Bring on the Casinos-Tax Free!

Long the subject of contentious debate, Las Vegas-style casinos could be on the verge of official approval in Mexico. In an interview with the Mexican newsweekly Proceso, a congressman in charge of overseeing legislative initiatives related to gaming said full-service casinos will be an integral part of a proposed law substituting the nation’s 1947 gaming law that will be voted on in the coming weeks.

“Whether we like it or not, gambling and games of chance are a cultural and historic reality of the Mexican people. In this way, the new federal gaming law will protect the rights and liberties of Mexicans,” said Fernando Zarate Salgado, president of the gaming commission in the lower house of the Mexican Congress.

Crafted after years of polemics, the new law will expressly allow Las Vegas-like casinos for the first time in new hotels built in Mexican tourist zones. Seen by some as a new tourism attraction, the hotel-casinos will be granted tax incentives.

“If (casino owners) are going to invest millions of dollars to open hotels, it is logical to exempt them from paying certain taxes since this is creating jobs and fomenting economic development,” Zarate reasoned.
The legislation assigns authority for regulating gaming to a new government agency beefed up by an “army of inspectors” and guided by a “consultative council” formed by representatives of government, civil society, educational institutions and the gaming industry, according to Zarate.

The congressman said the more than 200 articles contained in the legislation have been hammered out and agreed upon by all seven political parties represented in the Mexican Congress. “It’s already negotiated,” assured Zarate, who represents the center-left PRD party.

Changes to the 1947 law contemplated in the new gaming legislation include the reduction of business permits from 25 years to 10 years (with the possibility of renewals), and limitations on permit holders to have one business for each permit. Currently, a permit holder is allowed to operate multiple business establishments with just one permit.

In provisions written with crime, irregularities and money-laundering in mind, the pending legislation requires professional training for all gaming staff, as well as full disclosure of the ownership information and connections of permit holders.

Under the new law, the minimum age of casino customers will be increased to 21. No betting parlor will be permitted within 1,500 feet of schools, churches, archaeological zones, historic sites, hospitals, shelters, parks, and national and natural reserves.  The new law will apply to all gaming enterprises ranging from horse racing and cockfighting to activities at places like Aguascalientes’ annual San Marcos Fair. And with the modern age in mind, the new regulations will put Internet gambling under its purview.

“The future of gaming is online, not in the casinos,” Zarate added. “It is managed by businesses based in other countries that tend to rip off the players. They will now be registered in Mexico and comply with our rules.”

The Mexican politician acknowledged that members of the casino industry he did not name are lobbying for changes to their liking in the proposed gaming reform, but maintained that the law will be voted on as it currently is drafted.

Critics of the reform, most notably the civil society group Say No to Casinos, continue to speak out against it.

Daniel Olivares Villagomez, former member of Mexico’s diplomatic corps and representative of Say No to Casinos, contended that the new legislation will expand the influence of organized crime.
“The new Mexican law will allow the installation of hotel complexes with casinos in a large part of the national territory,“ Olivares said. “There will be a wild proliferation with no control all over the place.”

Congressman Zarate specifically mentioned Cancun, Puerto Penasco, Puerto Progreso and the Baja California Peninsula as among the places where the hotel-casinos will be permitted. The lawmaker conceded that existing, smaller casinos have been covers for other criminal activities like money laundering and drug trafficking, but insisted that the new regulatory regime will bring corruption under control.

While big casinos in the mold of Las Vegas would represent a new addition to the Mexican gaming scene, gambling joints and machines of different varieties-both legal and illegal- are open for business from one end of the country to the other.  Much of the industry is dominated by three large firms:  Spain’s Codere group, Televisa and Tijuana’s Grupo Caliente, a company associated with the city’s controversial former mayor, Jorge Hank Rhon.

Facilitated especially by former officials from the Fox and Calderon presidencies, hundreds of new gaming establishments opened up across Mexico during the past decade. The grand total even exceeds the number of universities (180) affiliated with the National Association of Universities and Institutions of Higher Learning, according to a comparison between the education and gaming sectors by the Mexican daily La Jornada.
In addition, an estimated 75,000 “tragamonedas,” or street slot machines, have sprouted up in corner stores and other businesses often located in working-class neighborhoods, where a low-income clientele wagers 30 or 100 pesos an outing.

Recently, the Interior Ministry affirmed that the tragamoneda boom was linked to organized crime, generating a pot of $50 million every week and serving as a “source of corruption of minors.”

In a geographic analysis of the Mexican gaming industry, La Jornada noted a correspondence between gambling enterprises and zones of the country where organized crime wields heavy influence. According to the newspaper, the cities with the highest number of gaming joints are: Tijuana (18), Mexicali (13), Hermosillo (12), Mexico City (11), and the large Guadalajara suburb of Zapopan (9).

However, smaller localities also situated in regions with high degrees of criminal activity sport gaming palaces, including Cajeme, Sonora; Ahome, Sinaloa; Apodaca, Nuevo Leon; Fortin, Veracruz; and Arandas, Jalisco. On a statewide basis, Baja California, Nuevo Leon, Jalisco, the Federal District, Mexico, Sonora, and Veracruz are identified as the entities with the greatest amount of gaming enterprises.  A story published by El Sol de Mexico last July reported that the Interior Ministry had only 60 inspectors to cover more than 300 small-scale casinos in the entire country.

Anti-gaming activist Daniel Olivares remained unconvinced of the purported benefits of the proposed new law, contending that it would spread “the virus” of gambling addiction while benefiting the big players like Televisa and Grupo Caliente. Pressed by a reporter to answer pro-reform arguments that society has a right to gaming, Olivares responded:

“Yes. They contend that if greater freedom is not given to the gaming businessmen, the people will continue to gamble in a clandestine manner. Damn it! They should legalize child pornography since that too is done clandestinely.”

Sources: El Universal, September 25 and 26, 2014. Articles by Francisco Nieto and Horacio Jimenez. Proceso, September 21 and 25, 2014. Articles by Rodrigo Vera and Mathieu Tourliere. La Jornada, September 15, 2014. Article by Fabiola Martinez. El Sol de Mexico, July 23, 2014. Article by Alberto Gonzalez.

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