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Why Uruguay Is Important To Trade Canada

Why Uruguay Is Important To Trade Canada

Posted by Bruce McDougall on May 19, 2014

Earlier this year, Canada’s Foreign Affairs Minister, John Baird, invited his counterpart from Uruguay, Luis Almagro, to meet with him in Ottawa. Their official relationship began last August, when Baird traveled to Montevideo, Uruguay’s capital city. About 18 months before that meeting, another Canadian cabinet minister, Diane Ablonczy, paid a visit to the Uruguayan capital to meet Danilo Astori, vice-president in the government formed a year earlier by President José Mujica.

At first glance, these meetings seem routine. Under the Harper government, Uruguay has become a priority emerging market, along with every other South American country, and Ottawa wants to strengthen commercial relations between the two nations.

Those relations have a long way to go. Canada’s politicians could have accomplished more for their country’s trading ambitions by visiting Tulsa, Oklahoma, and they would only have to have travelled a quarter of the distance. Canadian companies sell more merchandise to Oklahoma than they sell to Uruguay, although exports to the South American country include aircraft and nuclear reactors, products that don’t interest the state government in Oklahoma City. As for imports, with about 3.5 million people in an area smaller than Oklahoma, Uruguay is primarily a source of beef patties and mandarin oranges, products that don’t rank high on the list of priority items for Canadians.

So why is Canada so interested in a nation with a population smaller than Toronto’s and whose average per-capita GDP of about $15,000 is about one-third of Canada’s?

Since he was elected in 2010, President Mujica has led social initiatives such as universal health care coverage, the legalization of same-sex marriage and the advancement of reproductive rights. Over the objections of farmers, ranchers, and environmentalists, he also wants to develop mining activities in the country, recently approving a $ 3-billion open-pit mine expected to deliver more than 4 billion tons of iron ore for export.

“We want to diversify our economy,” Mujica said in a recent interview. “But we have to do it the right way.”

That might help to explain the flurry of official visits between Uruguay and Canada. Among other things, they help to promote opportunities for Canadian companies not only in mining but in forestry and agri-business, as well.

Among the Canadian crops that interest Uruguay is marijuana.

Since it assumed power, President Mujica’s government has legalized marijuana with the intention of eradicating crime associated with the weed. As the U.S.-led war on drugs continues to fail miserably and at great cost, Uruguay wants to try other ways to alleviate the social misery associated with drug-related crime, and legalization is one of those ways.

At the moment, Uruguay has no domestic supply of marijuana. As an alternative, it might import the crop from another country. Canada is one of the more likely sources. “That’s where the best quality is,” says Uruguayan Senator Lucia Topolansky, a senior member of the ruling Broad Front Party, who is also Mujica’s wife.

In Canada, where about 15% of the population smokes pot, sales of marijuana amount to an estimated $7 billion. But unlike Uruguay, Canada has taken no steps to legalize it, and police in this country continue to arrest more than 50,000 people a year for possessing the plant.

About 10 Canadian companies currently grow medicinal marijuana and sell it legally for an average price of $7.50 a gram. Mujica wants to make marijuana available in Uruguay for about $1 a gram. Exports from Canada are legally possible, but the trade would not only require some form of subsidy, it would also need approval from the UN’s International Narcotics Control Board, which has frowned on Uruguay’s initiative. And if a stranded boatload of dope ever put into a U.S. port on its way to Uruguay, American authorities would certainly seize it.

Meanwhile, Mujica’s initiative remains controversial. “It’s almost certain that we’ll be under the international spotlight,” he said in an interview with a U.S. magazine called Vice. “We’re a petri dish, really, a social laboratory.”

At the moment, Health Canada has stated that Canada has “no plans to encourage the export of cannabis to Uruguay or any other country.” That may change if a Liberal government assumes power in Ottawa. Liberal leader Justin Trudeau supports legalization of marijuana, although he says his party hasn’t decided “how we get there, how long it takes [or] how many steps.” 

With or without Liberal leadership, Canada’s legal marijuana industry is expected to generate sales of $1.3 billion a year by 2024. And some of that money could come from Uruguay.

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