The Effects of Legal Cannabis on the Black Market – Central and Latin America

Illegal farm Jaimee Saldarriaga

The medicalization of cannabis and its distribution through legal channels is set to significantly impact illicit markets and cartels in Central and Latin America. With little historical reference it will be difficult to quantify changes in the short term, however, what is clear so far is that black marketeers in LATAM and around the world are adaptable.

As consumers in the US and throughout the world are beginning to enjoy the fruits of regulated cannabis markets, that bring quality products to patients and consumers, the influence and income of illegal drug rings are being weakened. In 2012, 32% of the US population had access to legal medical and/or adult use cannabis products, in that year 1400 tonnes of cannabis was seized by US  border control. By comparison, 2017 saw 63% of the US having access to legal cannabis, in that year seizures were down more than 50% compared to 2012.

Recent underground politics, arrests, and splintering of factions have seen further unrest, particularly in Central American cartels groups. While we can see a decrease in illegal cannabis being exported, an increase in the smuggling of drugs such as heroin, cocaine, and fentanyl has been observed. This shows evidence of illegal organizations diversifying to meet the demands of their northern neighbors. As cannabis becomes available via legal and quality controlled means it is pleasing to see a decrease in illegal activity and crime related to cannabis across the southern US border, however, the shift towards smuggling more dangerous substances is of serious concern.

“This is our chance to be part of a legal system… our chance to say no to the wrong people and yes to the right ones.”

-Ariel Huetio, community organizer representing indigenous farmers in western Colombia

Economic assessment of illegal drug organizations around LATAM shows wages for employees can be considerably higher than the average wage in legitimate employment. Despite monetary incentives and external pressures, new generations and family farmers are seeing the benefit of entering legal cannabis markets. Citizens are experiencing the stability of working for legitimate organizations and farmers are joining cooperative that allow them to cultivate on their traditional lands. In Colombia, local and global cannabis companies have an onus to source a percentage of their raw product from local cooperatives, in enacting such regulations the government hopes to further incentivize the population to avoid earning their income through the black market.

Image: Pharmacielo cultivation, Colombia. Jaimee Saldarriaga

Other measures are being put in place in LATAM countries with legal cannabis markets that, for security purposes, restrict access to commercial farms. Additionally, testing is required to ensure the quality and genetic profile of raw material, with the intention of preventing illegal cannabis from infiltrating the legal market. Regulations such as these are helpful preventatives in the push to minimize the influence of black market cannabis on the budding legal industry.

Evidence points to drug-related violence being generated by inter-organizational competition. Full legalization is in place in Uruguay and Mexico set to follow suit soon, the future of drug violence fueled by cannabis is uncertain. Particularly in relation to Mexico regulatory changes allowing for both medical and adult use, has the potential to either increase or decrease violence, as competition increases. While it is unlikely we will see a complete withdrawal of cartels and drug rings in the cannabis arena, legalization in northern America and around the globe is surely impacting their bottom line.

As cannabis prices decrease across the US in the wake of widespread legalization and stabilization of the industry, the decline in legal prices is likely to continue to dent the black market’s income. While a percentage of the population are keen to source their medicinal or recreational products by legal and quality controlled means, there are still many who are loyal to their longtime black market dealers and are happy to continue to avoid paying taxes.

Image: Size of illicit markets. The Economics of Drug Trafficking, Organization of American States

Despite figures showing a decrease in illicit cannabis being smuggled across the border, cartels, and drug rings are showcasing their adaptability. While cannabis has been a cornerstone of operations for cartels for decades, they are changing with the tides and are continuing to diversify their operations. Unfortunately, in light of this, it will be difficult to measure the impact of legalization on the black market, however, what is apparent is legal cannabis is giving cartels a run for their money.




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