Gaming in Buenos Aires

Argentina is fast emerging from the worst economic depression in its history. In 2001 alone, violent clashes between protesters and police left 27 dead on the streets of Buenos Aires, the president resigned, Argentina defaulted on a substantial amount of its U.S. $132 billion debt, and the peso’s peg to the dollar was abandoned.

The outlook for Argentina looked very grim and uncertain indeed as the country went through five presidents in just two weeks. However, since then Argentina has made what some observers have called an almost miraculous recovery. Granted, the economy still suffers a number of economic woes, such as high inflation, and the rapid growth of the economy has slowed during the administration of Cristina Fernandez de Kirchner, but the outlook is nowhere near as bleak as it was back in 2001. And the economy continues to grow—5 percent in 2010.

One of the factors that has aided Argentina’s economic recovery has been a huge growth in the tourism industry. Before 2001, each peso was artificially valued at one U.S. dollar. This meant that Buenos Aires, as a tourist destination, was almost a prohibitively expensive place to visit compared to neighboring countries; a tourist was almost a rarity even in downtown Buenos Aires. Fortunately, that has all changed now.

Sometimes known as the “Paris of the South,” Buenos Aires is without doubt one of the most vibrant and beautiful cities in the region, and tourists are still arriving in record numbers to experience its many charms. Today, the capital also serves as the gateway for travelers wishing to explore further afield, be it to the jaw-dropping splendor of Iguazu Falls in the north or the world-renowned skiing slopes of Bariloche in the south.

Although prices are not quite as attractive as they were shortly after 2001, they are still relatively reasonable, and higher costs do not seem to be putting off travelers wishing to come here. According to the latest statistics released by the Argentine Ministry of Tourism, for the first eight months of 2010 tourist numbers increased by 23.3 percent compared to the previous year, with almost 1.5 million tourists arriving in the country by plane.

Gaming in the “Paris of the South”
While casinos continue to proliferate nationwide and at a fast pace, especially in tourist hot spots, gaming in the capital is still a deeply divisive and complex issue. Legally speaking, casinos are banned in Argentina’s capital. Nonetheless there are three large-scale casinos in Buenos Aires. All three continue to be the focus of considerable controversy.

The largest casino in Buenos Aires is located beneath one of the most famous landmarks in the city, the Palermo racetrack. Surrounded by the largest park in the city, the racetrack opened on May 7, 1876, as the first racecourse in Buenos Aires.

Unfortunately, with the horse racing industry in decline, the track saw falling profits for many years. The track was purchased by Hipódromo Argentino de Palermo SA (HAPSA) in 1992, but for the next 10 years profits continued to decline. Then, in 2002, HAPSA won the right to install slot machines on the premises.

The track now follows the racino model (casinos attached to racetracks), which has proven highly successful in the region. The casino is very popular and has brought new life to the track and to the surrounding area. However, there have been cries of foul play for some years now surrounding the relationship between former Argentinian President Nestor Kirchner and his friend, the self-made businessman Cristóbal López.

In 2001, while he was governor of the province Santa Cruz, Kirchner granted Casino Club SA, in which López now has an estimated 30 percent share, the concession to run the first three casinos in the province. Then, in 2003, while Kirchner was president, the National Lottery Commission granted the Palermo racetrack the right to house 150 slot machines. The slot machines were to be run and operated by Casino Club.

Since 2003, the number of slot machines at the Palermo racetrack has expanded greatly, and today the casino now houses approximately 4,000 slot machines and nine roulette tables. According to estimates, these slot machines each generate U.S. $300 dollars per day, which combined totals to more than $1 million dollars per day net win.

In 2007, HAPSA’s right to run the casino and racetrack was extended from 2017 until 2032. Kirchner, in one his last acts as president (the decree was made five days before he relinquished his post), also ordered an additional 1,500 slot machines to be installed on top of the 3,000 then in operation, in effect ordering the racetrack to increase the number slot machines so that it could meet growing demand.

