Monday, January 15, 2007

 

Mexican Priorities: Gaming, Tourism and Energy

 

By Enrique Andrade González

 

Since early in January 2007 three issues have been highlighted as priorities, so that Mexico will be able to attract foreign investment and to create promised jobs that are currently nonexistent.

 

First is a ruling on gaming permits that were granted by officials during prior administrations, the legality of which will depend on a forthcoming judgment by Mexico’s Supreme Court.  This ruling will relate to the validity of the 2004 Regulation of the Federal Gaming and Raffles Law, and whether or not permits issued under that authority in 2005 by former Secretary of Government, and now Senator Santiago Creel, are valid.  Permits that well may have cost Creel the National Action Party (PAN) presidential candidacy.

 

According to most expectations, this proceeding — that is being handled by Justice Olga Sánchez Cordero, and that the Court as a whole must rule on — will favor and uphold the issuance of the permits.  And by doing so, the Secretariat of Government will be able to grant future permits for Bingo-type numbers game parlors, remote betting centers called “Books,” and electronic gaming machines.

 

Still, casinos per se, with gaming tables and the like, cannot be authorized until the 1947 law itself is amended.  Yet if the aforementioned permits are allowed, surely reforms to the law will become more likely in the near term so that the next steps can be taken, as casinos and the gaming industry should be important development opportunities and attractions for many Mexican cities.

 

The Mexican Congress can also be expected to take up this matter in the near future.  And based on the agreement strategy on economic matters that has been reached by the National Action Party (PAN) and Institutional Revolutionary Party (PRI), advances could come about quickly on this issue that should not be allowed to lag behind.

 

The second matter, that has been the subject of considerable debate for years, deals with crude oil and its derivatives.  It has been made clear that the privatization of Petróleos Mexicanos, PEMEX, will not be proposed due to difficulties in reaching agreements to change the Mexican Constitution in order to allow foreign investment in the state owned petroleum conglomerate.

 

In other words, the exploration and exploitation of oil and gas will continue to be activities reserved for the state.  Nonetheless, predictions are that advances will be made towards allowing private sector national and foreign investment in the refining or transformation of hydrocarbons, as well as in their storage and distribution.

 

What will be important is to plan modifications based on the Mexican Constitution, and not to try to find novel interpretations of the Constitution that provoke opinion and debate but will not resolve the problem nor provide greater security for this investment.

 

The subject of economic sovereignty in deciding amounts of exploitation of oil and gas fields, along with exploration, can continue to be safeguarded by the Constitution, but too new resources in the areas of oil and gas refining, storage and distribution should be promoted and empowered.

 

By continuing an indiscriminate exploitation of crude oil in order to maintain exportation levels, and by not making investments needed in other development areas, in just a few years Mexico will be out of the oil export business.  And soon thereafter it will become an importer, with the sovereignty over energy resources that is being defended today lost.  Therefore this is an urgent matter.

 

The final subject that is to be a priority is tourism.

 

Mexico has yet to take full advantage of its tourism opportunities and possibilities, and to thus become one of the leading tourist destinations in the world.  Certainly it is an attractive destination, but it still comes up short in its potential for greater visitor industry income.

 

During this sexennial tourism must become a true and stronger source of foreign exchange, on a par at least with crude oil exports and revenue from remittances sent home by Mexicans living abroad.  And to do so, even more legal reforms will have to be made to allow outside capital in the tourist industry, part of which would be invested and brought to Mexico once casinos are authorized and opened.

 

These three issues and areas are indeed important — and addressing them as immediate priorities is not only needed but also overdue.

 

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Enrique Andrade, a Mexico City-based attorney and business consultant, writes a weekly column for MexiData.info.  He can be reached via e-mail at enriqueag@andradep.com.