Legal recreational cannabis brings opportunities that companies like West Coast Ventures Corp. (OTC: WCVC) benefit from, while in Uruguay tricky legislation makes the business less lucrative.
Following some US states, like Colorado, recreational and medicinal use of cannabis is legal in Uruguay. Full legalization of the substance has its benefits, as it helps to push out the black cannabis market, as well as brings profit to both the public and private sectors. In Colorado, the state government recorded a $6 billion income from sales of cannabis, while local companies benefit too.
West Coast Ventures Corp. (OTC: WCVC) is America’s first CBD restaurant stock which exceeded $3 million in revenue in the first year of operations. Their Illegal Burger restaurants’ success is so promising that the company is counting on hitting even more by the end of 2019 and 2020. WCVC recently started to sell their CBD products online which will boost the sales even more.
In Uruguay, businesses are free to explore the opportunities that the cannabis sector offers, but they also face a more nuanced problem. The regulated production of marijuana punishes profit margin in the South American country, a pioneer in the legalization of the plant, so some businessmen turn to medicinal cultivation.
Eduardo Blasina is an agronomist who became a businessman in 2010 when the Uruguayan government gave clear signals that the regulation of marijuana was serious. It was the first country in the world to open the production and consumption of cannabis flowers and it was necessary to correspond the audacity.
In 2017, he was one of the growers who gave life to one of the two companies authorized to produce this product for recreational purposes and sell it in a few pharmacies distributed in the territory.
Enthusiasm cooled because of a cost problem. The price at the points of sale is set by the government through the Cannabis Regulation Institute: one dollar per gram when the optimum would be five to six dollars per unit of measure. “There’s no margin,” says Blasina.
The first two companies selected by the government to make the law 19172 of 2014 effective were Iccorp and Symbiosis. It was necessary to produce on a large scale and supply pharmacies with two tons a year, but the accounts did not come out and did not comply with the offer.
Symbiosis continued to grow psychoactive marijuana, but Blasina left to found Cannabis Uruguay, turning to medicinal purposes, in partnership with other enthusiasts of this new business, oriented to export in an environment of greater freedom. The agronomist’s experience came from the time when he dedicated himself to self-cultivation in his home in Montevideo’s Palermo neighborhood, which is now the Cannabis Museum, and he was not willing to abandon his authentic professional vocation.
Not all entrepreneurs in the Cannabis sector are willing to talk about this issue in public because these crops are still notorious in a region that also covers the shadow of drug trafficking. In fact, the law was approved by Parliament in 2013, despite the fact that the polls prior to the regulation were against the project of President José Mujica, a leftist who proposed the initiative as a means of snatching the market from the traffickers.
Entrepreneurs had a hard time getting money into the banking system. Although everything is legal at the national level, the day after the list of pharmacies that were to sell cannabis flower was made public, their checkbooks were canceled. The same thing happened in 2014 in Colorado, when the state ignored the American national legislation and legalized marijuana.
The bank refusal is due to international legislation that penalizes the use of resources linked to the production and sale of cannabis. That’s why the accounts were canceled in September 2017, according to a bank operator.
Although the establishments expanded their range of goods, the amount in circulation is insignificant, said a pharmaceutical businessman who spoke on condition of anonymity.
“It is very difficult to operate outside the banking system. And this is contradictory because there is no product in Uruguay with traceability and control strict as cannabis. A package of five grams has a bar code and you know who produces it, who sells it and who buys it,” said the pharmaceutical businessman.
The sale in pharmacies is one of the three ways to access cannabis; the other two ways are the cannabis clubs and self-cultivation. All are registered with the regulatory institution: there are 39,956 registered with fingerprint and official identity card to buy in pharmaceutical establishments, plus 3,900 grouped in 125 clubs (through fees of $120 to $150) and 7,224 additional, which produce at home.
Now there are more pharmacies interested in placing marijuana in their counters, but the production of the two concessioned companies is insufficient, so the government has already launched a new call for more licenses.
In July 2017, three and a half years after the law went into effect, legal commercialization began. In 2018, the total sale was equivalent to 445,000 dollars, through 17 pharmacies throughout the country (with a territory similar to Chihuahua), where each package has a price of 250 Uruguayan pesos, about seven dollars. In Colorado, a one gram cigarette costs at least 12 dollars.
One of the pending issues is the sale of cannabis to tourists, who come to Uruguay thinking that, as in Denver, there is unlimited marijuana. But surprise: it is illegal.
Businessmen like Blasina believe that both sales to visitors and production for medicinal purposes should continue to broaden horizons.
In March 2020 he will assume a new government and we hope,” said Blasina, “that the next administration, no matter which party it is from, will scientifically reason the cannabis issue and push Uruguay much further as an investment opportunity, which should be a platform for research and development”.