Constraints to national policy space arising from tensions with international drug and finance norms in the development of Uruguay’s regulated cannabis market

Introduction Following landmark legislation in 2013, Uruguay became the first country to regulate the legal production, distribution and sale of recreational cannabis. While broader debates anticipated the significance of the UN drug conventions, the extent to which Uruguay’s drug treaty obligations shaped regulation is unclear and the relevance of finance norms has been neglected.

Methods Drawing on institutionalist and governance theories, this study explores how international drug and finance norms limited Uruguay’s policy space to implement cannabis regulation, and how this was perceived by policy actors. Policy documents and 43 semi-structured interviews were thematically analysed.

Results The analysis demonstrates how Uruguay’s drug treaty obligations were less directly constraining to policy space compared to informal finance norms, including the US Patriot Act, anti-money laundering standards and financial inclusion practices. Such norms and practices exerted powerful influence over Uruguay’s ability to implement aspects of cannabis supply that interact with broader financial systems, allowing foreign banks to terminate business relationships with clients deemed to be high risks for money laundering.

Conclusion The Uruguayan case suggests that financial regulations at diverse levels are likely to constrain policy space in other contexts where the market-based policies of cannabis regulation raise tensions with a narrowly constructed risk management principle in approaches to financial supply.