Latin America or “LATAM” as many like to put it, is currently one of the most sought-after markets for gaming operators. Latin Americans are natural gamblers, no doubt. They love action, risk and challenge.
That said, we have already made the first slipup without even trying to get to grips with the industry, which is to consider “LATAM” as a region, let alone as a whole.
LATAM is composed of a series of individual countries (no less than 20), some of which, such as Mexico and Argentina, are enormous markets just by themselves. All such countries have their own idiosyncrasies, and, make no mistake, there is no way to design a common approach to all of their more than 600 million inhabitants. Some have tried already and have consistently failed.
Current State of Play
Nevertheless, the countries share some common traits.
First and foremost: the lack of regulation of online gaming and other products in most of such countries has led to a flourishing black market that provides no return to society (at least in the form of taxes) and lays the ground for fraud. Each is really one-of-a-kind, yet most of them are in a “wait-and-see” mode regarding regulatory development in the gaming space despite the indisputable fact that Internet gaming is here to stay.
Also, most countries continue to struggle with the clampdown on illegal street gaming, which is being tackled by regulating real-time connection of machines to the relevant regulatory authority via central systems that allow their monitoring. As usual, the missing bit is the enforcement of it all.
Estimates point at a Spanish- and Portuguese-speaking market of more than 1.5 billion USD just for online gaming, something to be carefully evaluated despite existing volatility and legal uncertainty. A wave of new regulation will inevitably come from the coexistence of legality and black markets in most major markets, such as Argentina, Mexico and Brazil, and the initiation of regulatory processes in adjacent jurisdictions, such as Uruguay, Chile, Costa Rica or Peru. Mexico probably will be the first one according to latest news and may even be ready to publish a new gaming law before year’s end.
Recommendations to Gain Recognition in Emerging LATAM Markets
This is no big secret, but here it goes: brand recognition. Inevitably, a strategic local partner with a well-established brand can be great leverage. The brand must be trustworthy even over the product itself. That said, I go back to my very first statement: each market is very different. Hence the necessity to partner locally and to get accurate advice from experts with sufficient experience and credibility in order to create a successful business model.
Operators must be able to partner with content and service providers, but should always remain in the driving seat. They should lead the strategic focus and the implementation and unfolding of a relevant and successful gaming offering. The Internet will prove a most valuable tool for both advertising and also as a measurement of player behavior.
Why is Every Regulator Ever Worried to Regulate?
Pressure from the industry, lack of knowledge of the sometimes very intricate workings of online gaming, problem gambling, taxation model? Probably all of them.
The only way to overcome this is education; reaching out to independent consultants, international certification laboratories with solid track records and, to some extent, to the industry itself have proven to be more than effective. The truth is that a regulator is always worried about corruption and about being regarded as “too close” to economic operators, but in an industry that is fast-evolving and constantly at the forefront of technological improvements, in a global economy, this interaction becomes a must. In an orderly manner.
Lack of regulation can create losses in taxes, less protection for players, match fixing and, most importantly, damage to reputation as regulators and as government. The gaming industry is as much an economic activity as any other and, thus, government should pay as much attention to it as to any other.
How to overcome it? Education, education, education. There is a remarkable lack of market studies and benchmarking efforts that deal with Latin American markets. There are no specialized consultants or law firms. Regulators should look at other more specialized jurisdictions and promote the exchange of information, sharing of experiences and other fundamental approaches. There is no need to reinvent the wheel.
And then, of course, regulation, supervision and… enforcement, enforcement, enforcement.
A Few Conclusions
The “star product” will inevitably be sports betting, both land-based and online, which currently accounts for more than 50 percent of the total market. Regulation must, to some extent, consider the role of existing licenses as a channel to introduce new gaming offerings in order not to disrespect a partially well-established market that should have a fair opportunity vis-à-vis the pure “offshore” online gaming players. In a nutshell: do not learn from some of the EU markets that have let former illegal online gaming operators profit from illegally branded platforms and user databases.
Payment processing remains one of the bigger challenges. Online payment processing is still quite undeveloped in some countries, and there is limited access to credit and debit cards. Pre-paid cards remain the most popular method.
In addition, the few regulatory actions that have been taken are usually the result of judicial or governmental decisions. LATAM countries should wake up and become leaders, toss away their reputation for lack of control and security, and start projecting a clear and transparent approach to the concept of a controlled, yet sensibly regulated, gaming offering that would become a flourishing industry with rewards for both the governments and the operators and related businesses. Whether a game is pure chance, skill or a combination is not relevant, the key should be the monetary prize, the real reward that drives a user to play.
Fair and not misleading advertising, player protection, monitoring by regulators, local licensing, AML prevention policies and responsible gambling are just a few of the drivers of a solid regulation that should be taken into account.
To begin something, especially in politics and legislation, has never been easy. World trends must be watched closely as the Internet, inexorably, brings the world closer together. In this case, the world trend is regulation. Experiences like the ones in the United States (regardless of UIGEA) and the U.K., which only last year recognized that moving toward point of consumption regulation could drive players to illegal sites, are good examples.
Mexico and Panama are at the forefront of new regulations at the moment, and Chile, Uruguay, Brazil, Argentina and Colombia, among others, are following suit. This has to mean something and the industry should get ready to get its hands on the opportunity.