The development of Peru’s legitimate gaming industry has been far from plain sailing. The regulatory laws brought in with so much enthusiasm and so many good intentions back in 1992 were, as we wrote in January 2005, ‘chopped and changed by bureaucrats and politicians of all colours to serve their own ends. There has never been a business or development plan other than that issued in 1992 to promote investment and employment in a country destroyed by terrorism and the disastrous economic policies of the 1980s. Since then the lack of knowledge of the officials and the influence of powerful groups have converted the gaming laws and regulations in Peru into playthings to be manipulated, where the technical aspects protecting both society and investors have been put aside.’

On 9 July 1999 Law No. 27153 was enacted that corrected earlier mistakes and clarified the initial regulations. A good step forward but many Peruvian businessmen retreated behind manipulated Habeas Corpus rulings from the courts, a legal ploy under the Peruvian Constitution, and not only continued to run unregulated businesses but used the protection to enter new partnerships and open further gaming rooms. The Peruvian Gaming Authority had no power to collect the taxes due or oversee the operations.

Some major foreign companies had their fingers burned when entering the Peruvian gaming market. One well publicised case was a long-running legal battle between Aristocrat Technologies and Corporacion Meier when the Peruvian company sued over a deal for 3,000 slot machines. Maintaining that the company had acted according to its contractual obligations Aristocrat found itself fighting its way through a legal system guaranteed to cause frustration. That frustration boiled over in June 2005 when Aristocrat held a seminar in the provincial capital Trujillo in order to expose judicial ‘corruption.’

In February 2006 the Constitutional Tribunal in Peru declared the Habeas Corpus rulings were invalid against taxation and stated that there would be no recourse to obtain contrary judgements in the courts. However, by the change of the Peruvian administration at the end of July 2006 gaming regulation and taxation were not much further forward and the legal wrangling continued. At that time the tax authority SUNAT stated that only 42% of gaming operations complied with the country’s tax law and that ten companies, operating 147 venues in total, were paying no tax.

Casino Compendium commented, ‘Political expediency, lawyers with wealthy clients and, in some cases, a lack of industry knowledge have so far kept a workable and enforceable gaming law from becoming a reality. Until the country finds the political will to force through compliance with an uncompromising gaming law, and one that cannot be changed by opportunism, Peru will continue to lose millions of tax dollars that could be used to benefit local communities and reduce the gap between the very rich and the very poor.’

Early in 2007 the municipalities agreed to work with the regulatory authority (MINCETUR) to bring the illegal operations under the law. Operators were given until 24 March to submit applications to formalise their situation and obtain a licence. The next month the battle to regulate gaming in Peru received a setback when a Supreme Court ruling supported the lower court decisions of its judiciary despite the common knowledge that these favourable rulings are more often than not bought and paid for, and despite the constitutional court of Peru decreeing that all gambling operations must be subject to licensing by the gaming board.

By the end of 2007 the campaign by MINCETUR to formalise illegal slots operations in Peru heated up when the gaming commission and local police started to confiscate and close down unlicensed gaming businesses. MINCETUR gaming director Manuel San Roman said, “At the start of this campaign there were only 27 duly licensed slots operations, now there are 70. These businesses are paying their taxes, and the US$1 million that we were collecting has risen to US$4 million a month.”

A draft bill proposed in April this year seeks to prevent the transfer of gaming businesses to companies not authorised to acquire them. The most important point of the draft bill is that gaming operations being transferred must have paid all the taxes and fines owed up to the month before the presentation of the transfer documents, or to have passed the debt to the new owner and registered this with SUNAT. As things stand under the present law, many companies with unpaid tax problems transfer their gaming licences and dissolve their company, leaving both themselves and the new operator with no tax liability.

Favourable political and economic stability in a country with steady 7% annual growth over the last few years is bringing increased foreign investment in the gaming market but the battle continues on other fronts. MINCETUR reports that 1,665 machines made for minors in Peru were seized from July 2007 to June 2008 while 2,433 were confiscated from July 2006 to June 2007. This year so far 781 slot machines made to attract children have been confiscated from districts round Lima and Callao and from provincial cities.

It is a slow process to bring the Peruvian gaming industry into full compliance but the signs that a well-regulated and fair operating system will finally result are promising. (E-08.14.08)

© Copyright 2008 CasinoCompendium



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