as 600 pesos ($20) a gram.
The press releases from the Interior Ministry’s anti-narcotics body are ambiguous and broad. The monetary scale to describe the black market establishes a dollar for a gram, $200 for a kilo (equal to 40 cents a gram) and $1,000 for a metric ton.
Without a doubt, those that have profited from the regulation policy so far are the 5,000 individual growers and the 1,000 members of cannabis clubs legally registered with the Cannabis Regulation Institute (Instituto de Regulación del Cannabis – IRCCA). The IRCCA was created by Law 19.172 and holds a governmental overview function.
“For less than 1,000 pesos [$33], you can grow your own plants in your house,” said Marcelo Cabrera, a small salesman in Montevideo. “Three bags of seeds will cost you 680 pesos. And every plant that you grow will easily provide you with 30, 40, 50 or 70 grams.”
Leaving the Door Ajar
Independent analysts and official sources believe that it will take some time for the illegal market to subside.
“Consider the fact that there are 55,000 regular consumers who are responsible for 80 percent of the marijuana consumption in the country, but currently only 10 percent are consuming from the legal market, the rest are buying the drug off the illegal market,” said Marcos Baudeán, an academic at ORT University in Montevideo and a member of the study group Monitor Cannabis Uruguay. “Drug trafficking still operates and marijuana remains a profitable business.”
Baudeán added that “the legal market will build itself up little by little, but while it grows, the demand remains and since the legal market cannot satisfy it, the demand is fulfilled by the illegal market.”
Hopes of completely shutting out drug trafficking reside in the delayed but upcoming pharmacy sales.
“Not all consumers grow plants in their house, not all can join a club and receive their monthly product,” said Daniel Collazo, the author of “Uruguay se planta,” an instruction book on how to home grow marijuana. “So the majority will turn to the pharmacies and that’s when the government will start to compete with the black market.”
IRCCA has already established the future price of a gram in pharmacies at $1.17. The state-supervised producers will receive 90 cents, leaving a profit margin of 30 cents for the state. But the figure has been questioned by some, as it does not take into account additional costs linked to the transportation or the storing of the marijuana.
Authorities assert that the quality of legal cannabis, the two kilos available in every pharmacy, and the legality and security of the sales process will make the price on the black market crumble to the point of destroying the incentives for criminals to traffic marijuana.
The marijuana that will be on offer will be of a general type and from a single strain, according to IRCCA officials. The companies Symbiosis and Iccorp, both of which are financed by domestic and international capital, won in 2015 the government bid for the production of marijuana. Each firm has already grown two metrics tons to fulfill the government’s established quota for the first distribution round.
Sabini argued that producing marijuana from a single strain will facilitate the traceability of the product and hence the detection of illegal drugs via IRCCA’s control mechanisms.
“Drug traffickers will no longer set the rules; neither will a transnational firm or a businessman,” Sabini said. “The state will decide based on health criteria, accessibility to the substance and a drug regulation policy.”
The Delay in Implementation
One of the reasons for the delay in the setting up of sales points in pharmacies is the fear that concerned businessmen have expressed with regard to the possibility of these sales points being targeted by criminals and criminal groups.
“The law is okay; but have we done all this just to combat drug trafficking? If that’s the aim, I think that home growing and the membership clubs are useful, but [selling in pharmacies] is exposing a sector in which 90 percent of the workers are women,” said Alejandro Antalif, the vice president of the Uruguayan Center for Pharmacies. Antalif also questioned the profitability of commercialization given the fixed price of the drug and the requirement that buyers register with the IRCCA.
Authorities have not revealed the exact number of pharmacies that were registered between March and May 2016 to become marijuana selling points. But the JND President Juan Andrés Roballo said that there were around 50 spread out across the capital cities of the 19 different departments and administrative areas of the country. The geographic coverage is important to ensure a high availability and thus undercut the black market.
The delay has fueled speculation that the policy may be receiving opposition from President Vázquez, an oncologist and anti-tobacco activist. But he publicly declared himself in favor of Law 19.172 in October 2015 by saying that the law was an instrument to fight drug trafficking and that he had not stalled the implementation process.
“The prohibitionist policy against drug consumption in the world has failed just like the prohibition [of alcohol] in the United States,” the president said.
Despite the delays, Uruguay is right to feel optimistic. Baudeán calculated that pharmacy sales will increase the legal offer to cover 25 percent of the total demand.
“The marijuana trade is a very important pillar of drug trafficking, due to the simple fact that this is the drug with the most number of consumers in the world,” Baudeán explained. “According to the United Nations Office on Drugs and Crime, in 2005, the marijuana trade was worth $4.2 billion a year in South America and $141 billion worldwide. There are uncertainties surrounding these figures, but they show how important this market is, because there are millions of consumers. Here we can see that one of the ways to weaken drug trafficking is to legalize the market. And we can see that it is being done in a very specific way: the state regulates the entirety of the process, from production to distribution to consumption. It receives support at certain stages but it controls the whole process.”
It has yet to be proven that Uruguay’s formula can be effective at combating drug trafficking, but the next steps in the implementation process could open up new possibilities.
“When the consumer shifts toward home cultivation and pharmacy sales, this ceases to be a business,” said Juan Baz from the Foundation for the Study of Cannabis in Uruguay. “We already know that those who illegally sell marijuana sold less in 2015. This has already started and it will continue in stages. For the last three years we have been taking steps forward, and the idea is to not take any backwards.”
Article originally appeared on Insightcrime.org, republished here with permission.