Mexican Gamble

South-of-the-Border Casinos in the Cards

Written by Barnard Thompson

After nearly a decade of hurdles and debate, and despite sometimes recalcitrant and obstructionist political opposition in Congress, a new "Federal Law of Gambling with Wagers and Raffles" reform package seems on the verge of approval in Mexico.

The Mexican Congress reconvened on September 1. And after several weeks during which the governing process requires members of Congress to address certain administrative and budgetary priorities, the Congress can resume normal business and address a backlog of issues that include pending bills and reform legislation.

One initiative that should be dealt with in a conclusive manner is reform of Mexico's obsolete Federal Gambling and Raffles Law of 1947. The current draft proposal includes the reopening of casinos after a 66-year ban.

Presuming imminent passage of the casino-included legislation, a number of issues-as well as how things work in Mexico-must be considered.

The uninitiated should take caution with respect to what people might be told or what advice will be given to potential investors and entrepreneurial partners. This, because nearly everyone in Mexico will claim to be an "expert." And overzealous advocates and fee-seeking consultants will habitually assert their insider information and access to the highest levels of government.

Where will they be located?
These points serve as a segue to what has become the most frequently asked question regarding future casinos in Mexico: If and when the legislation passes, where will they be located?

The preamble of the draft legislation includes the following casino related statement: "The installation of the same will not be generalized in national territory, and the (National Betting Games and Raffles) Commission may only award permits for those locations where the Secretariat of Tourism determines that the existence of those establishments would contribute to improving the development of the same and towards attracting more tourists, mainly of foreign origin."

And tourism ministry officials are mum. Still, certain other government entities allow some studied speculation.

Before continuing, however, it should be noted that plans call for freestanding Monte Carlo or Montreal-type casinos at a controlled number of locations in Mexico. The casinos are not to be part of hotels, although one of the determining factors on whether or not an area may qualify for a casino is the number of available hotel rooms. Initial casino totals heard most often range from seven to 12 sites nationally.

Since last May, representatives of the Chamber of Deputies' Tourism Committee have been holding public forums at select locations. Scheduled to conclude by August 15, the sites included Cancún, Los Cabos (Cabo San Lucas,) Acapulco, Veracruz, a location in Nayarit and two cities in Tamaulipas.

Border cities left out?
Yet as compelling as it might be, a rush to name those as first-phase locations should be slowed. Especially since some border cities near population centers in the U.S. were curiously absent from the hearing site list. As for the subcommittee, members will report back their findings to the Tourism Committee before the gaming reform bill moves on to its second reading.

In a back channel effort to identify possible sites, sources in the Secretariat of Environment and Natural Resources were asked about casinos. The sources (who must go unnamed) revealed that government officials have shown interest in several areas: Cancún; Playa del Carmen; Veracruz; Acapulco; and Los Cabos. Puerto Vallarta was not on the first phase list, according to the sources.

Once the Federal Law of Gambling with Wagers and Raffles is promulgated, a Regulation of the Law will have to be published. It is this regulation that will further define regulatory and operational particulars that may lack specificity in the law. When the time comes those details will include such matters as site information and future phase plans.

Actually a new gaming regulation, apparently sans casinos, has already been drafted by the Secretariat of Government and sent to Mexico's legal oversight commission for review. That commission, however, rejected the draft code as unconstitutional and sent it back for rectification.

Barnard Thompson has spent more than 40 years in Mexico and Latin America, providing business, professional, lobbying and problem resolution services for multinational clients. He is a principal in MIRA Associates, based in San Diego, California, and can be reached at mexidata@ix.netcom.com.