Can Cannabis Save Argentina's Economy?

In the movie The Matrix, Morpheus gives Neo, the protagonist, a red pill that allows him to see reality and pull him out of the simulation in which he is immersed, but which he believes is the real world. A Platonic drug, the cyberpunk equivalent of the allegory of the cave.

In both cases, the subject exposed to the Platonic solution goes from believing X to believing Y about the same matter. For Plato, this was the way to abandon the world of appearances and know the absolute truth that shaped the universe. On the other hand, we postmodern beings can afford to strip the metaphysical weight from that expression and settle for saying that both procedures (the red pill and Plato's cave) serve the same functional role. It is, simply, changing what one thinks about something.

Neo-reactionary philosopher Curtis Yarvin coined the term redpill to describe this ideological device or thought experiment. In an analogous way, we can use the term green pill to apply the same process to the idea at hand while also giving a friendly nod to the author. What if for a moment we suspend our ideological position (our placement on the political compass after choosing a design that represents the full spectrum we deem adequate) regarding psychoactive substances and look at them from a new perspective, as a business.

Beyond the fact that Argentina owes itself an enormous debate about the freedom of adults to modulate or equalize their mental states with substances (legal or illegal), today I want to focus the discussion on something more specific: the home cultivation of marijuana and its subsequent sale.

How the homegrown weed market works

First of all, a fundamental distinction. Most cannabis users between the ages of 24 and 35 started smoking what is known as "prensado" (pressed), "paraguayo" or "paragua". Until about ten years ago, a joint was a block resembling a bouillon cube, which was ground into a powder that was then rolled and turned into the famous "porro". That changed with the emergence of THC magazine, to which all cannabis users owe a great deal. We learned that cannabis is a plant and what we smoke are the flowers of the female plant, also known as buds. What are actually not single flowers but floral clusters that produce an enormous quantity of crystals called trichomes, which in turn contain delta-THC, the psychoactive substance of the plant. Cannabis contains a wealth of substances known as cannabinoids, among which THC stands out for its psychoactive potential and CBD for being responsible for a sedative effect that, in most cases, inhibits the transmission of nerve signals associated with pain. CBD, which is not psychoactive, is the substance for which the medical uses of cannabis are being researched.

Perhaps it needs to be stated, but cannabis grown at home -- homegrown, domestic, under the "self-cultivation" model -- is infinitely superior in quality to what arrives from Paraguay, since the entire pressing process is avoided. That process consists of turning the whole plant into a dry block and transporting it without any kind of protection from Paraguay to its final destination in Argentina. The quality of this product is terrible; it often includes mold, insecticides, and may be rotten among other issues.

The rise of home cultivation responded both to the limitless curiosity of stoners and to the ethical issue of not buying from dealers or people linked to the trafficking of illegal substances, of which marijuana is the most harmless. With all these factors in play, a kind of home-growing boom occurred that can be placed from 2009 to 2019 and that I like to call "the stoned decade". The boom follows a dynamic that traces all the steps of capitalist development. Growers started this movement out of a personal need (to avoid dealers and get good-quality weed) until at a certain point they began selling their production surplus.

Marijuana is a very resilient plant and grows at almost any latitude, but here you don't need much to do it: pots, proper soil, seeds, and plenty of sun. There is also the indoor growing method (indoor) that requires lamps, extractors, and lights. While this method is more widespread since it allows growing marijuana in any environment and not only in summer, it is also much more expensive because the powerful lights used for cultivation must remain on between twelve and eighteen hours throughout the plant's entire life, which averages around five months.

The surplus of domestic cannabis is traded in an informal market, where sellers and buyers connect through word of mouth and almost always through friends who act as intermediaries, and the price is determined by the push and pull between supply and demand.

