As gaming grows in Latin America, two of the major countries are being left out of an investment, fiscal and jobs creation bonanza: Brazil and Mexico. If the former has indeed shot itself in the foot through an irascible presidential decree, which closed down all bingo activity in the country on the aftermath of a close aid’s bribery accusations, the latter has just opened the floodgates of irregular gaming operations on account of a politician’s presidential ambitions.

Whether both politicians were right or wrong is immaterial at this stage because an important sector of the entertainment industry is being badly handled in two countries where politicians should know better. Latin America is no longer the domain of political godfathers or cheap caudillos seeking to line their pockets. Corruption is not a free and easy ride anymore.

About ten days ago Representative Vicentinho Alves managed to get approval from the Commission for Economic Development, Industry and Commerce for a white paper to authorize the operation of bingos and casinos in Brazil, limiting casino operations to the economically backward north and central western regions of the country.

Although the full legislation text has still to be approved by the commissions of Finance & Taxation, Constitution & Justice, and Interior before it is sent to the Plenary of the Brazilian Congress, and then to President Lula for his consent, it is a step in the right direction. It may take a few years, but gaming legislation is right back on the political agenda.

Mexico’s new regulations do not work
In Mexico, up to now, there have been aspiring and forward thinking politicians lobbying for a new version of the irrelevant Federal Law of Gaming and Lotteries of 1947. Irrespective of his political private agenda, Santiago Creel’s gaming regulations to the Law in 2004 did manage to open up the gaming industry in the country.

The outcome of the gaming regulations was the issue of gaming permits to the principal operators in Mexico plus a new player in the form of Apuestas Internacionales, a company wholly owned by giant telecommunications multinational Televisa, supposedly the backer to Creel’s frustrated presidential ambitions. Right now, however, claims and counter claims on the matter are not the point any more.

As gaming developed in Mexico, the Association of Gaming and Lotteries Permit Holders (APJS, for its Spanish acronym) was formed under the direction of Alfonso Perez Lizaur to group together the most important operators in the country plus major manufacturers such as International Game Technology (IGT) and Bally Technologies. All licensed gaming operations must pay 20% gaming tax, and revenues for the country are in the region of US$500 million.

APJS’s intentions are amongst other things to strengthen legal gaming in the country, but the problem for Mexico is that some of the permit holders with practically no gaming operations expertise are entering into management agreements with operators, which to some is the downright sale of an operating licence. This practice is common knowledge in Mexico, and both APJS and the regulators at the Government Secretariat find themselves unable to deal with the problem.

Not to be outdone by the exclusiveness of the permit holding operators, others have taken refuge in Latin American businessmen’s favourite legal-circumventing pastime and applied to the Courts for a Habeas Corpus ruling on the grounds of government infringement of constitutional rights. As is also the practice, the judiciary has found in favour of some operators and gaming houses keep on sprouting up around the country. In most of the Habeas Corpus cases those favoured by the ruling are also exempt from paying gaming taxes.

Permit holders support new gaming legislation
In the mayhem that has become the gaming industry in Mexico, APJS maybe congratulated for its intentions to strengthen licensed gaming in the country, but it is a job compared to King Canute’s stemming of the waves or the proverbial flood of casinos that are opening in the country.

As some of the licensed operations also consider seeking a ruling against paying gaming tax, APJS has been reported to be the latest organization lobbying for new regulations to free its members from the restrictions of operating Class II gaming devices against Las Vegas Class III machines on offer at other gaming houses operating under judicial rulings. Exclusiveness is no longer a recipe for optimum returns in a gaming environment where the tables literally have been turned.

As the current parliamentary session wends its way, the Gaming and Lotteries sub committee set up by the Tourism Committee has asked for an investigation of the 763 permits authorized by the Secretary of Government to date, starting with Creel, now a senator in the Mexican Congress. Some say that this is part of the usual Mexican politicians’ feet dragging dance routine.

Gaming and Lotteries sub committee chairman Armando Garcia Mendez, a proportional representation deputy with the Alternativa Party, has declared that the sub committee’s intentions are to identify the information related to the way in which permits are issued for the operation of gaming houses after first meeting officials from the Secretariats of the Treasury, Government, and Tourism, who are involved in the matter.

Asked for the time scale of future gaming legislation, Garcia Mendez said that after the meetings with the government officials: “A proposal for the new Federal Gaming and Lotteries Law will be drawn,” adding that he hoped that the legislation project could be ready by the end of this year. The current parliamentary session ends on December 15.

Has Lula the political will to help the poorest?
A prominent Brazilian gaming industry expert said that it was at an early stage for the new gaming legislation proposals and that for it to work there had to be a political will. Maybe President Lula’s socialist background holds the so-called moral high ground on the social exposure to unrestricted gambling, which unregulated gambling certainly is, but with the bankruptcy of morals on all political paths, the economic regeneration of the poorest regions in his country may just weigh heavily enough on his political conscience to endorse Representative Alves’ project.

The Brazilian Association of Bingo Operators (ABRABIN) said that after gaming legislation there will open about 1,500 bingo operations in Brazil, as there were more than 1,200 operating in 2003 before the bingos were closed by President Lula, adding that the new legislation would produce around US$2.9 billion in gaming tax. Alves' optimism was higher, putting gaming tax receipts at some US$5 billion. The job numbers are a matter of adding zeros to sums above.

While ABRABIN comments from a position of experience in Brazil, in Mexico experts have put down similar revenue numbers fr the advent of fully legislated gaming. Suffice to say that gaming tax revenues in USA are in excess of US$5 billion and that the Mexican economy follows closely on its bigger neighbour north of the Rio Grande.

Still, the question remains whether the political will for change is able to trump personal political agendas in two major countries of Latin America, to bring about new gaming legislation. Legislators only have to look at Chile for inspiration, where new casino laws have brought much needed investment, created jobs and enabled local governments to benefit from the windfall of gaming tax revenues. (E-09.16.08)

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