Uruguay’s smoking laws draw tobacco fire

Financial Times

Uruguay’s smoking laws draw tobacco fire

By Benedict Mander in Buenos Aires

9 May 2014

While Uruguay has been celebrated by liberals around the world for its bold steps to regulate cannabis, with new rules taking effect this week, its similarly pioneering attempts to control smoking of another, legal plant – tobacco – has earned it powerful enemies.

Tobacco company Philip Morris is suing the tiny South American country for $25m at the World Bank’s International Center for Settlement of Investment Disputes (ICSID), marking the first time a tobacco group has taken on a country in an international court.

Known as “the Switzerland of South America”, Uruguay’s reputation as one of the best places to invest in the region is also at stake, with Philip Morris presenting its arguments at the ICSID in March that the nation has violated terms of a bilateral investment treaty with the real Switzerland, where it has its headquarters in Lausanne.

The world’s biggest tobacco company – whose annual revenues of $77bn across 180 countries far exceed Uruguay’s gross domestic product of about $50bn – claims that a 2009 anti-tobacco law damages its intellectual property rights and has hit sales, in what is being seen as a test case for the tobacco industry.

President José “Pepe” Mujica is due to seek support from US President Barack Obama in the legal dispute at their meeting on May 12 in Washington, when the former guerrilla who spent years in solitary confinement will also discuss whether Uruguay will receive prisoners from Guantánamo Bay.

“It is ironic that on the one hand Uruguay is making it easier to smoke marijuana, while at the same time it is clamping down on tobacco,” said one industry insider.

But John Walsh, a drugs policy expert at the Washington Office on Latin America, says Uruguay’s trailblazing efforts to regulate marijuana and tobacco industries are consistent. “With tobacco they are bringing to heel a legal industry that is accustomed to operating with scant control, while with marijuana they are taking an industry out from the shadows and putting it under better control,” he said.

Nevertheless, there have been contrasting reactions in the international community and the UN in particular, with the World Health Organisation and former New York mayor Michael Bloomberg praising Uruguay’s campaign against tobacco. It became the first country to ban multiple sub-brands of cigarettes in 2010, having already been the first in the region to ban smoking in enclosed public spaces in 2006.
"On the one hand Uruguay is making it easier to smoke marijuana, while at the same time it is clamping down on tobacco"

But when Uruguay was first to legalise the process from the planting to the smoking of pot last December, the International Narcotics Control Board criticised its “pirate attitude” for going against its conventions on drugs, despite winning praise elsewhere for seeking alternatives to a “war on drugs” that is increasingly seen by Latin American leaders to have failed.

Philip Morris, which has also filed lawsuits against regulations in Australia and Thailand, opposes the Uruguayan anti-tobacco law’s requirements that graphic health warnings cover 80 per cent of both sides of cigarette packets, and that brands have a single image, thereby prohibiting sub-brands such as Marlboro Red or Marlboro Gold.

“At the bottom of all this is a desire to control everything,” said Daniel Radío, an independent lawmaker and former doctor. Although he favours cannabis legalisation in theory, he is critical of the intrusive and prohibitive nature of Uruguay’s system, which he calls “anti-liberal”. He points to requirements to register in order to buy cannabis at state-controlled pharmacies, or in the case of tobacco, “making people feel guilty about smoking cigarettes”.

Philip Morris has not expressed interest in producing marijuana cigarettes in Uruguay, although it represents a pioneer market along with countries that permit the use of medicinal marijuana like Canada, Israel and the US.

The legalisation of marijuana in the states of Colorado and Washington is creating a regulated pot industry, with cannabis-focused private equity funds sprouting up that hope to raise hundreds of millions of dollars to tap into an industry projected to reach sales of $2.6bn this year – that compares to just $30m-$40m in Uruguay.

The government of Uruguay will take applications for up to six licences from companies to grow the drug commercially, with military oversight and protection, for sale in state-controlled pharmacies. It is expected to be available by the end of the year for about $1 per gram, mirroring the price on the black market which is largely supplied by low-grade illegal produce from Paraguay.

Indeed, Paraguay’s President Horacio Cartes, who owns the nation’s largest cigarette manufacturer, opposes legalising cannabis in his country, which is believed to be the second-biggest producer of illegal marijuana in the world after Mexico. He once claimed: “I have seen former high school classmates suffer and die because of the effects of marijuana.”

Philip Morris is suing Uruguay for $25m, not $2bn as reported in an earlier version of this story