Once homegrown marijuana production was established, a number of small businesses sprang up around it, giving rise to the boom of grow shops, stores specializing in cultivation supplies. While ten years ago finding bat guano (an excellent fertilizer for the plant) meant going down a hallway in some remote apartment building in Flores, today that same product, with branding and packaging, can be found at the corner nursery. Grow shops multiplied in the city's shopping arcades. Furthermore, cannabis became a social activity that brings together everyone from people who grow to reduce harm to mothers who want to cultivate in order to make oil for their children suffering from conditions like epilepsy, cerebral palsy, or sclerosis. Additionally, various cultural activities emerged such as cannabis cups, magazines, books, YouTube channels, and last year the first expo, organized by the THC magazine team at La Rural, where it broke attendance records.

The charming thing about homegrown weed is that, being illegal, it has no regulation whatsoever. There is no state intervention and the price per gram is determined by a constant tension between buyers and sellers. A market driven solely by supply and demand. For example, in the months following the harvest, which coincide with autumn, the abundance of weed is such that prices drop. While in January and February, scarcity causes prices to rise. Moreover, weed has almost no demand for dollars, only very few for buying seeds (which can range from $3 to $9 dollars), so its price is completely denominated in pesos. The price of a seed is almost equivalent to a single gram of dried flowers, of which the plants can yield, making a rough average, about fifty per harvest.

Although if you think about it, the state does play a role. On the one hand, it dedicates itself to finding and destroying large plantations, which in a way functions as a sort of anti-monopoly entity, since any plantation that exceeds a certain size attracts the attention of the authorities (because it is too conspicuous or because they didn't "make arrangements") and they shut it down.

Now, the size of the market is difficult to quantify, although we can get a general idea by reading the 2017 consumption data from Sedronar:

It is the most widely consumed illicit drug in the country. 7.8% of the population (ages 12 to 65) reported using it in the past year; 10.7% of men and 5.2% of women. Between 2010 and 2017, consumption grew across all age groups, in both men and women. However, it is men and young people between the ages of 18 and 24 who show the highest consumption rates. Meanwhile, 2.7% of adolescents aged 12 to 17 used marijuana in the past month.

We are talking about roughly one million four hundred thousand people who used marijuana at least once during the past year. And a significant detail added by the report is that more than one million people consumed marijuana in the last thirty days (5.4%). To put it in perspective, about two million three hundred thousand people said they had drunk alcohol in the past year.

While, for now, it is impossible to determine the number of users who smoke pressed weed versus those who smoke flowers, by simply adding this item to the annual SEDRONAR survey we could acquire that data and quantify the real size of the domestic marijuana market for recreational purposes. Although this type of use is just the tip of the iceberg, since marijuana's greatest potential is associated with its medical use thanks to a cannabis variety known as industrial hemp.

Argentina's battered economy

Argentina has been stagnant for ten years, without growing and with an economy that swings between recession and crisis. This can be seen both in the deterioration of its GDP during the 2011-2019 period and in the rampant poverty and unemployment figures.

Perhaps this sounds very abstract, but in real life this means worse salaries, worse healthcare, worse education, worse working conditions, fewer chances of escaping poverty, more illness, more exclusion. In short, economic hardship, in this context, leads to a destruction of quality of life.

The difficulty of Argentina's productive model is that to sustain a new era of growth, it will have to change its productive structure, or wait for luck to once again gift it a boom in the price of some of the commodities it produces: soybeans, wheat, corn. On one hand, it is clear that we cannot depend exclusively on luck and that changing productive habits is very difficult. For all these reasons, marijuana represents a unique opportunity.

It is a product that we already know how to produce at the household level and that would only need to be scaled to an industrial level. But it is also an agricultural product, an activity in which Argentina has a tradition like few other countries. The only thing holding us back from this new and renewed source of income is an ideological hang-up. We do not have to change the productive structure, we do not have to pass new laws, invent new taxes, or promote anything. At the state level, it only means changing the approach, removing marijuana from the orbit of the security ministry and transferring it to health and agroindustry. At the social level, it means changing a way of thinking, taking a green pill. The only thing we have to do is set aside a prejudice and perhaps we can save a part of the Argentine economy.

