Doing business in foreign countries is seldom plain sailing and sometimes creates long-running legal battles. In November 2001 Aristocrat Technologies Inc. was happy to announce a multi-million dollar contract with Corporación Meier S.A.C. for 3,000 slot machines to be placed around Peru. Aristocrat is the world’s second-largest gaming machine manufacturer and it is now being sued through the Peruvian courts over the collapsed deal.

Aristocrat maintains that it has acted according to its contractual obligations with Meier and is fighting its way through a legal system guaranteed to cause frustration. In June the company held a seminar in the provincial capital Trujillo in order to expose judicial ‘corruption,’ a move that could be ascribed to that sense of frustration - but maybe not exactly helpful to winning friends in the Peruvian courts. The initial optimistic press release published after the Meier contract was signed stated: “It is a significant milestone for the company and reflects the efforts to increase our market share in South America.” The later events, which included allegations that the machines were not in working condition, caused a huge setback that had an adverse effect on Aristocrat share value.

Shares in Aristocrat have since recovered, but the legal fight will not go away so easily. In this year’s first-half results presentation Paul Oneile, Managing Director and Chief Executive of Aristocrat, made several significant comments. “I would like to re-iterate that we adopt a low risk model in emerging markets. We will not be taking on unacceptable risks in pursuit of revenue or market share.” He added, “During the first half we developed a strategy to position ourselves in a number of key countries in South America. We expect the benefits of this strategy to start flowing later this year. The region is an important growth market which, as a global leader, we cannot ignore. I believe that our strategy is one which enables us to optimise our potential in the region, whilst recognising its higher inherent risk.”

The reportedly US$28 million deal for refurbished machines and software in Peru may have gone sour but Aristocrat cannot afford to ignore the South American growth market, particularly in the emerging Chilean sector. The Peruvian gaming industry is, on the whole, one of the best-regulated markets in Latin America. Negotiating the intricacies of commerce however, from importation onwards, in Peru can be hazardous to the unwary. Negotiating the legal system is time consuming at best and, at worst, a nightmare. (E-10.11.05)

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