It is my understanding from the report, that the policies implemented by Portugal have decreased the amount of usage, and increased the ability of addicts to receive treatment for addiction and associated problems.
I don't think its reasonable to make inferences outside the subject of the decriminalization of drugs. It might not even be reasonable to make inferences to what happens outside of Europe. But it seems to have had a very positive effect. The Cato report is admittedly lacking in explanations, and relies heavily on government statistics for its work (suspiciously heavily, for a libertarian think-tank), but if its data are accurate, it has interesting implications.
I say let California try it out. The States are laboratories of democracy, and few are so willing to experiment as California. It is good to watch them.
And, yes, if you eliminate all laws, you would see the crime rate drop. But that doesn't mean what you think it meant when you wrote that sentence.