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Column 021907 Thompson

Monday, February 19, 2007

 

A Renewal of the Effort to Open Casinos in Mexico     

 

By Barnard R. Thompson

 

The Mexican Supreme Court, in a long awaited — and in recent times expected (foreknown?) — decision, ruled on January 22, 2007 that the Regulation of the Federal Gaming and Raffles Law is constitutional.  This following a challenge by Mexico’s Chamber of Deputies of the 2004 Vicente Fox administration published Regulation, which questioned the president for supposed jurisdictional violations, and there were claims that portions of the Regulation contravened the governing 1947 Law.

 

So, with the legality of the Regulation being upheld by the Supreme Court controversial permits that were issued in 2005, for remote betting centers (offsite books) and numbers parlors, are revalidated.  Which means permit holders with gaming establishments already in operation will stay open, and others who may have hesitated due to legal doubts can now forge ahead.

 

Yet gambling casinos la Las Vegas or Monte Carlo are still precluded based on a 1934 prohibition.  A ban that could soon be lifted, considering the fact that the Supreme Court also sent a message to Congress that the 1947 Law must be modernized — plus some public and private sector interests are already kicking things off.

 

About two weeks after the Supreme Court ruling, Senate members of the Party of the Democratic Revolution (PRD) expressed their support for the installation of full-fledged casinos in Mexico.  Speaking from the Senate, they said that the time has come for clandestine gaming activities to end, and for taxes that should exceed US$800 million annually to be paid.

 

On February 13 the Mexican Senate sent an “excitativa” to the Chamber of Deputies, a formal request urging the other chamber to move legislation that would reform the 1947 Law, and allow casinos, forward.  According to the Senate’s exhortation, three initiatives or bills have been wasting away in committees in the lower house: the Federal Gaming with Wagers, Raffles and Casinos Law (presented by the Institutional Revolutionary Party, PRI, in 1999); the Federal Gaming with Wagers and Raffles Law (National Action Party, PAN, 2003); and the Federal Gaming with Wagers and Raffles Law (PRI, 2004).

 

The most recent reform proposal of 2004 also includes a chapter that authorizes casinos, long a divisive sociopolitical issue in many Mexican circles.

 

The five page excitativa (this columnist has a copy) calls for the Chamber of Deputies’ (1) Government; (2) Tourism; and (3) Treasury and Public Credit committees, that have joint responsibility over this matter, to report on the status of the reform legislation in an expeditious manner.

 

In subsequent paragraphs it talks about the past history of gaming in Mexico, the debate over the pros and cons of gambling and casinos, the changed world we live in today, and why lawful gaming should be expanded to allow well regulated and properly supervised casinos.  And it outlines six specific areas that would benefit Mexico under the following leads: tourism promotion and growth; new investment and needed foreign exchange; tax revenue; job creation; crime reduction (insofar as unemployment is a cause of crime); and an end to illegal and clandestine operations, and thus tax evasion.

 

It also calls the timing opportune, based on the Supreme Court ruling in January that validated books, and certain other gaming and sports activities with authorized wagering.

 

Another issue resolved as legal by the Supreme Court, in January, dealt with certain raffles, including “instantaneous lotteries” or scratch off tickets sold by vendors, over the counter, with vending machines, or via the media.  A ruling that led to an additional Court ruling that should stimulate public sector support for authorized lotteries and drawings.

 

In a separate case, on February 15 the Supreme Court revoked an “amparo” (writ of protective injunction, similar to habeas corpus) granted earlier by a lower court to a media group.  The corporation had called into question the constitutionality of the Financial Code of the Federal District that applies taxes for lotteries, raffles, drawings and contests, however its challenge was rejected by a vote of ten justices to one on the higher court.

 

With this the Court ended a decade of uncertainty, through a decision that clearly allows the Federal District and Mexico’s 31 states, as well as the federal government, to apply taxes on lotteries, raffles, drawings and contests.

 

And finally, Mexico’s broadcast giant Televisa (that received 130 permits in 2005) launched its new lottery business on February 12 thanks to the January ruling.  Using its huge television platform, Televisa will promote its attractive lottery prizes with tickets that can be purchased from terminals to be placed in shops and stores throughout Mexico.

 

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Barnard Thompson, editor of www.mexidata.info, has spent nearly 50 years in Mexico and Latin America, providing multinational clients with actionable intelligence; country and political risk reporting and analysis; and business, lobbying, and problem resolution services.  He can be reached via e-mail at mexidata@ix.netcom.com.