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Mexico Massacre Outlines Gaming Shortcomings

Mexico Massacre Outlines Gaming Shortcomings

At a May 2008 conference in Monterrey, delegates stressed that Mexico needed legal reforms to shore up the regulatory regime governing its rapidly expanding gaming market.

At the time, the modern and industrialized Monterrey was being held up as a Mexican success story. But since then, the city has descended into violence—with the local gambling industry directly implicated in the gravest in a series of recent tragedies.

On August 25, gunmen burst into Monterrey’s Casino Royale. At least 52 people died when the gaming parlor was set ablaze and patrons—mainly women—were unable to escape.

While symptomatic of broader challenges in Mexican society, the tragedy also highlighted, for some, the deficiencies in the country’s gaming regime.

Mexican media quickly said the attack was carried out by a leading drug cartel to force the Casino Royale’s owners to pay extortion money. Less immediately clear, though, was who those owners were and under whose gambling permit they had been operating.

Rewind to 2004.

That was the year when the administration of then-President Vicente Fox issued a new decree which authorized Mexico’s Ministry of Interior to issue new gambling permits and allowed bingo halls and sports books to install electronic gambling machines for the first time.

Gaming regulators at the interior ministry have since indicated that Class III slots and electronic table games are also legal—further establishing Mexico as key emerging market for leading gaming equipment manufacturers.

But critics say Mexico’s recent gaming boom has not been matched by expanded oversight.

The Ministry of Interior says there are 306 legal gaming parlors in Mexico, as well as 70 unlawful ones. Gaming regulators say they have taken action to shut down illegal businesses. But court injunctions have made the task more difficult.

“Mexico is the least mature of all the markets in which we operate,” says David Elizaga, chief financial officer for Codere, the Spanish gaming company. “The pace of growth has been very fast, outstripping the authorities’ ability to enforce the existing regulations, including through prosecuting those halls operating without the necessary permits, and developing a regulatory framework commensurate with the gaming sector that exists today in the country.”

Reacting to the arson attack in Monterrey, the former Mexican interior minister at the time of the 2004 decree agreed that Mexico’s gambling laws are “weak.”

They are also precarious.

The 2004 presidential decree, which did so much to fuel growth, did not actually supersede an earlier law from the 1940s that essentially banned casino gambling. That means a new Mexican president—and one will be elected in 2012—could rescind the 2004 regulation without needing to go through Congress.

“Basically, what we have now is a regulation acting as a law,” says Alfonso Pérez Lizaur, the president of APJSAC, Mexico’s equivalent of the American Gaming Association.

“All this can work, but I believe the best thing that could happen is a new law,” Santiago Creel Miranda, the former interior minister and now a Mexican Senator, told a Mexican newspaper after the Monterrey attack. “If you want to have gambling, you need to know exactly who is behind it and that they are operating transparently.”

Such arguments were made at the Monterrey gaming conference in 2008. Whether congressmen will be more inclined to listen now, with 2012’s elections looming, is the question.


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