Solving Uruguay’s adult-use cannabis supply shortfall and anticipating first medical exports: Q&A with attorney Daniel Podestá

(Editor’s note: This is the second in a series of Q&As with speakers at MJBizConINT’L, Sept. 4-6, in Toronto. Daniel Podestá’s panel will discuss hemp and cannabis opportunities in Latin America and the Caribbean. To read the previous Q&A in this series, click here.)

Uruguay’s persistent recreational cannabis supply shortage boils down to a cautious regulator that preferred to start slowly, said Daniel Podestá, a partner at the Montevideo law firm Estudio Podestá.

The Institute for the Regulation and Control of Cannabis (IRCCA) “started offering low quantities with low percentages of THC, so the demand always was higher than what was available,” he told Marijuana Business Daily.

“Now they are offering strains with higher amounts of THC, reaching 9% and delivering more consistently to pharmacies.”

Earlier this year, a public tender was opened to select three more companies to produce recreational cannabis.

Podestá also said the country’s first medical marijuana exports are on the horizon.

MJBizDaily spoke with Podestá about the Uruguayan experience with legal cannabis and the lessons learned almost six years after the landmark law was approved.

Uruguay was the first country in the world to fully legalize marijuana in December 2013. What has worked well? And what was the worst mistake?

Uruguay was a model for other countries that regulated cannabis. Being first has certain benefits but also many challenges.

One of the main benefits of the Uruguayan regulations in comparison with regulations in other countries that came later was allowing companies to focus on any part of the supply chain.

A company can produce flowers or biomass to export, can industrialize it or sell it to third parties, can import and distribute derivatives and more.

Companies can differentiate and specialize in any of those activities or do all together as a vertically integrated company.

But being the first country worldwide to regulate implied a learning process.

As the industry was developing, authorities needed some flexibility. So they delegated several aspects of regulation to certain public bodies.

What happened in practice was that these government agencies sometimes had a conservative approach to some topics, so, instead of creating a streamlined process with clear and standardized guidelines, cases were studied one by one.

One of the challenges for Uruguay is to update some aspects of its regulations, capitalizing on experience gained over the years.

Soon there will be general elections in Uruguay. Did cannabis become a nonissue after it was normalized with legalization? Is there any chance the country will slide back to prohibition?

Uruguay has a very strong democratic tradition, and Uruguay is recognized abroad for being a country that respects the bills passed and the investments made under the auspices of those regulations.

In October/November, Uruguay will have general elections, and none of the candidates that have a chance to become president is proposing going backward.

The Uruguayan society, politicians and media have understood the impact of a vigorous cannabis industry for our country in creating jobs, paying taxes and bringing revenues to companies, so any new debate related to this industry is taken very seriously and with no stigmatization.

Has Uruguay exported any high-THC medical products for commercial purposes so far? 

In Uruguay, the CBD market is much more developed than the THC market.

But it’s encouraging that more and more companies are showing interest in producing high-THC cannabis.

This year, one of the authorized producers announced a deal to export 6 tons of high-THC dried flower to Germany. The shipment has not occurred so far, but it is expected to happen this year.

What are the hemp and CBD opportunities in Uruguay – both the local market and the export sector?

The CBD market has developed strongly in Uruguay. Companies have grown hundreds of outdoor hectares and thousands of greenhouse or indoor square meters. They have harvested good quantities, and each crop is better.

Also, there are many companies investing in R&D to obtain new strains and improve existing ones.

Public authorities are very straightforward when talking about CBD and hemp. The rules, requirements, procedures and timing are clear. Those are things companies appreciate a lot.

Because Uruguay is not a big country, its local market for CBD products manufactured at scale does not make a difference. There are products sold locally, such as drops, creams or yerba mate, but quantities are not considerable. The main objective of the companies is to export.

The challenge that CBD producers have are certifications requested for being accepted as medical suppliers, Good Agricultural Practice (GAP) and Good Manufacturing Practices (GMP) are usually requested by purchasers when buying CBD for medical purposes, in order to achieve a better price in destination markets.

How does US federal prohibition affect the legal Uruguayan industry – for instance, with banking issues?

Banking is not a problem just in Uruguay. Other countries that have legalized cannabis also have problems one way or another when companies transfer funds from cannabis.

Uruguay’s problem is that some banks prefer to (avoid) conflict with their intermediary bank in the U.S. and, so, avoid working with the industry.

Despite this, the cannabis market in Uruguay continues expanding, and there are always new companies exploring possibilities and coming to invest.

This interview has been edited for length and clarity.

Alfredo Pascual can be reached at [email protected]

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