Uruguay's Great Evolving Cannabis Experiment Continues

In 2014, Uruguay became the world’s first nation to federally legalize cannabis when it implemented an adult-use program three years before likewise establishing a regulated medical-use program. Thus being a pioneer in cannabis reform, it now aims to become a leading exporter of variants for medical use.

Given the lessons learned whether from benchmarks or challenges pertaining to product access, enforcement, banking, international treaties, access to the product, tourism, and research and evaluation, Uruguay’s experiences represent immense value to policymakers and analysts elsewhere. Last December, Uruguayan President Tabaré Vázquez was on hand to open Canada-based International Cannabis Corp. (ICC)’s $12 million laboratory to produce hemp-derived CBD products.

Predictably, the country unearthed some obstacles while setting up its programs, and still faces some adaptations to address in determining the future viability of its markets. For instance, Uruguay is involved in an intricate web of international trading agreements with regional countries, some of which still prohibit cannabis either for medical or adult uses.

Still, investors appreciate Uruguay’s favorable characteristics, including the country’s general conditions for foreign investments, its national educational level, legal certainties, macroeconomic stability, and other elements combining with its robust and federally comprehensive cannabis-related regulations.

Uruguay’s dozen free trade zone (FTZs) afford the potential to set up an offshore or onshore company in a part of the country (e.g., near an airport, shipping port, inland, or in Montevideo’s business district, etc.) with exemption to all national taxes whether existing or to be created (including profits). The most frequently used type of company by international investors is a corporation featuring bearer shares.

Today – as described in New Frontier Data’s free Latin America Regional Cannabis Report 2019 Industry Outlook – Uruguay allows for medical cannabis with less than 1% THC content to be exported wherever else it is legal, an attractive market opportunity for international stakeholders.

Unlike many early legalization efforts in the U.S. spurred on by voter initiatives, cannabis policy reform in Uruguay was driven by the government, as led by the leftist Broad Front political party (though its most prominent member, President Vázquez, is a physician who has publicly considered cannabis to be dangerous).

Any misgivings notwithstanding, the political motivation for reform was to reduce the violence associated with drug trafficking, and to promote public health overall. Uruguay’s government tightly controls the cultivation, processing, and dispensing of both medical and adult-use cannabis. Cannabis use is restricted in public spaces, and neither driving nor working while experiencing the plant’s effects is permitted.

Domestically, Uruguayan citizens or legal residents over age 18 may consume cannabis for adult use so long as it has no more than 15% THC. Consumers must be registered with the Instituto de Regulación y Control del Cannabis (Institute for the Regulation and Control of Cannabis, or IRCCA), and through the registration process they select one of three sources as their only point of access to legal cannabis. The law allows for personal cultivation and sales through licensed pharmacies in a government-run permit system, and consumers may also legally access it through cannabis clubs (clubes de membresía). Each club (of between 15-45 members) must be registered with the government’s Institute for the Regulation and Control of Cannabis (IRCCA), is prohibited from advertising, and may own up to 99 plants.

The IRCCA maintains registries of licensed consumers, and is empowered to inspect cannabis clubs, pharmacies, and cultivators that supply the pharmacies. The IRCCA and law enforcement are not permitted to inspect home cultivations without either the homeowner’s permission or a judge’s order. The IRCCA can seize products, force closures, or otherwise take legal action where violations occur.

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