south america market update

south america market update 2016 1 SOUTH AMERICA Regulatory Overview Clarion Gaming in Association with Gaming Publishing (G3 magazine) have create...
Author: Shannon Harvey
6 downloads 0 Views 8MB Size
south america market update

2016 1

SOUTH AMERICA Regulatory Overview Clarion Gaming in Association with Gaming Publishing (G3 magazine) have created an exclusive report for Juegos Miami detailing the gaming markets of South America Today the South American market is poised on the edge of major changes many of which will have a profound impact on the gaming landscape in the future. Governments in almost every country have sought to more fully regulate gambling and have passed significant laws which provide clear guidelines and a framework in which the industry may operate. As a result gaming has grown substantially in the region and has increasingly won recognition as a legitimate business which can generate substantial tax revenues.

2

While the gaming industry continues to gain ground, gambling as a pastime has become more popular, widespread and acceptable. Although small compared to other regional markets the gambling industry in Latin America has consistently recorded fast growth. With new gaming laws now being debated as a matter of increasing urgency in a number of jurisdictions the G3 Latin America Regulatory Report 2016 covers how gaming legislation has evolved over the last ten years and focuses on how gaming policy is shaping up today in every jurisdiction in South America. With gaming legislation often going through a long and complex process, the report covers gaming legislation as it has faced every hurdle and all aspects of the market including casinos, slot parlours, on and off track horse race betting, bricks and mortar sports betting, online gaming, bingo and lotteries.

Covering the size and scope of the market, the report pays particular emphasis and offers in depth analysis of the gaming markets in Argentina, Mexico, Brazil, Colombia and Chile. But smaller markets are also covered in detail which we see as having the potential for major growth in the future such as Paraguay, Peru and Nicaragua. However a number of major developments are on the way in two of the region’s largest markets: Mexico and Brazil and these are both covered in particular depth in this report. In Mexico the House of Representatives approved the new Federal Betting and Raffles Law in December 2014 which aims to regulate the gaming industry more efficiently, and this is now awaiting approval in the Senate. In Brazil the text of a new gaming bill which would allow for 35 casinos could be passed before the end of this year.

SOUTH AMERICA Key Developments and Trends Opportunities and major changes in the land-based sector have concentrated the focus of the international community, while online gaming still remains unchartered territory

The gaming landscape in Latin America has seen a remarkable transformation over the last ten years. While a number of governments have passed wide sweeping gaming laws which have further opened up the market for foreign investment, elsewhere developments have been far less positive with a number of governments moving to ban casinos and other forms of gaming completely.

At the same time a number of gaming markets are underdeveloped and this is especially true of the sports betting industry. While the casino and slot parlour industry continues to grow land based sports betting remains in many jurisdictions small scale. Indeed in almost all markets sports betting is limited to a small number of government lottery type sports betting products with little or no brick and mortar option available. This is perhaps particularly surprising given the Latin American passion for sports and the fact that horse race betting is in almost all jurisdictions is well established with a long and distinguished history.

Although the horse racing industry is in decline a number of tracks have been able to remain open due to the racino model which has proven extremely popular in Uruguay, Panama, and Argentina. There has also been more good news of A major issue that remains is illegal gaming. late as a number of agreements have been made Over the last ten years regulatory bodies in Latin to simulcast races abroad from some of the largest America have met with varying levels of success in tracks in Latin America which has provided a eliminating illegal gambling and creating a clearer welcome and well needed boost for the industry. legislative framework in which the land based sector can operate. But illegal gaming remains Meanwhile, online gambling still remains as issue in every jurisdiction especially Brazil unchartered territory when it comes to a good where numbers runners and the mafia control an number of jurisdictions and even when online infamous street lottery called the “Animal Game,” gambling is banned little is done to block locals as well as in Colombia where illegal gaming still from accessing offshore betting sites. However, a accounts for at least 20 per cent of the market, number of governments, albeit slowly, are finally and Bolivia and Paraguay where illegal gaming addressing the issue and could open up the market remains rampant. In addition slot machines to offshore operators while other markets such located outside of casinos are an increasingly point as Uruguay and Colombia look set to allow online of contention in Chile, Uruguay and Mexico. gaming long term.

