Mexico’s Casino Rollercoaster

The government in Mexico has just approved Class III gaming. And, sorry, but if you’re not already doing business in Mexico, the line forms on the left. All the international machine players bought their tickets in advance and have been selling Class II and III machines in the country for years. It’s what they like to call a growing market, and you can be assured it’s growing very fast. With the momentum it’s now generating, Mexico is on course to become the new “Monster of the Midway” attraction in the global gaming business.

For the big-time casino operators—at least in the United States—getting on board this fast-moving thrill ride is prohibited by their respective gaming control boards. Until Mexico’s government puts in place an international program of strict gaming regulations, all the big boys must stand on the sidelines and watch. Regardless, there’s no doubt many major operators would like to set up shop in this sunny paradise, with its overabundance of surf and sand locations to offer. But the big time operators must leave this fertile ground for others to make hay, at least for the foreseeable future.

In my opinion, Mexico’s burgeoning gaming jurisdiction could be the second largest in the world. It could be bigger than Macau! A lot depends on Mexico’s next president and that administration’s agenda regarding the further development of the country’s gaming industry. Regulatory moves could easily stimulate the international tourist industry to new heights. And this power could be turned on tomorrow: Let there be regulations. And there would be regulations. Governments love regulations.

President Felipe Calderón leaves office in 2012, as Mexico’s presidents serve only one six-year term. Therefore, one of his primary political obligations will be to help lead his party’s new presidential nomination to victory in the next election. In addition, he has his hands full with other pressing domestic issues. We are sure that he had a hand in this quick and powerful Class III fix.

With the Ministry of the Interior’s recent approval of random number generated machine games, Mexico has taken a huge step forward, moving out of the Class II gaming environment and into the real world of Class III gaming.

This ministry has the final say on all things regarding the gaming business in Mexico, and its power is granted in the old and new Gaming and Raffles regulations. If the ministry say it’s legal, then its legal, and there is no need for any vote in Congress. The legal side of the regulation process can be implemented overnight, propelling Mexico’s tourist industry and generating billions of pesos into the treasury via the taxes collected from a world-class gaming industry. That is, when and if the ministry decides to do so—it’s up to its members. And they can run it any way they please, and do.

Many people in and out of the gaming business think casinos are illegal in Mexico, but that, of course, is not the truth. What was true, and still remains true in some cases, is that certain gambling games, when delivered by named and unnamed gaming devices, are and will be illegal until deemed legal by the powers that be, changed to this status because of the illegal equipment used to deliver the games. Under the old 1947 regulations, cards were illegal. Therefore, many popular major casino games such as blackjack, poker and baccarat were taboo. Now with Class III in play, all major casino games can be delivered into Mexican gaming parlors.

We’ll see if the Mexican government understands that it is losing millions of dollars in taxes.

Talking Politics
Mexico was involved in one of the most severe crisis until 2000 because the Partido Acción Nacional (PAN) political party could build the bridges between the different political forces to attend the most urgent topics of the Mexican agenda—lack of security, employees and a long, long etcetera to this list.
Ironically, gaming business in Mexico is growing very fast, no matter whether politicians understand our industry or not.

New technologies, Class III machines and some other technological facilities are arriving in Mexico every day. Because this is a potential market of 130 million people, this is the kind of bet that we are talking about.

This last 4th of July, Mexican people lived through another democratic test. Twelve different states’ elections were on the tables of the political parties. (PRI, PAN and PRD are the most important political forces.) The big winner was the Partido Revolucionario Institucional (PRI), with nine victories in nine different states. And the biggest loser was President Calderón, with only three victories in three different Mexican states.

Why am I sure that the President Calderón was the biggest loser in this election? Because he is on the third party of his administration and he doesn’t know already which man or woman on his crew is to relieve him.

On the other hand, the PRI is on the right track to win the presidential election in 2012.

Don’t forget these important names:

1) Enrique Peña Nieto is a Mexican politician, member of the PRI, and current governor of the state of Mexico.

2) Manlio Fabio Beltrones is a political reformer educated within the Mexican public school system who as served in many important political offices, including federal deputy; president of the State Administrative Committee of the PRI; federal senator; undersecretary of the Interior; and secretary general of the National Confederation of Popular Organizations. He was also governor of Sonora, president of the Mexican House of Deputies as well as the Chamber of Senators, and headed the Political Coordination Advisory Board (Junta de Coordinación Política). He is currently president of Instituto Belisario Domínguez, a research division of the upper chamber.

Beltrones has been an advocate of the new structure of the Mexican state—one that would promote greater interaction between party entities and the population. He has emphasized that, in public policy, no issue is taboo and that Mexico is entitled to representatives who will create the competitive platforms that will enable us to prosper.

Final Thoughts
As I mentioned in my 2010 Gaming Forecast in the January 2010 issue of CEM, a new gaming regulation should be proposed by the Mexican federal government in the first half of 2010. But that never happened, and now it is too late, as Calderón and his political party have one, and only one, target in their minds: the 2012 presidential election.

I am pretty sure that the permit holders and providers are very disappointed with the gaming public policy of the Mexican federal government. Why? Because one doesn’t even exist to date.

The lack of regulation (2004) and illegal operations (around 70 percent of the market) are the most controversial issues in the Mexican gaming industry. However, Calderón’s administration never shows any sign of fixing these urgent topics.

On the other hand, the Mexican gaming industry is facing many troubles and its members are trying to handle it without any support of the federal government. The good news is that the operators and providers are on the right track to increasing their profits and revenues.

Log onto to listen to José Luis Benavides talk more about the gaming market in Mexico as part of the Gaming Law News series of podcasts.

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