Since then, controversy over gaming in the city has continued, but over another issue: taxes. According to a recent report in the Argentine newspaper Clarin, casinos in the capital currently pay only half the amount of taxes that casinos located in the wider province of Buenos Aires pay. This is because, in some ways, they are still operating in a legal vacuum, as the city administration and the federal government battle it out over who has control over gaming in the city.

The background to this bitter quarrel is that, in 1994, a constitutional amendment granted the city autonomy, and since then the city of Buenos Aires has been governed by an elected major’s office and a 60-member elected assembly. Ever since 1994, the city has tried to collect the tax revenue generated from gaming.

However, judicial rulings have opposed these attempts, ruling (almost perversely) that since gaming comes under the control of the National Lottery Commission, it is the federal government, not the city, that retains control and that, therefore, it is the state that should reap the tax benefits of gaming.

In the meantime, the city’s attempts to collect additional tax revenue from gaming has been thwarted at almost every turn. In 2008, local politicians ruled that the casinos operating in the city’s jurisdiction should pay an 8 percent tax on yearly gross income. But as court rulings are still in place that state that casinos come under federal jurisdiction, the city has not been able to collect this additional tax—meaning that it is losing several millions of dollars in gaming revenue per year.

The Floating Casinos
Controversy also extends to the other two casino located in the city—the so-called “floating casinos” that are moored permanently to the city harbor. The first floating casino was granted a licence under then-President Menem in 1999. Via presidential decree, Menem, the conservative Peronist who ruled Argentina in the 1990s, permitted the floating casino on the grounds that it was on the River Plate. In July 2004, then-head of the Lottery Commission Waldo Farías granted Spanish gaming company CIRSA the right to operate a second boat alongside the first.

In fact, the floating casinos have been even more controversial than the racino in Palermo, as at the end of 2007 they were flashpoints for violent clashes between rivalling labor unions and police. Because the boats are moored, they must by law be permanently manned by a ship’s crew. The crew, all members of the Maritime Union, demanded that the casino workers join their union, and when members of the gaming union flatly refused, the crew walked. This meant that the casinos had to close temporarily.

In December 2007, casino workers clashed outside the casinos. The confrontation between rival union members was so intense that police and members of the Coast Guard had to disperse protesters with clubs and tear gas, alarming the many tourists who were visiting the area at the time. Although the situation is now much less fraught and there has been no repetition of such a scene, the issue of trade unions in the floating casinos still has to be resolved by the Ministry of Labor.

As is the case for the racino in Palermo, the floating casinos are also the focus of a power struggle between the local and federal government as to who should control gaming in the city. Because the boats, which are Mississippi-style riverboats converted into casinos, are officially in national waters and not in the territory encompassed by the Buenos Aires city limits, they both fall under the jurisdiction of the federal government, where casinos are legal.

To begin with, the city government rejected this on principle, arguing that as the boats were physically moored to the harbor, they were operating illegally. However, as the city government has reluctantly begun to accept their existence (after several unsuccessful attempts to shut them down), the focus has changed away from whether they should be allowed to who should control them. This debate continues even after a 2007 Supreme Court decision ruled that the casinos came under federal, not city, jurisdiction.
All the same local politicians are still extremely vociferous in their opposition, and yet more objections have come of late over the building of a large-scale restaurant on the parking lot next to the floating casinos—land which is owned by Cirsa and its partner, López, who bought a significant share of the floating casinos in 2007.

One of the most outspoken critics of late has been Radical Deputy Silvana Giudici who demanded in April that an inquiry be launched into the current gaming activities under way in the city harbor. Arguing that the land in the port zone belonged to the city of Buenos Aires, Giudici claimed that the construction was an “offense to the city.”

Unfortunately, while these claims are made, the power struggle over gaming between the city and the federal government looks set to continue. And while it looks pretty certain that all three casinos are here to stay, there seems for now no end in sight to the bitter controversy that surrounds them. Indeed, the building of a restaurant next to the floating casinos could very well bring the issue of gaming and who controls it back into the spotlight once more.

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