Wednesday, February 19, 2014

Uruguay Eyes Real-World Risks of a Regulated Marijuana Market

Less than two months before Uruguay’s historic marijuana law goes into full effect, remarks by National Drug Secretary Julio Calzada shed new light on the kinds of factors the government is taking into account as it prepares the fine print of the measure. For one thing, it’s clear that Uruguay is not taking the fact that its legal cannabis market will compete with violent criminal organizations lightly.

In an interview with leading daily El Pais, Calzada told the paper that officials are seriously weighing the possibility that criminal elements might attempt to sabotage Uruguay’s regulatory regime for marijuana when it kicks in on April 9th. “We have conducted an analysis of all the existing risks and obviously this is one of them. Though today we have no evidence suggesting that drug trafficking activity aims to put the system at risk, this is not something that can be ruled out,” he said.

Potential scenarios listed by the drug czar include attacks on officials and the destruction of legal marijuana crops, as well as an attempt by foreign drug trafficking groups to undercut the regulated market with a cheaper product. The latter has been one of the most common criticisms leveled against the law, and has gained traction in recent months due to statements from other officials in the region expressing concern over the potential for cross-border spillover of the drug.

One of the most high-profile critics of the region is the government of Paraguay, a country which also happens to be the primary producer of marijuana in South America. The top Paraguayan anti-drug official, Luis Rojas, has not been shy about attacking the law. Rojas has repeatedly predicted that regulation will cause demand for cannabis to rise, which in turn will encourage drug trafficking networks in his country to send more illicit cannabis to Uruguay. In December, he told news agency EFE that the Paraguayan traffickers would be able to undercut Uruguay’s proposed price for marijuana by as much as 30 percent.

Calzada directly responded to this argument yesterday, pointing out that officials hope to undercut the existing black market for Paraguayan pot with improved quality and accessibility as much as price. And while he acknowledged that user surveys in the future might suggest an increase in demand for marijuana, Calzada maintained that the most likely cause of this would be a greater willingness to admit to drug use in the wake of the law’s passage. The official said it “insane” to worry about  the risk of Uruguay’s planned 10 hectares of marijuana leaking to other countries, when estimates of Paraguay’s illicit marijuana crop suggest it produces up to ten times as much (between 8,000 and 10,000 hectares).

Additionally, Calzada offered a convincing argument against the economics or Rojas’ claim. He asserted that the elasticity of illicit drug prices is limited, as they are “related to the risk involved in introducing [drugs] into the market, not the costs of production.” To combat both an influx of Paraguayan cannabis and the risk of spillover, then, the official claimed that Uruguayan law enforcement intends to step up controls on illegal drug trafficking.

As I wrote in an analysis for InSight Crime following the law’s passage in December, however, this is easier said than done. One of the biggest vulnerabilities of the law is its language allowing households to grow up to six marijuana plants. Monitoring compliance with regulations, especially in rural areas along Uruguay’s porous northern border with Brazil, will be a tough order. I argue:
Because the [Institute of Regulation and Control of Cannabis (IRCCA)] currently only exists on paper, it is still unclear how it will ensure that those who obtain home cultivation licenses stick to six plants per household. Will authorities carry out periodic checks? Will individuals be left to self-regulate? How strictly will those who violate IRCCA regulations be punished? These are all questions that are not answered in the text of the law, and will have to be determined by Uruguayan officials in the coming months.
This logic is fairly simple, but implementing it will be key to the law’s success. If Uruguay hopes to eliminate the illegal marijuana market, it will have to make the cost of continuing to fuel that market higher than participation in the state’s regulatory framework. When the law kicks in in April, the government will have a strong incentive to demonstrate zero tolerance for illicit cannabis cultivation and trafficking. Judging from Calzada’s remarks, officials are well aware of this.