Legalization

My legalization proposal is as follows: the state does not have to do anything. In reality, it has to amend Law 23737 and remove marijuana from the list of prohibited substances. After that, it is a matter of letting the cannabis market continue on its current path and at most creating a licensing system for dispensaries in the Dutch style where the product is sold to the public. Periodically, the locations could be inspected and product quality certified. Given the circumstances brought about by the COVID-19 pandemic, that structure could be digital. The government could authorize buying and selling through an e-commerce company and distribution would be handled by apps like Glovo, Rappi, or Pedidos Ya.

The impact on tax revenue would be immediate through VAT charged on recreational cannabis. While the price per gram of flowers ranges between three and six dollars, the state would collect 21% on all transactions. I believe most cannabis users would be willing to pay 21% more on the product's price in exchange for it being legal. In turn, in exchange for paying taxes, users could demand a ceasefire. That is, for the state to lift the prohibition stipulated by Law 23737 of 1989 and stop prosecuting growers and stop initiating cases for possession, cultivation, and commercialization of cannabis (seeds included). This way there would be an enormous boost to the industry. Being legal, the number of growers would multiply and that would give a greater push to the domestic cannabis market. Thus hundreds of Argentines could use their skills and knowledge to generate a cycle of growth, more jobs, and move to the forefront of an industry that is booming.

This way all parties win. The state gains a new source of revenue while also saving the costs of keeping human beings locked up for judicial cases related to the possession, cultivation, and buying and selling of marijuana. The absurd number of judicial proceedings and costly police operations would end, with resources now focused on what truly matters: consolidating the country's borders and preventing drug trafficking networks from expanding their influence across the national territory.

Those who import cannabis from another country illegally should be punished to the full extent. Furthermore, the importation of pressed weed would be economically exterminated because the market would have such a level of supply that there would even be room for a good-quality and cheap product. Perhaps this is the main reason why legalization of this substance is not moving forward.

Green Economy

The cannabis economy has already begun and is at its peak. These first years will be where the greatest profits are made and then, progressively, the product will tend to become a commodity. That is why it is imperative that Argentina does not miss, once again, the innovation train.

Canada and the Netherlands are the pioneers and the United States is starting to join the green fever. The country governed by Justin Trudeau legalized the entire cannabis production cycle, has a market close to five billion dollars, and two of the main companies dedicated to this activity: Canopy Growth and Aurora. Both received multimillion-dollar investments from venture capital funds and threaten to become the giants of the region. In the Netherlands, the marijuana business represented one percentage point of GDP in 2018, reporting a profit of 4.8 billion euros. One point in an ultra-developed economy integrated into global trade. That is the potential of this industry.

To get an idea of the business's profitability on American soil, we take the data provided by a private investor who in the 2019 season produced medical cannabis in the state of Colorado:

On 1 acre (0.4 hectares) of land, an average of 2,000 plants can be cultivated. It is estimated that each plant, conservatively, produces 1 pound (0.45 kilos) of biomass. In June 2019, biomass had a value of $2.90 "per percentage point of oil". The oil percentage was estimated at 10%, resulting in $29 per plant, or $58,000 per acre ($130,000 per hectare).

The key lies in the price per percentage point of oil. At the peak of the harvest, the price was around $1.75. The negative impact on investments caused by the pandemic leads specialists to assume that, this year, the cultivated area will be smaller, meaning the price per oil point will be higher.

According to a report from an industry consultancy, despite being legal in only three states, the cannabis industry generated 211,000 full-time jobs and another 300,000 indirect jobs on American soil. You only need to browse Instagram to find hundreds of figures from the American star system promoting their own varieties of cannabis products. From actor, screenwriter, and film director Seth Rogen to former heavyweight champion Mike Tyson.

While the scale of the Argentine and American economies are incomparable, this gives us an idea of the potential of the marijuana industry. Argentina, as of today, as confirmed by another local industry expert, already exports genetics to Uruguay.

With a mere legal change, our country could be a pioneer in the region and capture a multimillion-dollar market while generating thousands of new jobs -- two urgent needs for our battered economy. To do so, it is necessary to set aside our prejudices and put everything necessary in place for Argentina to get back on the path of economic growth. Not doing so would be, at best, foolish and, at worst, a criminal act.