This past July, in a move that received relatively little attention in North American cannabis circles, Uruguay became the first country in the world to fully legalize the sale of cannabis across its entire territory. Sales began last month, but significant challenges from international financial institutions may still stand in the way.  

Uruguay, which has long boasted liberal institutions and an open-minded national culture, had never fully outlawed the consumption of recreational drugs. However, the cultivation and sale of cannabis was still illegal until this summer. Cultivation was legalized in 2014, and legal sales began this past July.

The tides began to turn for cannabis law in Uruguay after the 2011 arrest of Alicia Castilla, a then 66-year old intellectual and writer of the popular book “Cultura Cannabis”. Castilla was cultivating 29 plants for personal use. The arrest of the popular, peaceful, 66-year old writer for personal cannabis use sent shockwaves throughout Uruguay, with her imprisonment becoming a focus for national news.

“The media coverage was crazy. Legislators started bringing legal marijuana draft bills for me to look at in prison,” Castilla recently recalled.

Her case was finally dismissed by Uruguay’s supreme court just last year, after a long series of trials. She was ultimately incarcerated for a total of three months, though she had faced a possible prison term between two and ten years. Along with the push for Castilla’s freedom came a powerful demand for sensible cannabis laws. In Uruguay, recreational drug possession had never been illegal, so arrests for cultivation and sale had long sent a mixed message to cannabis users. Campaigners for legalization attribute their success partially to this factor.

According to one campaigner, Laura Blanco, “We found this grey area in the law where consumption was legal but cultivation was not, so every time a marijuana-grower was taken prisoner it was reinforcing the message that the only place to obtain access to a legal substance was on the illegal market.”

Beyond cannabis law, Uruguay is a very different from the North American or European countries weighing the prospect of full legalization. With a total population of about 3.4 million, Uruguay has only between a quarter and a third the total population of the Los Angeles metropolitan area. Just under half of that population lives in the nation’s capital, Montevideo. In July, the government said nearly 5,000 people had registered to purchase cannabis, through fingerprint recognition, with a limit of 40 grams per month. About two thirds of those live in Montevideo.

Grams were first sold for about $1.30, and only two strains were initially available to consumers – an indica called Alpha I, with 2 percent THC and 7 percent CBD, and a sativa called Beta I with 2 percent THC and 6 percent CBD.

To satisfy demand on such a relatively small scale, the government chose just two businesses to cultivate cannabis. 90 cents of the $1.30 goes to those businesses, while rest is divided between the pharmacies who sell the cannabis, and the government, whose share goes toward prevention programs.

Polls have shown that most Uruguayans actually oppose the legalization plan, and most of the country’s pharmacies did not register to sell cannabis. Sales, however, were quite good for the pharmacies that did register.

These pharmacies though, have since run into one obstacle which mirrors similar difficulties faced by cannabis businesses in American states which have legalized. American banks, including Bank of America, have sent letters warning that they may stop doing business with banks in Uruguay that provide services to such pharmacies and other cannabis businesses. The threat of losing their bank accounts has already forced some of the merely 15 pharmacies selling cannabis to halt sales. Other pharmacies that had considered registering are now holding off until the situation is resolved. Overcoming a challenge from powerful, international institutions could make for a serious obstacle to continued legal sales.

Officials in Uruguay say they are looking for a solution, but President Tabaré Vázquez told reporters last week that “We can’t hold out false hope.”