When it comes to bingo the industry has been impacted negatively by political developments and a lack of interest locally and bingo halls are now banned in Ecuador along with most other types of gaming, while in Venezuela only a small and beleaguered handful remain in the wake of the government’s continued crackdown on the gaming industry. Meanwhile, in other countries such as Paraguay, where bingo has been permitted for over twenty years, the game has simply failed to take off and only bingo on television is popular. Latin America therefore offers an extremely diverse picture when it comes to gaming. Overall there is still much work to be done to combat illegal gaming and open up the market and there is also still huge room for growth especially when it comes to sports betting and online gaming. However the market has improved immeasurably as lawmakers seek to capitalise on the benefits of a well regulated industry and many markets are likely to see a number of major developments in the near future.

3

COUNTRY-BY-COUNTRY gaming sector analysis Country-by-country analysis of gaming sectors, providing regulatory updates and legislative changes affecting all aspects of the gaming industry in the South American market. Sectors include: Casinos and slots, sports-betting, horse racing and off track betting, bingo, online and lotteries

ARGENTINA

CASINOS AND SLOT MACHINES Gaming has proliferated rapidly over the last ten years in Argentina especially in capital Buenos Aires, where according to a recent study gaming has increased 70 per cent since 2007. Nationwide in 2007 there were a total of 80 slot parlours, racetracks and casinos in Argentina. This has since almost doubled to 157. On a national level casinos are less controversial then they are in the capital and they have been increasing steadily especially in the provinces of Rosario and Mendoza. Rosario is now home to the largest casino in Latin America while casinos in tourist hotspots such as Mendoza are adding to the number of tourist attractions on offer. Indeed casinos look likely to expand in the coming years in other provinces such as Missiones in the north east where they will be instrumental in improving tourist infrastructure. Bingo halls in Buenos Aires, meanwhile, are often large scale housing in some cases hundreds of Class III slot machines on the premises and there are there are a total of 15,000 slot machines in the province of Buenos Aires alone. While casinos continue to proliferate nationwide and at a fast pace, especially in tourist hot spots, gaming in the capital is still a deeply divisive and complex issue. Although casinos are banned by law there are still three large scale casinos in the capital. These are the two “floating casinos”

4

docked permanently to the harbour while the third is under the racetrack in the neighbourhood of Palermo downtown. All three have been the focus of a bitter dispute between the city government and the federal government as to who should reap the tax benefits of gaming.

share, the concession to run the first three casinos in the province. Then, in 2003, while Kirchner was president, the National Lottery Commission granted the Palermo racetrack the right to house 150 slot machines. The slot machines were to be run and operated by Casino Club.

This is because while the city of Buenos Aires has been autonomous since 1994 it is the National Lottery Commission which has control over gaming. While a 2007 Supreme Court decision finally passed judgement that the casinos came under federal, not city jurisdiction both parties continue to battle it out over who should reap the tax benefits. All three casinos continue to be the focus of considerable controversy.

Since 2003, the number of slot machines at the Palermo racetrack has expanded greatly, and today the casino now houses approximately 4,000 slot machines and nine electronic roulette tables. According to estimates, these slot machines each generate US$300 per day, which combined totals to more than US$1m dollars per day net win.

The largest casino in Buenos Aires is located beneath one of the most famous landmarks in the city, the Palermo racetrack. Surrounded by the largest park in the city, the racetrack opened on May 7, 1876, as the first racecourse in Buenos Aires. Unfortunately, with the horse racing industry in decline, the track saw falling profits for many years. The track was purchased by Hipódromo Argentino de Palermo SA (HAPSA) in 1992, but for the next 10 years profits continued to decline. Then, in 2002, HAPSA won the right to install slot machines on the premises. The track now follows the racino model (casinos attached to racetracks), which has proven highly successful in the region. The casino is very popular and has brought new life to the track and to the surrounding area. However, there were cries of foul play surrounding the relationship between the now deceased Argentinean President Nestor Kirchner and his friend, the selfmade businessman Cristóbal López. In 2001, while he was governor of the province Santa Cruz, Kirchner granted Casino Club SA, in which López now has an estimated 30 percent

