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Column 092004 Luken

Monday, September 20, 2004

 

Mexican casinos appear on the horizon

 

By Carlos Luken

 

What has long been seen as the Holy Grail of Mexican tourism could become a reality as the 59th Congress prepares to assess the initiative for a new Federal Gambling and Raffles Law, and probably authorize the opening of casinos in Mexico.

 

The new gaming bill is slated to replace the currently obsolete law of 1947, that appears to have been originally approved in ambiguous terms so as to allow corruption-inspiring loopholes for government official’s to make sympathetic rulings.

 

Although partisan squabbling in Congress has frozen most of President Vicente Fox’s crucial fiscal and energy reform initiatives, some political analysts believe that the gambling initiative may have the needed crossover votes to pass, especially since heavy lobbying from gaming and tourism interests has been persistent for the last 15 years.

 

During those years Mexican tourism officials, hotel executives and gaming industry representatives have organized numerous conferences and meetings to painstakingly appraise the social, political and economic impact that gaming would have on Mexico.

 

In the past various misgivings overwhelmed several bills that sought to advance casino gambling in Mexico. Ever since one of the first summits in the early 1990s, organized by Congress and the Tourism Ministry in the resort town of Huatulco, Oaxaca, there have been concerns and reservations with respect to corruption, money laundering, organized crime and, most importantly, community distress.

 

Those fundamental worries were joined by several undefined operational procedures and vital structural uncertainties. During the Huatulco summit, it was primarily resolved that any gambling authorizations were to be sanctioned in support of the existing tourism industry, with questions as to where, when or how left unanswered pending further consultations.

 

The central issue as to whom would oversee and control the new industry was contested between the Interior, Treasury and Tourism ministries, with a surprise appearance by then Quintana Roo governor Mario Villanueva (currently imprisoned for drug trafficking and corruption), who pled for local control. Officials from the Interior ministry questioned all resolutions and the meeting ended in an impasse.

 

Now as then, state and municipal governments believe they should have an important involvement in the issue. Many cities feel that they are likely candidates for gaming establishments, and most hotel owners feel qualified to receive casino authorizations. And executives involved in the existing gambling industry feel they are entitled to membership on executive oversight committees that would predictably be formed.

 

While the new initiative does not address all outstanding issues, it does resolve many vital questions and allows for a comprehensive understanding of what and how Mexico plans to execute its gaming program.

 

To begin with, the initiative recommends gaming control by the Secretary of the Interior through an independent Federal Gaming Commission. This governing board would include 11 members, six government officials and five community representatives to be selected by the president. The committee’s powers would include policymaking, program execution and oversight.

 

It defines the objective to have gaming authorized for areas where it can be an added feature to Mexico’s existing tourist facilities. As such, resorts like Cancun, Cabo San Lucas and Acapulco would appear to be near certain sites although the locations are so far uncertain.

 

It sets criteria for casino size and location according to potential markets, investment resources, job creation and local authority opinions. Foreign investment is allowed up to 50 percent and gaming concessions will be authorized for 30-year terms.

 

Authorizing casinos in Mexico is not without its detractors. Many businessmen and several legislators from all parties consider that casino openings will offer a quick fix false door and send the wrong message to a population that is already suffering through one of the country’s most severe economic crises. But supporters of the initiative counter by recognizing that wide scale illegal and unregulated gambling is already rampant, and it is an untapped drain on the Mexican economy and its people.

 

While gambling may not be the most constructive product a country can have for promoting investment and generating revenue, it does prop-up one of the Mexico’s more sustainable industries. Many issues should be considered but both congress and tourism are confident that gaming can aid as a balancing factor to the economic drain that is being felt as industrial jobs are lost to China.

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For additional information:

Casinos in Mexico — that is the question?” by Barnard R. Thompson, MexiData.info, April 19, 2004;

Mexican Gamble: South-of-the-Border Casinos in the Cards” (click on Features), by Barnard R. Thompson, Global Gaming Business Magazine, Vol. 3, Issue 9, September 1, 2004

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Carlos Luken (a www.mexidata.info columnist), a Mexicali, Baja California, based businessman, is the principal in I.L.C. Corporate Real Estate, a project development firm, and I.L.C. Corporate Services, a consulting practice that provides business management, consultancy and lobbying services to global corporations and government agencies. He can be reached via e-mail at ilcmex@yahoo.com.