Mexican Leaders Bet on Casinos to Boost Economy
Congress Close to Legalizing Gambling Over Objections of Church and Police

By Kevin Sullivan
Washington Post Foreign Service
Sunday, August 18, 2002; Page A11


LA PAZ, Mexico -- Back in the days of Prohibition in the United States, Mexican casinos were the playground of choice for Al Capone and others looking for cheap and legal booze, floozies, cards and dice. By 1938 Mexico was so fed up that casinos were banished by a presidential decree that stands to this day.

But now an old law is confronting a new reality: The economy is sagging, tourism needs a boost, casinos are cash factories and President Vicente Fox is a pragmatic businessman who likes the sound of billions-with-a-b.

So casinos are suddenly playing good odds. Despite continued opposition from church leaders and law enforcers, analysts here said, the political and economic climate is right for the Mexican Congress to legalize casinos, possibly by the end of the year.

In this summer of grim economic news, the vision of croupiers hauling in mountains of fresh cash has cheered officials and business leaders in tourist centers from Cancun on the Caribbean to Acapulco on the Pacific to this sandy enclave near the southern tip of the Baja Peninsula.

"A casino wouldn't be our salvation, but it would be the perfect complement to our development. It would be oxygen," said Mayor Victor Guluarte, looking out over La Paz Bay to a spit of land where he envisions a casino anchoring a big development with hotels, restaurants and a marina.

More than 325,000 tourists, at least half of them Americans, came here last year mainly to snorkel, dive and fish where the dry Baja mountains tumble into the luminous blue and green waters of the Sea of Cortes. Guluarte's government estimates casinos could bring 100,000 more each year.

La Paz has none of the Planet Hollywoods, bungee-jumping towers and happy-hour advertisements trailed behind airplanes that dominate many beach resorts in Mexico. Guluarte said this sleepy city of 200,000 people has positioned itself as more of a laid-back center of ecotourism. But snorkels alone cannot drive an economy, he observed.

Guluarte said a casino, built with private capital, could create at least 1,000 badly needed jobs, develop a prime piece of real estate and pump millions of dollars into the local economy for roads, schools, water and other services that need upgrading.

All over Mexico, officials are doing the same math. Federal studies estimate that building a dozen casinos could bring in $200 million in new private investment and $500 million a year in new tax revenue. One recent privately commissioned study estimated that opening casinos could generate $3 billion a year in tourism and create almost 100,000 new jobs a year. Tourist industry associations have taken out full-page newspaper ads urging Mexico to take advantage of that opportunity.

With the Mexican economy hurt by the downturn in the United States, analysts said casinos may be too attractive for even the doubters in Congress to turn down. The government desperately needs money for schools, roads, health programs and other services in a nation where half the population lives in poverty.

"Mexico can be an attractive market," said Jaime Mantecon, a federal legislator who favors casinos. "We already have history, archaeology, nature and beaches. If we add gambling as a tourist attraction, more money would come into the country as a result."

Some of that money would probably come from wealthy Mexicans who now spend it elsewhere. Kevin Bagger, senior research analyst at the Las Vegas Convention and Visitors Authority, said Mexico is his city's second-largest source of foreign visitors, behind Canada.

Bagger said 231,000 people flew to Las Vegas from Mexico in 2000 and spent an estimated $164 million on things such as hotels and food -- and that is not counting the millions they spent gambling. He said those numbers also do not include thousands more Mexicans who drove to Las Vegas or flew in from border cities in the United States.

Those figures are not lost on major Las Vegas casino operators such as MGM Mirage, Park Place Entertainment Corp. and other U.S. corporations that would be interested in investing in Mexico, said Washington-based business consultant James R. Jones. Jones represents Sol Kerzner, a South African-born entrepreneur who owns casinos in the Bahamas and Connecticut and who developed the Sun City resort in apartheid-era South Africa.

"Anybody in the entertainment industry has to look at Mexico," said Jones, who served as U.S. ambassador to Mexico from 1993 to 1997.

Jones said there is so much interest in Mexico that he was invited to give a speech about the Mexican market at the American Gaming Summit, an industry trade show, earlier this year in Las Vegas.

