KEY COMMITTEE PROPOSES TO MODERNIZE MEXICO'S GAMBLING LAW, BUT PROVISIONS ON CASINO GAMBLING REMAIN IN LIMBO.

After months of informal debate, the Mexican Congress is finally considering the thorny issue of whether to legalize Las Vegas-style casino gambling. But a final decision may not be forthcoming anytime soon because of strong fears among members of Congress that the risks may outweigh the economic benefits.

The ambivalence of legislators toward approving casino gambling was evident in the debate in a key committee of the Chamber of Deputies. The committee, the Comision de Gobernacion y Seguridad Publica, was considering casino gambling in the context of modernizing existing gaming legislation (Ley de Juegos con Apuestas y Sorteos), which dates back to 1947. The legislation covers all wagering, including all casino operations, horse and dog racing, and cock fights.

Proponents tout economic benefits

The proposal to legalize casino gambling has been endorsed in principle by legislators from President Fox's center-right Partido Accion Nacional (PAN) and the former governing Partido Revolucionario Institucional (PRI).

The two parties believe that casinos could become a major source of economic development. A recent federal study suggested that construction of just 12 casinos would attract about US$200 million in new private investment and produce additional tax revenues of US$500 million per year. The possibility of increased taxes is especially attractive with the prospect of another austere federal budget in 2003 (see SourceMex, 2002-11-13).

Proponents of casino gambling also point to the potential for increased tourism. A recent study released by the Asociacion Mexicana de Hoteles y Moteles (AMHM) suggests that casinos could bring an additional US$3 billion per year from foreign visitors.

"Mexico can be an attractive market," said PRI Deputy Jaime Mantecon Rojo in an interview in August. "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."

Casinos would also be expected to provide a boost to local communities. "A casino wouldn't be our salvation, but it would be the perfect complement to our development. It would be oxygen," said Victor Guluarte, mayor of La Paz, Baja California Sur state.

Some of these projected revenues could come from the largely untapped clientele in Mexico. A recent report in the Mexico City daily newspaper Reforma indicated that Mexican nationals are among the largest group of clients at gambling operations in US cities close to the border with Mexico, including casinos operated by Kikapoo and Mescalero Apache Indian tribes near Eagle Pass, Texas, and Ruidoso, New Mexico.

"The euphoria over the casinos among Mexicans has been so great that eight companies have set up daily tours," said Reforma.

Concerns about crime derail approval

That the potential benefits of casino gambling are outweighed by the potential increase in crime is the main argument presented by the center-left Partido de la Revolucion Democratica (PRD) in opposing the proposed legislation to legalize casinos.

The concerns about crime were cited as a major factor in explaining why efforts by former President Ernesto Zedillo's administration to legalize casino gambling stalled in the Congress (see SourceMex, 1996-11-06 and 1998-05-06).

"Casinos could be a breeding ground for corruption, prostitution, and money laundering," said PRD Deputy Rafael Hernandez Estrada, a member of the committee considering the latest casino-legalization plan.

The PRD is not alone in raising this concern. Even the PRI and PAN proponents of the plan are proceeding with extreme caution in the committee considering modernization of the gaming law. A provision promoted by the PAN would require a special committee to conduct a two-year technical review on any company seeking to establish a casino in Mexico.

The proposal also seeks to establish a referendum among citizens in the affected community to determine whether they want a casino.

PRI legislators want to use the casino-gambling legislation as a tool to boost the domestic economy. A provision introduced by PRI committee members stipulates that casinos must pay 9% of their profits in taxes to municipal, state, and federal governments.

Some business organizations such as the Confederacion de Camaras Nacionales de Comercio, Servicios y Turismo (CONCANACO-SERVITUR) are also pushing for legislation to ensure greater participation by Mexican companies in casino operations. The organization said it will not endorse the measure currently under consideration unless the appropriate changes are made. "This bill discriminates against national investors and favors foreign casino operators," said CONCANACO-SERVITUR president Arturo Gonzalez Cruz.

Among the companies that had expressed strong interest in investing in Mexican casino operations are corporate gaming giants Nevada Gold & Casinos Inc., MGM Mirage, and Park Place Entertainment Corp. "Anybody in the entertainment industry has to look at Mexico," said James Jones, a business consultant who served as US ambassador to Mexico under former US President Bill Clinton.

Some of these companies had been lobbying Mexican legislators heavily to pass legislation to legalize casino gambling, and representatives of these companies had expected their efforts to bear fruit during the current legislative session. "The odds are that before November 2002, it will actually, for the first time, come to a vote, and I am now predicting it will pass," Nevada Gold & Casinos vice president Donald Brennan told the Associated Press in late September.

Similar sentiments were expressed by Bradford Smith, former chairman of the New Jersey Casino Control Commission, who had been hired by the Mexican government as a consultant. "The Congress in Mexico is very serious about bringing casinos into Mexico, and they're very serious about doing it the right way," Smith said.

Congress defers debate on casino legislation

But the gaming companies did not anticipate the widespread ambivalence in the Mexican Congress, which will almost certainly delay passage of a casino-legalizing bill in the near future.

PAN Deputy Armando Salinas Torre, who chairs the committee considering the gaming legislation, said sufficiently strong disagreement exists among members regarding the proposed legislation to postpone a final decision on casino gambling. This has prompted the committee to proceed with modernization of Mexico's gambling laws but without making a final decision on casino gambling.

The PRI, which had initially opposed leaving out the debate on the casinos from the gaming law, eventually agreed to the plan. PRI Deputy Manuel Anorve, the second in command in the Comision de Gobernacion y Seguridad Publica, said his party will still push for discussion of the casino-legalizing measure during the current session of Congress. "This issue is very thorny because of the variety of interests and opinions," said Anorve. "Therefore, we have decided to support discussion of whatever other gambling measures that can be approved and seek parallel discussions on casinos."

In the remote chance that the PRI succeeds in pushing through casino-legalizing legislation, the measure would have to come up for debate in the full Chamber of Deputies. The next step would be for the Senate to debate the issue. But the measure could be cast aside on the floors of the lower and upper houses, given the preoccupation of Congress with debate on the 2003 budget and other important legislative initiatives like electricity reform.

Legislators caution that, even if a bill is approved this year or next year, there is strong sentiment to include the PAN-promoted proposal for a two-year waiting period before operations could begin. This means that the earliest that any casinos would be allowed to operate in Mexico would be in 2005 or 2006. (Sources: The Washington Post, 08/17/02; Associated Press, 09/20/02; Unomasuno, 10/03/02; El Financiero, 10/21/02, 11/12/02; Reuters, Agencia de noticias Proceso, 12/05/02; Novedades, 11/13/02, 12/06/02; CNI en Linea, La Cronica de Hoy, 12/06/02; Spanish news service EFE, 12/08/02; Notimex, 10/17/02, 12/05/02, 12/06/02, 12/09/02; Milenio Diario, 12/06/02, 12/09/02; The News, 12/09/02; Reforma, 10/02/02, 10/07/02, 10/28/02, 12/06/02, 12/10/02; La Jornada, 11/04/02, 12/10/02; La Cronica de Hoy, 11/18/02, 12/10/02; El Universal, 11/18/02, 12/05/02, 12/06/02, 12/10/02)