Tag: uruguay

Uruguay will forever hold the title of being the first country on earth to pass a nationwide adult-use cannabis legalization measure. Lawmakers in Uruguay made the historic move in 2013, with regulated sales launching in 2017.

Regulated sales are still limited to residents in Uruguay, with tourists currently being prohibited from making legal purchases. It’s one disadvantage to Uruguay’s legalization model compared to Canada’s, where anyone of legal age can make purchases regardless of their residence status.

One distinct advantage that Uruguay’s model has over Canada, at least from a consumer standpoint, is that there is no tax on cannabis purchases in Uruguay. When Uruguay’s law was initially passed, the lack of taxes on cannabis purchases was geared toward directly undercutting the unregulated market.

Lawmakers in Uruguay recognized at the time that the more regulated cannabis costs at the point of sale, the less likely consumers would be to take the regulated route versus making their purchases via unregulated sources. This is not to say that Uruguay’s cannabis industry is free from fees. Producers have to pay licensing fees and people in the industry still have to pay income taxes on profits.

A Senator in Uruguay is proposing a new tax on cannabis to help fund, among other things, athletic competitions. Per El Observador Senator Sergio Botana is proposing a 1.5% tax on cannabis in Uruguay to help generate funds for the Uruguay Olympic Committee.

By comparison, cannabis taxes in Canada are much more complex than the flat percentage rate being proposed in Uruguay by Senator Botana. Still, a 1.5% tax rate would effectively be lower than what is required in Canada, and significantly lower than many (if not all) of the state-level tax rates in the United States.

With that being said, cannabis taxes are always a risky area of public policy and involve a very slippery slope. If/when Uruguay implements a 1.5% tax rate, how long until it is raised even higher? Whenever lawmakers need to drum up more public revenue, cannabis taxes will likely be a popular target, and that is true not only in Uruguay but also everywhere else that cannabis is legally sold.

Every dollar that gets added to the price of regulated cannabis results in some amount of consumers and patients seeking out cheaper, unregulated options. Also, keeping cannabis tax-free hinders the cannabis industry’s ability to pay for its own regulation and to benefit society beyond regulation, such as generating taxes that go to schools. It’s a delicate balance that lawmakers everywhere need to be mindful of.

Late last week the President of Uruguay, Luis Lacaille Pou, reportedly stated that it was a mistake for Uruguay to have passed an adult-use legalization measure back in 2013, and subsequently, launched legal adult-use sales four years later. Both moves by Uruguay were the first of their kind by any country on earth since the start of global cannabis prohibition. It’s worth noting that Uruguay’s current President was elected in 2020, well after the country legalized cannabis for adult use.

As expected, cannabis opponents are pointing to the President of Uruguay’s statements as loudly and as often as possible. They are touting it as some type of ‘proof’ that adult-use cannabis legalization does not work, and that the first country to ever legalize cannabis for adult use has buyer’s remorse. According to the President, the government should not be part of the process of growing or selling “drugs” because he considers legal cannabis to be “unprofitable.”

Why Did Uruguay Legalize Cannabis?

When Uruguay passed its national cannabis legalization measure, the public policy shift had three main objectives, two of which were specified in the law itself:

• Reducing cartel-related violence by moving cannabis into a regulated market
• Promoting public health through education and prevention
• Eliminating the catch-22 of allowing possession but effectively blocking consumers from accessing cannabis

Contrary to the spin-doctoring that Uruguay’s President seems to be currently engaging in, the goal of Uruguay’s historic cannabis policy shift was never to maximize profits. Prohibition is a failed public policy, and a regulated model will always be a better approach to cannabis policy.

Drug cartels have caused an enormous amount of misery and suffering in Uruguay and throughout the region. Cannabis is obviously only one of the many facets of a drug cartel’s operations, however, giving consumers a regulated option to legally acquire cannabis hurts cartels’ bottom line to some extent, and from that perspective, legalization is clearly working.

Improve The Legalization Model

Legalizing cannabis purely for monetary gain is not a solid reason for such a public policy change. People should support cannabis legalization because it is the right thing to do being that cannabis prohibition literally ruins lives. No one should ever be subjected to the criminal justice system due to possessing, cultivating, and/or buying a personal amount of cannabis.

With that being said, if Uruguay’s President is truly concerned about the profitability of the nation’s emerging cannabis industry, then he should seek to improve it rather than destroy it. The first thing that the President should seek to do is open up the nation’s cannabis system to tourists. Unlike Canada, Uruguay only allows sales through pharmacies and private clubs, and those sales are only open to residents. That is obviously going to limit the size of Uruguay’s potential customer base and hinder industry profits.

One thing that the President seemed to disregard in his statements is the cost savings to Uruguay by the country no longer enforcing failed public policy. Enforcing cannabis prohibition is expensive. It costs money to pay law enforcement to identify and investigate unregulated cannabis activity. It costs money to then prosecute cases through Uruguay’s court system. Incarcerating people also costs money. When Uruguay stopped enforcing prohibition, it yielded obvious cost savings for the government. Legalization is working in Uruguay, whether the country’s President wants to admit it or not.

Uruguay will forever hold the distinction of being the first country on earth to pass an adult-use cannabis legalization measure. Uruguay made the historic policy change in 2013.

Nearly a decade later, only two countries have joined Uruguay on the legalization list – Canada and Malta. Out of the three countries that have passed legalization measures, only Canada and Uruguay currently allow legalized sales.

Researchers around the globe have kept a close eye on Uruguay to see what, if any, significant public health outcome changes occur due to legalization, with a particular focus on youth cannabis consumption rates.

Cannabis opponents always predict doomsday scenarios regarding youth cannabis consumption whenever cannabis reform measures are being proposed, including in Uruguay leading up to legalization.

A team of international researchers recently explored data specific to Uruguay and youth consumption rates, and fortunately for sensible policy advocates, there appear to be no sustained changes in youth consumption patterns. Below is more information about it via a news release from NORML:

New York, NY: The adoption of nationwide regulations governing the retail sale of cannabis to adults is not associated with sustained increases in young people’s cannabis consumption, according to data published in the journal Addiction.

An international team of researchers from Chile, the United States, and Uruguay assessed cannabis use trends in Uruguay among those ages 12 to 21 following legalization.

Uruguay initially approved legislation legalizing the use of cannabis by adults in 2013, although retail sales in licensed pharmacies did not begin until 2017. Under the law, cannabis sales are restricted to those age 18 or older who register with the state. Commercially available cannabis products may only be produced by state-licensed entities and sold at specially licensed pharmacies. THC levels are capped by regulators and government price controls are imposed upon flower. Limited home cultivation is allowed in private households.

Consistent with prior studies, researchers reported no significant changes in cannabis use patterns among either adolescents or young adults. Among those under the age of 18, marijuana use fell following legalization. Among those ages 18 to 21, cannabis use initially rose, but then decreased.

Authors concluded, “The legalization of recreational cannabis in Uruguay was not associated with overall increases in either past-year/past-month cannabis use or with multi-year changes in any risky and frequent cannabis use among young people.”

Numerous North American studies have similarly failed to identify any significant upticks in cannabis use by young people following the adoption of adult-use legalization in either US states or in Canada.

Full text of the study, “Does recreational cannabis legalization change cannabis use patterns? Evidence from secondary school students in Uruguay,” appears in Addiction. Additional information is available from the NORML fact sheet, ‘Marijuana Regulation and Teen Use Rates.’