Despite being the first country to fully legalize marijuana, Uruguayan dealers claimed that they would stop the sale of cannabis on November 7. Marijuana sales, which began in August following a four-year planning period, were quickly halted because of a provision of the U.S.A. PATRIOT Act that prevents American banks from doing business with distributors of controlled substances.
The act instituted this rule in order to limit terrorist groups’ income from illegal drug sales. For this reason, U.S. banks are hesitant to become involved with legal marijuana and told Uruguayan banks that their deals would be closed unless the accounts of marijuana distributors were closed in compliance with the clause.
The same issue has played-out as American states have set up recreational marijuana industries, but these distributors have chosen to instead operate as cash-only businesses. In Uruguay, the only licensed distributors are pharmacies. Because marijuana represents only a fraction of these businesses’ profits, they are worried about the potential closing of their accounts and instead are choosing to refrain from sales altogether.
Former-President José Mujica, leader of the legalization movement in Uruguay, demanded that action be taken to fix the issue and called for members of the government to either act or resign. Many distributors and customers expressed frustration at the government, given that the long rollout of legal sales was meant to prevent unexpected issues from arising.
The slump in legal sales of recreational marijuana has caused some cultivators to change their business platforms, tripling the production of hemp and prioritizing the pharmaceutical production of cannabis oil, both of which are currently seen as safer investments.
The recreational marijuana system in Uruguay was carefully crafted to discourage illicit drug sales and limit the influence of narcotic trafficking in Uruguay. Mujica wrote the legislation to take into account the failures of the U.S.-led War on Drugs, which has yet to achieve tangible results in Latin America. Advocates of legal marijuana pointed out the irony of U.S. anti-drug legislation contributing to the sale of illegal drugs.
Marijuana sales are currently halted in Uruguay as the government seeks a solution to work around U.S. law. It remains to be seen how Uruguay can achieve this, or if the United States will change its laws given the increasing number of countries legalizing recreational marijuana.