News Briefs
  • As anticipated, Venezuelan opposition politician Leopoldo Lopez surrendered himself to law enforcement authorities yesterday after a rally outside government offices in downtown Caracas. Before his arrest, Lopez gave an impassioned speech standing atop a statue of Cuban independence hero Jose Marti in which he called for a peaceful and constitutional change of government. The New York Times has some impressive photos of the demonstration, and notes that it was “the largest rally in more than two weeks of growing protests.” Thankfully, yesterday’s dueling marches in Caracas occurred with no reports of major clashes similar to last week’s violence. However, El Universal notes that an opposition protester in the eastern Venezuelan city of Carupano was killed after being hit by a car earlier this week.
  • The backlash from Semana magazine’s report on a military corruption ring in Colombia is heating up. President Juan Manuel Santos announced a major shake-up of the army’s top brass yesterday, dismissing army commander General Leonardo Barrero and four other high-level officers. In his remarks, Santos made it clear that Barrero was not being sacked for corruption but for his “disrespectful speech,” a nod to recordings released by Semana in which Barrero calls on army leaders to form a “mafia” against judges investigating human right abuses. El Tiempo calls the purge “historic,” and claims that they are proof of the Santos administration’s commitment to a “zero tolerance” approach to human rights violations.
  • The Washington Post looks at reports of recent violence by residents of Rio de Janeiro’s favelas which have been occupied by Police Pacification Units (UPPs). As an example, the paper notes a recent shootout in the Rocinha favela, during which the main tunnel running through the community was closed and a UPP commander sustained injuries. However, the article contains no official statistics on violence in occupied favelas, and offers no explanation for the alleged rise in violence.
  • A new survey by Brazilian polling firm MDA ahead of the country’s October presidential race shows that President Dilma Rousseff remains the leading candidate, though her approval rating fell nearly four points from November to 55 percent this month. Her closest rival continues to be Aecio Neves of the PSDB, whom 17 percent of respondents said they would support in the vote. As Reuters notes, the fact that as many as one-third of respondents are undecided suggests it is still too early to tell if Rousseff could win a first round vote and avoid a runoff.
  • In El Salvador, a UTEC-CIOPS poll released yesterday shows that the FMLN's Salvador Sanchez Ceren has 54.9 percent support ahead of the March 9 runoff there, compared to 45.1 percent for ARENA’s Norman Quijano. Meanwhile, Quijano’s conservative allies in Washington have continued to spread fear about the “disastrous” potential of an FMLN victory in the country. The latest culprit is Heritage Foundation president and former U.S. Senator Jim DeMint, who warned in a Miami Herald op-ed on Friday that a win by Sanchez Ceren could turn El Salvador into “gang haven that will act as a transit point for drugs plunging America’s inner cities further into crime and despair.” WOLA’s Geoff Thale has a measured response to DeMint’s claims, noting that while gang violence is a serious issue in the country, his near-hysterical rhetoric does not match up with the facts.
  • The Washington Post has an excellent report on tensions between the United States and Mexico governments over Mexican President Enrique Peña Nieto’s security policies. While the security relationship between both countries have improved somewhat since Peña Nieto first took office, his administration still maintains more distance from American law enforcement and intelligence than his predecessor. As proof, the Post points to a drop in the number of criminals sent back to the U.S.  for prosecution, as well as a delay on implementing Merida Initiative-funded programs that lasted until as recently as November.
  • These tensions may play out today following U.S. President Barack Obama’s trip to Toluca, Mexico for a summit with Peña Nieto and Canadian Prime Minister Harper marking the the 20th anniversary of the North American Free Trade Agreement. The NYT notes that Obama’s attempts to further the Trans-Pacific Partnership trade pact there have been questioned by Democratic Party leaders in Washington, and that the U.S. president faces the tough task of convincing his counterparts that he is committed to the deal while minimizing his lack of political support at home.
  • The Miami Herald has the latest on Dominican President Danilo Medina’s plan to present a legal path to citizenship for those affected by the country’s recent Supreme Court ruling which limits Dominican nationality. The fine print has not been made public, but Medina is expected to unveil it next Thursday during his state of the union address.