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Casinos in Mexico

A safe bet or endless machinations?

Casinos in Mexico

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 past 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-December 15 regular legislative session.
As well, the chairman of a congressional committee with oversight responsibilities told Global Gaming Business his understanding is that the gaming and casino reforms will probably be sent to the floor this 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Reform legislation for Mexico’s outdated Federal Gaming and Raffles Law of 1947 is still mired in three committees of the Chamber of Deputies, the lower house in the bicameral legislature.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, 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 was 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.
Concerning 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 (outlet), 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 has 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 could be called “casinos lite.”
Actions involving books and numbers parlors 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.
The Major Players
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 (except for 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 these 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 excerpt 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 Miranda, 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 if the PRI is in favor of casinos, Ojeda Camacho 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 set up in places where they are 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 set up, 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, that are involved in the matter. Subsequently a proposal for the new Federal Gaming and Raffles Law will be drafted.”
Subcommittee chairman García Méndez 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.
Asked if the legislation would allow casinos, García Méndez responded, “It is not to allow or prohibit them; it is to regulate the activity. There it is, it has to be regulated; if not regulated it could become a social problem.”
Legal Language
Mexico’s Chamber of Deputies has established an ad hoc subcommittee to deal with what boils down to two areas: first, legal, regulatory and fiscal matters related to gaming activities nationwide; and second, legislation that could lead to full-blown casinos in Mexico.
The new Gaming and Raffles Subcommittee has been formed to advance inquiries and legislation regarding gaming matters; to police so-called “irregular” casino-like activities that are operating outside the law or with questionable permits; and to gain a future tax stream that is now but a trickle. And to address the casinos issue.
Ever since the 2004 passage of the Regulation of the Federal Gaming and Raffles Law and the issuance of new and/or updated permits in 2005-that vox populi at least tied to the presidential ambitions of then-Secretary of Government (Interior) and now-Senator Santiago Creel Miranda (National Action Party, or PAN), the matter of permits has been festering. Given that, the Adjunct General Directorate of Gaming and Raffles, of the Secretariat of Government, has increasingly come under fire-especially by opposition party politicians and some pundits who, among other things, charge bias or suggest favoritism in the issuance of permits and/or oversight of permit holders.
Much of this comes with the justification that only a claimed 34 percent of gaming activities in Mexico are legal, or conversely that 66 percent of the gaming is unregulated and untaxed. As well, observers say all of this could mean that many of the unlawful gaming activities are tied to organized crime and the laundering of drug money.
The initial meeting of the 14-member subcommittee (representing five political parties) took place on September 11, with a rather routine agenda for a first meeting. The two most interesting calendar items covered: “Advances, strategies and results obtained during the first stage of the work plan regarding the gathering of information;” and “Methodology proposal in order to undertake the next stage of the work plan that consists of work sessions and summons appearances with the actors involved with gaming and raffles.”
Ojeda Camacho said the work will be done in five phases: the compiling of information; working meetings and hearings; drafting of the proposed law; conclusions; and dissemination of the same.
According to a statement issued by the press office of the Chamber of Deputies, one of the first things approved by subcommittee members was to urge the Secretariat of Government not to authorize a single new or expanded permit for gaming and raffles until the subcommittee has comprehensive analyses of all authorizations, as well as the gaming industry in Mexico.
Subcommittee chair García Méndez was quoted as saying the draft of the gaming and raffles law proposal will be complete in four months. He said subcommittee members will soon meet with Undersecretary of Government Abraham González Uyeda and other ministry officials to discuss the difficulties.
Subcommittee member Gilberto Ojeda said the board is awaiting information from the Directorate of Gaming and Raffles to begin an investigation into gaming and betting parlors that presumably have counterfeit or bogus permits. The subcommittee is asking for a register list of all permits that have been issued by the Secretariat of Government, and will ask for a list of unlawful permits that have been found.
Shut Down Illegals
As a sidebar to the press statement, Octavio Martínez Vargas (Party of the Democratic Revolution, or PRD), who chairs the Tourism Committee in the Chamber of Deputies, discussed black market sales and transfers of permits to third parties with a reporter from the Mexico City daily El Universal. Martínez told the reporter that “gaming concessions are being sold regularly under the table, each costing up to US$2 million.”
The press communiqué also states that, during the meeting, an objective was set to authorize states and municipalities to close businesses that have slot machines, and to confiscate the machines insofar as they are unauthorized. In the interview, Martínez Vargas said, “Of each 10 small business establishments, seven have slot machines.”
Everyone acknowledges that a revised Mexican gaming law is necessary to replace the antiquated Federal Gaming and Raffles Law of 1947, and obviously this is to be a major part of the subcommittee’s work. Additionally, casinos, if they are to be authorized, must be part and parcel of a new law.
With the draft proposal slated for completion in four months, a vote on the legislation could come during next year’s February-to-April regular legislative period.
García Méndez says a new law is needed because gaming has become considerably more controversial over the past three to four years-a result of the increased number of betting establishments in Mexico and ineffectual regulations.
Moreover, when asked about casinos, García Méndez repeats what politically may be his safeguard catch-phrase, as he has used the implicit casino reference in variation before, saying that a new law is needed not to prohibit betting parlors but to regulate the activity.
And then there are several wild cards that will come into play with respect to casinos, over and above partisan political wrangling that is a sure thing-especially in Mexico’s 2009 midterm election year. The Catholic Church, entrepreneurial organizations and unions, citizens’ groups, addiction control activists, anti-crime advocates-the latter being important due to the fear of possible infiltration by organized crime-and others can be expected to step into the fray, and it is yet to be seen which way they might sway the spheres of influence.
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.
Barnard Thompson, the editor of MexiData.info (www.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. Thompson cane be reached via email at [email protected]

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