Monday, September 15, 2008

Casinos in Mexico – A Safe Bet or Endless Machinations?

By Barnard R. Thompson

The seemingly perpetual debate, over the possible authorization of full-fledged casinos that are prohibited today in Mexico, goes on – and it is hard to believe that bombastic politicians might one day break from the vicious circle of the last 15 years.  Yet, once again, there are expectations that something might finally be done by the Mexican Congress based on occurrences during the run-up to its September 1 to December 15, 2008, regular legislative session.

As well, the chairman of a congressional committee with oversight responsibilities told yours truly, during a recent private lunch, that his understanding is that the gaming and casino reforms will probably be sent to the floor during the aforementioned session.

Reform legislation for Mexico's outdated Federal Gaming and Raffles Law of 1947 is still mired in three committees of the Chamber of Deputies, the lower house in the bicameral legislature.  Of the three, the Tourism Commission, or Committee, has normally been the lead (yet hitherto uncreative) entity on this matter.

On August 12, 2008, during the congressional recess period, the Tourism Committee established a new Gaming and Raffles Subcommittee, chaired by Armando García Méndez, a proportional representation deputy with the Alternative (Alternativa) Party.  The subcommittee formed evidently to move gaming matters off the dime, and to police so-called "irregular" casinos that are operating outside the law or with questionable permits.

Speaking about lost tax revenue, with the claim that 66 percent of gaming activities in Mexico are taking place outside the law, columnist Leopoldo Mendívil recently wrote: "The current gaming and raffles business is an everyday matter in Mexico.  Related allusive propaganda can be found in every media, be it the written press…, television, radio or the Internet, and the gaming and raffles business has in fact become a normal entertainment activity in the life of all Mexicans."

Mendívil also complained that the Secretariat of Government (Interior), which has jurisdiction over gaming activities in Mexico, has allowed (tacitly at least) the growth of gaming establishments yet failed in the promotion of regulatory reform which, in turn, would produce greater fiscal benefits for the nation.  And he said, "… legislatively the Tourism Committee of the Chamber of Deputies [has] outstripped the [Secretariat of] Government, having established a new Gaming and Raffles subcommittee after recognizing that the important executive branch ministry is being obstinate by keeping [the matter] under the carpet."

As well, concern (maybe based on political and/or selfish interests) is being expressed over "remote betting centers” – books for betting on offsite activities; and numbers parlors – for games on “electronic terminals” as the bingo-based machines are euphemistically called, that hold valid permits.  Both of these venues are permitted by law, in establishments that this observer has dubbed "casinos lite."

Regarding the opening of the aforementioned authorized books and numbers parlors, said actions were, and are, based on federal permits issued by the Secretariat of Government – some new, some old.  And ever since new permits were issued and others expanded in 2005, the number of gaming houses in Mexico has been growing.

Televisa, Mexico’s broadcasting and communications giant and the largest media company in the Spanish-speaking world, through its subsidiary Apuestas Internacionales, S. A. de C. V., holds 65 book permits and 65 numbers parlor permits, for operations in 29 of Mexico’s 32 federal entities (excepting the states of Baja California Sur, Campeche and Colima).  And Apuestas Internacionales, with an aggressive business plan, has been opening more and more of its "Play City" establishments.

The so-called Caliente group, an international gaming conglomerate run by Tijuana-based Jorge Hank Rhon (who holds permits under a variety of corporate names), has also opened several new books and gaming centers, while expanding others.  As well, a number of other facilities have been opened or enlarged by additional permit holders.

All of which could be harbingers of full-fledged casinos.  Or maybe beneficiaries of a quasi-casino presence if garrulous members of Congress play politics and, once again, drag their feet in a years-long do nothing cycle.

The Mexico City daily La Jornada, on August 13, carried the following piece by reporter Moisés Sánchez Limón.

"Before the year is out the Chamber of Deputies will have voted on a new Gaming and Raffles Law, which will authorize casinos, although they will be limited by a regulation and restricted to determined areas of the country, especially tourist destinations, in order to create jobs and generate economic benefits for states and municipalities, according to members of the Tourism Committee.

"… the Gaming and Raffles Subcommittee will investigate the 763 permits that the Secretariat of Government issued during the tenures of Santiago Creel, Francisco Ramírez Acuña, and the current secretary, Juan Camilo Mouriño; it will also review the concentration of those authorizations in the hands of a few."

One of those interviewed by Sánchez was Congressman Gilberto Ojeda Camacho (Institutional Revolutionary Party [PRI], Sinaloa), a member of the Tourism Committee.  Asked "Is the PRI in favor of casinos?" Ojeda responded: "What the PRI wants is for all of these types of activities to be duly regulated.  Certain areas of the country in need of tourist momentum would have to be tailored, and others not.  A phenomenon is taking place: casinos are [being] setup … in places where it is not truly viable.  What we want is for the autonomy of the states and municipalities to be respected, because [casino operators] are asking only for land use authorization, and they arrive [with] permits and they are setup, but they don't pay taxes and they create jobs for people that they hire in other places.

"Thus, the work of the subcommittee will be oriented towards codifying information related to the way in which permits are issued for the operation of gaming houses, after holding meetings regarding the legislation in effect that will include appearances by officials from the Secretariats of the Treasury, Government, and Tourism, among others, who are involved in the matter.  Subsequently a proposal for the new Federal Gaming and Raffles Law will be drafted," he concluded.

Subcommittee chairman García was also quoted in the article.  He was asked when this new law might be promulgated, and he answered that the hope is to have it ready by the end of this year.

Next García was asked if the legislation would allow casinos?  "It is not to allow or prohibit them, it is to regulate the activity," he said.  "There it is, it has to be regulated; if not regulated it could become a social problem…."

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Coming next week: The new Gaming and Raffles Subcommittee held its first meeting on September 11, in Mexico City.  Next week's column will review some of the plans, expectations and target dates that were discussed at said meeting.

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Barnard Thompson, editor of MexiData.info, has spent 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.