Still, opposition to casinos persists, and proponents of casinos acknowledge that lifting the ban is far from certain. The Catholic Church has used its clout to denounce casinos as immoral magnets for prostitution and illegal drug use. In a widely circulated paper on casinos, the church condemned them as contrary to the philosophy of "earning one's bread with the sweat of one's own brow."

Church officials have also said that Mexican business leaders and politicians have a long history of corrupt dealings. They said casinos would be a lucrative opportunity for bribery and kickbacks that public officials would not be able to resist.

Law enforcement officials in the United States and Mexico said they fear Mexico's drug cartels would use casinos to launder millions of dirty dollars. The authorities noted that the drug gangs have been able to bribe and bully Mexican police, judges and politicians for decades. They said no matter what regulatory scheme the government puts in place, the traffickers will find a way to turn casinos into piggy banks.

Attorney General Rafael Macedo de la Concha said in an interview that he had expressed his concerns about casinos to Fox, warning him that organized criminals are "always looking for ways to make dirty money clean."

Mexico City Mayor Andres Manuel Lopez Obrador is opposed to casinos in the capital, saying they would promote vice and adding, "We want economic growth, but not at any cost."

Hector Diaz Santana, who runs a marine engine repair shop here in La Paz, agreed: "This is going to bring the wrong kind of people. We need to bring more tourists, but we need something more healthy for the community."

But as Congress, led by legislators from border cities and beach areas, warms to casinos, arguments about prostitutes and drug lords are increasingly seen here as details to be ironed out, not reasons to keep the dice from rolling.

"Those things already exist in Mexico, and it's not because of casinos," said Laura Coronado, president of the La Paz hotel owners' association. "We have nothing to be afraid of, as long as it is well organized and controlled."

Mantecon, the congressman, said legislation to legalize casinos also would establish a strong new government regulatory agency. Tough gambling regulations in Nevada and New Jersey are being studied. Mantecon said Mexico needs to legalize and regulate gambling, because illegal gambling is already flourishing and the government is missing out on huge amounts of tax revenue.

Mexico has issued special permits to allow legal horse racing, dog racing and more than 110 betting parlors that accept wagers mainly on sporting events. Most analysts agreed that there are also probably 1,500 or more illegal gambling operations in Mexico including everything from cards to roulette wheels to cockfights, and the government is getting no benefit from them.

"We need to regulate gambling because we already have it," Mantecon said.

Jose Manuel Alavez, president of the National Entertainment Industry Association, a trade group, said legislation to legalize casinos has been introduced in each of the last four sessions of Congress. He said each year there has been a little more "demystifying" of casinos.

"Today we have many positive examples of gaming industries that are well operated, with clear laws: in the United States, Canada, Europe and South America," said Alavez, who is also a director of Interamerican Entertainment Corp., Mexico's largest proprietor of legal gambling establishments.

Under the legislation being considered, casinos would be built by private investors and their profits would be taxed at 9 percent, 3 percent each for the federal, state and local governments. If the law passes, analysts said, an initial round of 10 or 12 casinos would probably be allowed.

Here in La Paz, Guluarte said he is hoping that one of them will rise from El Mogote, an empty peninsula of sand dunes and scrub brush with a regal view of the mountains and the sea. "Casinos don't scare us," he said.

Opposition from law enforcers? Hah! Policias are one of the most corrupt elements in Mexican society. They're probably pissed because a person who just lost all his money gambling won't have cash to pay a bribe on a trumped up charge. ;)

Now that I think of it, isn't there some sort of gambling place already in Nogales? In the really wierd building between the two one-way streets that run to/from the border crossing?

This is assinine. Monopolies are going to be granted to the Hank family, just like has been done with the sports books. All casinos will do is benefit the rich and powerful, while serving as excellent areas to launder drug money. I hope they never come to Mexico. I can see no benefit in them.

I agree that it's a bad idea. I can't see people going to México with U.S. dollars when there are casinos everywhere now in America. All that will happen is it will hurt the local people by supplying them with a very addicting vice.

If they want to get American's money into their economy they should they something not so readily available to us like prostitution ...no wait that would be a bad idea too.

"Bagger said 231,000 people flew to Las Vegas from Mexico in 2000 and spent an estimated $164 million on things such as hotels and food -- and that is not counting the millions they spent gambling. He said those numbers also do not include thousands more Mexicans who drove to Las Vegas or flew in from border cities in the United States."


