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Mexico: boom or bust?

Oct 22, 2002 6:19 AM

  The lure of money and tourism has Mexico looking at casinos in a new light. Eyeing what’s estimated to be a $3 billion-a-year gaming market, south-of-the-border lawmakers appear ready to roll the dice.

"I think there is a greater prospect for legalized gaming in Mexico in the next few years than there has ever been before,’’ says former Nevada Gov. Bob Miller. Now a Las Vegas attorney, Miller makes regular trips to Mexico to monitor the situation for several unidentified gaming companies, as well as the American Gaming Association.

Speculation became feverish last year when Mexican President Vicente Fox reversed course and announced that he supported legalized gaming. Fox expressed interest in placing casinos in beachfront resort cities such as Acapulco, Puerto Vallarta and Cancun. Other possibilities are Tijuana, Ciudad Juarez and Mexico City.

But the road to Las Vegas-style gaming is hardly a straight line. Outlawed by presidential decree since 1938, casinos retain a tawdry and crime-ridden reputation in Mexico.

"I’m not sure the politicians even know what’s going on there,’’ says Carlton Geer of CB Richard Ellis’ Global Gaming Group. "The top tiers of government still appear to be anti-gaming. At this point, I’d rate the odds at less than 50-50.’’

But can a country notorious for its public graft and legalized cockfights continue to banish casinos at a time when illegal gambling revenues are believed to be running $500 million annually?

Roughly 250,000 Mexicans fly into Las Vegas from the interior of Mexico each year, making that country the fourth biggest international market for Nevada. And Las Vegas resort companies figure that’s just the tip of the iceberg.

Jeff Logsdon, gaming analyst with Gerard Klauer Mattison, says Park Place Entertainment Corp., MGM Mirage and Harrah’s Entertainment are poised to enter the Mexican market.

"There’s always been an attraction of being an early mover in a country that certainly has a significant economic base at the top end, and a less expensive labor force,’’ he said.

Nevada gamers are keeping their cards close to the vest, but, clearly, they are looking over the horizon. Harrah’s new presence in San Diego County puts it within an hour’s drive of Tijuana. MGM Mirage just announced it was postponing construction in Atlantic City to pursue gaming ventures in new markets — wherever they may be.

Other gaming companies, including Isle of Capri and Phoenix Leisure Corp., a small Las Vegas-based firm, have also expressed interest in tapping the Mexican market.

Harrah’s spokesman Gary Thompson said his company would consider forming partnerships with Mexican investors to develop casinos in Mexico, though he cautioned that there are no talks under way.

Under legislation pending in Mexico, 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, an initial round of 10 or 12 casinos would probably be allowed. Congressional studies say some 155,000 jobs could be created, and that casinos would kick-start a flagging tourist economy.

Jose Manuel Alavez, president of the National Entertainment Industry Association, a trade group, said there has been a little more "demystifying’’ of casinos each year.

"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,’’ he said.

Still, Geer sounds a note of caution. "There’s a lot of spin out there designed to maintain investor interest. I don’t see anything happening soon.’’