President Jose Mujica's leftist government will send a bill to Congress shortly on this as part of a package of measures to fight crime in the South American country.

The government will also urge that marijuana sales be legalized worldwide, Defense Minister Eleuterio Fernandez Huidobro said, adding the measure could discourage the use of so-called hard drugs.

Marijuana consumption is already legal in Uruguay.

"We want to fight against two different things: one is drug consumption and the other is drug trafficking. We think the ban on certain drugs is creating more problems in society than the drug itself," the minister told a news conference.

"Homicides related to settling scores have increased and that's a clear sign that certain phenomena are appearing in Uruguay that didn't exist before," he said.

The bill would legalize and set rules for the production and sale of marijuana but would not allow people to grow the plant for their own personal use. The government did not give details on how the new system would work.

In Uruguay about $75 million changes hands each year in the illegal marijuana trade, according to official estimates.

As of last year, 20 percent of people between 15 and 65 years old reported they had smoked marijuana at least once and about 5 percent of respondents were habitual users.

The proposal to legalize the marijuana market is one of 15 crime-fighting measures that include tougher penalties for police corruption, crack-cocaine trafficking and juvenile offenders.

(Writing by Hilary Burke; editing by Christopher Wilson)

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