And only about ten of them ever tipped a cabdriver over a dime while they were in Vegas!

Putanero

A funny thing. 3 or 4 years ago at the jai ali in the front area where they had video games thye had put up some actual blackjack/poker machines like they have in the indian casinos. I played for 2 days and on the third they wer facing the wall turned off. A week later tyhey were gone never to return.

I think a casino would be cool in Tijuana as it would provide jobs and bring money(bus loads of gringos).

The only negatives is it would draw in more prostitution and allot of riffraff. I like the current riffraff just fine.

if these folks run there casinos with the same integrity that they run every other business, than no thank you. i love to gamble--but i need some possibility of winning. i'll bet sports there--i don't think they control the outcome of an amercian sports game--but i couldn't feel good about playing black jack.

Mexico Gaming Prospects Dim

MEXICO -- The outlook for Mexican casino gaming is not good, at least in the near term, meaning the prospect of competition for Las Vegas from south of the border is just about dead.

A congressional committee in the Mexican lower house Wednesday approved a federal gaming and lottery law, but stripped out language legalizing casinos - in effect leaving land-based casino gambling illegal.

That means there won't be any competition for Nevada from Mexico anytime in the foreseeable future, said Bear, Stearns & Co. analyst Michael Tew.

Wall Street analysts and industry insiders had said Mexican casinos would not represent a competitive threat to Las Vegas' gaming industry, but lodging industry analysts had said such visitor attractions and the deflection of airline seat capacity to Mexico could affect Nevada.

The committee action also could mean the end to plans by Nevada operators to develop operations in Mexico.

Bill Wortman, an owner of the Nevada Palace on Boulder Highway, said last year he planned to build a gambling complex in the border town of Reynosa, Mexico, across from McAllen, Texas. He planned to spend $100 million to build a casino and 18-hole golf course.

Other Las Vegas operators had expressed interest, but had not released details of any specific plans.

Without passage of the federal gaming law, however, any such plans remain blocked, at least for the time being.

The original proposal considered by the legislative committee in Mexico would have modified a 55-year-old law that prohibits most forms of gambling.

The bill approved by the committee prohibits the creation of permanent casinos, but permits them on cruise ships sailing in national waters.

The bill, promoted by the governing National Action Party and supported by the Party of the Democratic Revolution and some representatives from the Institutional Revolutionary Party, modified a broader measure that would have legalized casinos.

The controversial legislation would have allowed more than a dozen casinos to be built at popular Mexican tourist destinations such as Acapulco and border cities, including Tijuana.

Despite the ban, there is an estimated $500 million-a-year gambling industry in Mexico that includes sports betting, horse racing, cockfights and casinos.

The Mexican Chamber of Commerce has estimated casinos could attract another 11 million visitors to Mexico yearly.

By legalizing gambling, Mexico could also collect much-needed taxes from an estimated 2,500 clandestine operations where people play poker and bet on slots.

The Mexican Association of Hotels and Motels had estimated an initial expense of $1.8 billion to build 10 casinos could generate $3 billion in total revenues a year and create 115,000 jobs.

Defeat of the measure was "no surprise," said Bear, Stearns analyst Jason Ader. "The government had been looking at it, but obviously there were problems."

Legislation legalizing casino gaming had been proposed by Mexican President Vincente Fox, as a way to improve a battered tourism industry, fund state programs and put a stop to illegal gaming in the country, Ader said.

"While it appears that legislators may have a achieved a foothold in the country ... Mexico's religious groups and police force were ... opposed to casino gaming, and have typically blocked legislative efforts to expand gaming in the country," he said.

Tourism business owners in Mexico who feared competition from major gambling operations also were strongly opposed to the proposal.

Legislators and officials of the Chamber of Commerce of Mexico had said there was broadbased popular support for the measure, and the downturn in the visitor industry had given it a 90 percent chance of passage.

The bill passed by the committee this week must still be ratified by the full session of the lower house and the Senate before becoming law, and could be amended to again include legalized casino gambling.

"The potential for meaningful legislation passing (now) has been diminished because the government is going to be focused on more important budget issues, Ader said.

source

Good. All casinos in Mexico would do is enrich Jorge Hank Rhon and his corrupt friends.