The economic impacts of the legalization of marijuana in Uruguay

One year after the legalization of marijuana for recreational purposes, has it had any significant impact on the economy?

The economic impacts of the legalization of marijuana in Uruguay

Leer en español: Los impactos económicos de la legalización de la marihuana en Uruguay

Last year Uruguay became the first country to legalize the sale of marijuana for recreational purposes throughout its territory. Now, marijuana can be acquired legally through three modalities: pharmacies, crops and cannabis clubs. According to The New York Times, marijuana is sold in pharmacies for $ 1.30 a gram and the maximum amount allowed for sale is 10 grams a week. This is a lower price than the illegal market where, according to the newspaper El Diario, a gram of marijuana sells for $ 4. In addition, pharmacies guarantee the highest possible quality of the product.

However, and according to this same medium, of the 1,100 pharmacies in the country, only 16 sell marijuana. This is due to the low prices of the product and its low profit margins. The newspaper also points out that: "the main problem is that banks have threatened to close the accounts of pharmacies that sell marijuana in Montevideo."

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For home cultivation, almost 7,000 people have registered, who can now grow and harvest up to 480 grams per year. As for the cannabis clubs, they can have a maximum of 45 members and harvest up to 40 grams per month. According to the newspaper El País, membership to these clubs costs around $ 100 per month. Julio Calzada, formerly responsible for drug policy in Uruguay, affirms that with these modalities "we have removed at least 12,000 people from the illegal market. That is already a success. And it will continue to grow. "

Advances so far

According to The New York Times, legalization has helped curb drug trafficking (30 million dollars a year business) in the country. The newspaper states that: "In 2016, the Directorate for the Suppression of Illicit Drug Trafficking in Uruguay seized, in total, 4,373 kilos of marijuana from drug trafficking, mainly Paraguayan pressed material." Then, if the legal quota of 3,192kg is planted in the home crops, the 63 clubs share their 1,200kg quota, and the pharmacies sell their 4 tons allowed, the legal marijuana consumption will double the illegal amount seized by the police.

In economic terms, the State runs the business. However, according to The New York Times, the initial investment of Simbiosys, a company licensed for cultivation and distribution, was $ 1.7 million and the estimated profits are half a million dollars in 5 years. With regard to sales prices, the US newspaper states that: "Pharmacies will keep 30 percent of the final sale price. Another 10 percent will be for the State that would raise one million dollars per year if users smoke the four tons planned per year. The two licensees, Simbiosys and International Cannabis Corporation (listed on the Toronto Stock Exchange), will keep $ 0.90 for each gram sold. "

Additionally, given that existing pharmacies do not cover the entire Uruguayan territory, plans are being made to open 20 more pharmacies, since the National Board of Drugs estimates that 161,475 people consume marijuana in the country, of which only 15% are registered. in pharmacies.

Potential markets

Eduardo Blasina, president of the cannabis museum in Montevideo, affirms that the new challenge is to allow the sale of the product to foreigners to promote tourism. In addition, according to the newspaper El País, "The next step […] is to become a marijuana cultivation power but not recreational, but medicinal, the great world business now that several countries, also in Latin America, are approving their use.

Projections for other countries.

According to Dr. Buscaglia, from Columbia University, the positive effects of legalization in Uruguay may not be replicated in the rest of Latin America. This is because: "The pharmaceutical industry has to comply with regulatory conditions to ensure that the product it sells does not have toxic effects harmful to the human body", which is why "Uruguayan policy is more likely to succeed than in other countries. Latin American countries such as Peru, Mexico, Guatemala, El Salvador, etc. One of the basic conditions to apply this Uruguayan policy in other countries is that you do not have a pirated pharmaceutical industry producing adulterated measures through organized crime "and these countries do not have the capacity to regulate the pharmaceutical industry.


LatinAmerican Post | Sofía Carreño

Copy Edited By Laura Viviana Guevara Muñoz

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