Monday, June 20, 2005

Legality of gaming permits questioned in Mexico

By Enrique Andrade González

Just days after Santiago Creel resigned as Secretary of Government on June 1, in order to seek the National Action Party (PAN) candidacy in the 2006 race for President of Mexico, serious questions arose with respect to gaming permits issued during Creel’s tenure.  In less than five months following the October 2004 publication of the Regulation of the Federal Gaming and Raffles Law, more permits were issued by the Secretariat for offsite wagering centers (foreign books), bingo parlors, and telephone and Internet bet handling than were issued since the 1947 Federal Gaming and Raffles Law went into effect.

These authorizations have both legal and political implications, as in principle they were issued in accordance with the aforementioned Regulation that, subsequent to its publication, was challenged by federal deputies in November of 2004.  As a result it was sent to Mexico’s Supreme Court, where it remains today as the court reviews its constitutionality and legality.  This means that the permits are valid as long as the Regulation is in force, however they could be annulled if the Regulation is invalidated.

The primary argument of those in opposition to the Regulation is that it is predisposed to the possibility of granting permits for gaming activities that are not included in the current Law.  That is because in Mexico a regulation of a law cannot regulate or allow something that is not also part of the higher law.

And this is precisely the case with the gaming permits issued last April 21.

The gaming Regulation states that a Consulting Council, with civil society members, must review permits to insure that they are not discretionary, or oriented according to political or economic interests of the official in charge.  This stipulation was not respected, because on the council that gave the favorable opinion only Secretariat of Government officials had the right to vote, which makes the permits irregular according to the Regulation itself.

Of the 176 foreign books and 206 bingo parlors authorized in April, 65 permits for each were issued to the company Apuestas Internacionales, S.A., that belongs to the Televisa media giant.  In other words, 30 percent of the legal gaming market in Mexico will be in the hands of a single business group, that also controls the nation’s principal television channels and radio stations.

Observing a request by federal deputies, a special commission has been formed and authorized to investigate and verify regulatory compliance in the issuance of the gaming permits.  The officials who participated in authorizing the permits will not only have to clarify their compliance with requisites, they will also have to explain the criteria for granting the permits to the Televisa owned businesses; why on a single day so many permits were issued; and if they have the corresponding studies to confirm that the business and investment plans of the companies address corruption, which is often part of such businesses, as well as antisocial behavior they might cause such as addition to gambling, drug sales, money laundering, etc.

The authorizations granted could be part of a dishonest act, as they were not done properly.  As well, they could harm the normal development of Mexico’s future gaming industry that, if and when allowed, should stimulate the nation’s economy, development and growth.

The problem however, is that whoever challenges the legitimacy of the permits will be up against Televisa, Mexico’s broadcast media giant, and all of its clout.

Carlos Abascal, the new Secretary of Government, as of this writing has not taken a position on the matter.  However he too will be responsible if he does not call for an immediate investigation and have his newly appointed assistants, Undersecretary Felipe González (a former governor of Aguascalientes) and Manuel Fierro Evans, who heads the Government Unit, clarify the legal and economic justification for issuing these permits.

And political motives could be uncovered.  Columnist Ricardo Alemán, who writes for the El Universal newspaper, contends that Creel negotiated preferential treatment with Televisa, the “Telecracy,” in the competition to win the presidency of Mexico — a down payment on favors expected during the 2006 campaign.

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