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Column 011005 Luken

Monday, January 10, 2005

 

Casino gambling in Mexico — don’t bet on it

 

By Carlos Luken

 

For more than a decade I have analyzed different aspects of the legalization of casino gambling in Mexico. I have sat through congressional hearings and held numerous private conversations with legislators and government officials regarding the subject.

 

The issue periodically arises, only to lose momentum with time — to say the least it has been an on and off affair.

 

At times advocates for legalized gambling take their proposition with zealous resolution as Mexico’s only road for increasing all important tourist trade revenue and jobs. But almost immediately opponents counteract and take the fizzle out of the proposal, chastising it as an evil that should be avoided at all costs.

 

The proponents are generally business-oriented members of congress, government officials and people involved in the hotel and tourist development industries. Their main reasons for support have to do largely with tourism business growth and foreign investment potential, as well as job creation and increasing revenues for the nation’s economy.

 

Some opponents are leftwing activists who see the opening of casinos in Mexico as a floodgate that would lead to an unavoidable cultural breakdown, plus more foreign investment would increase foreign intervention in the economy. Strangely they are grouped with conservative factions from all parties that consider gambling an unacceptable evil, that if authorized will damage the country’s moral fabric and traditional family values.

 

Opponents also caution against a claimed high probability of organized crime and drug cartels becoming involved, a possibility that is not easy to ignore in a country where corruption, while being curtailed by the current government, is still widespread.

 

Yet regardless of where interests lie, the potential economic benefits offered by the legalization of casino gambling in Mexico is a reality that cannot be ignored.

 

In recent years congressional hearings and committee votes have come and gone but no definite action has been taken one way or another, either by congress or by any sitting administration.

 

It would seem that as the gambling issue splits Mexican society, it also divides the bicameral legislature and the government. As with Presidents Zedillo and Salinas before him, Vicente Fox has avoided taking sides on the issue, a move that may seem popular and consistent to many of his fellow conservative National Action Party (PAN) members, but one that is unpopular with a number of the president’s pro-business supporters.

 

The issue is that after more than a decade of arguments for and against casino gambling in Mexico, no real headway has been made to resolve vital questions.  For example, (1) what games will be allowed; (2) the criteria as to city selections — at either current resort areas or development projects; (3) the number of casinos per city; (4) will casinos be privately or publicly owned, will foreign capital be allowed, and if so what percentage; and (5) will the federal government oversee and regulate casinos, or will it buckle under to the states and their powerful National Governors Conference (CONAGO)?

 

As well, there are lingering concerns regarding who will name gaming commission members, and who will oversee and regulate casino operators and operations.

 

These were some of the questions raised during a 1995 casino-related meeting at Bahias de Huatulco, Oaxaca, sponsored by the Tourism Committee of the Chamber of Deputies. Yet while the deputies have since changed many of the questions remain and few people, if any, know the answers.

 

There are also issues of Mexican federalism.  At the Huatulco forum the uninvited governor of Quintana Roo, Mario Villanueva, arrived and unceremoniously sat himself at the main table. Next he raised the issue of states versus federal regulation and control of casinos, this largely because he saw his state’s resort city of Cancun as a sure bet for a casino or two.

 

In 1999, a week before Villanueva was scheduled to leave office — and lose his constitutional immunity, the governor fled to avoid looming prosecution on conspiracy and drug trafficking charges. (Subsequently he was arrested and convicted.)

 

Considering Mexico’s current  economic strength, low rate of inflation, high foreign currency reserves, bulging oil income and the windfall from expatriates sending nearly US$17 billion home annually, there is little incentive for officials to open a public debate on such a divisive issue as casinos.

 

Furthermore, with the approach of the 2006 presidential election it seems unlikely that legislative and executive branch officials will set aside their ongoing feud over superfluous legislation when so many more urgent matters are pending.

 

In short, legalized casino gambling in Mexico would appear to be an odds-on Mexican standoff.

____________________

Carlos Luken (a www.mexidata.info columnist), a Mexico-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, lobbying, translations and cultural interphase services to global corporations and government agencies. He can be reached via e-mail at ilcmex@yahoo.com.