In 2007, HAPSA’s right to run the casino and racetrack was extended from 2017 until 2032. Kirchner, in one his last acts as president (the decree was made five days before he relinquished his post), also ordered an additional 1,500 slot machines to be installed on top of the 3,000 then in operation, in effect ordering the racetrack to increase the number slot machines so that it could meet growing demand. Since then, controversy over gaming in the city has continued, but over another issue: taxes. Casinos in the capital currently pay only half the amount of taxes that casinos located in the wider province of Buenos Aires pay. This is because, in some ways, they are still operating in a legal vacuum, as the city administration and the federal government battle it out over who has control over gaming in the city. The background to this quarrel is that, in 1994, a constitutional amendment granted the city autonomy, and since then the city of Buenos Aires has been governed by an elected major’s office and a 60-member elected assembly. Ever since 1994, the city has tried to collect the tax revenue generated from gaming. However, judicial rulings have opposed these

attempts, ruling that since gaming comes under the control of the National Lottery Commission, it is the federal government, not the city that retains control and that, therefore, it is the state that should reap the tax benefits of gaming. In the meantime, the city’s attempts to collect additional tax revenue from gaming has been thwarted at almost every turn. In 2008, local politicians ruled that the casinos operating in the city’s jurisdiction should pay an 8 percent tax on yearly gross income. But as court rulings are still in place that state that casinos come under federal jurisdiction, the city has not been able to collect this additional tax—meaning that it is losing several millions of dollars in gaming revenue per year. Controversy also extends to the other two casino located in the city—the so-called “floating casinos” that are moored permanently to the city harbour. The first floating casino was granted a licence under then-President Menem in 1999. Via presidential decree, Menem, the conservative Peronist who ruled Argentina in the 1990’s, permitted the floating casino on the grounds that it was on the River Plate. In July 2004, then-head of the Lottery Commission Waldo Farías granted Spanish gaming company CIRSA the right to operate a second boat alongside the first. In 2007 López bought a significant share of the floating casinos. As is the case for the racino in Palermo, the floating casinos are also the focus of a power struggle between the local and federal government as to who should control gaming in the city. Because the boats, which are Mississippistyle riverboats converted into casinos, are officially in national waters and not in the territory encompassed by the Buenos Aires city limits, they both fall under the jurisdiction of the federal government, where casinos are legal. To begin with, the city government rejected this on principle, arguing that as the boats were physically moored to the harbour, they were operating illegally. However, as the city government has reluctantly begun to accept their existence (after several unsuccessful attempts to shut them down), the focus has changed away from whether they should be allowed to who should control them. This debate continues even after the 2007 Supreme Court decision which ruled that the casinos came under federal, not city, jurisdiction. The issue does, however, seem to finally coming to a head under the new administration. Mauricio Macri won the presidential election beating rival Daniel Scioli in a closely contested Presidential race in December last year and his Cambiemos (Let’s Change) party now holds power over the province of Buenos Aires, the City of Buenos

Aires and the executive branch which could mean a more cohesive approach when it comes to gaming. In 2011 while serving as major of the city of Buenos Aires and before becoming President, Macri vowed to continue to strive to put gaming once again under the control of the city.

also launched Pingazo which allows customers to bet on the outcome of the races run in The San Isidro and La Plata racetracks. There are around 400 Turfito outlets in the capital and around 300 Pingazo electronic sales points based in lottery outlets in the province of Buenos Aires.

The recently elected Mayor of Buenos Aires, Horacio Rodriguez Larreta will attempt to place all gaming operations which are located in the city under the city’s jurisdiction for the first time. The move is part of a number of measures which are aimed at the transference of powers from the national government to the city government. Larreta is also looking at ways to transfer jurisdiction over the city port to the city which would put the floating casinos under the city’s jurisdiction for the first time as well.

SPORTS BETTING Bricks and mortar sports betting in Argentina is extremely limited and there are no bricks and mortar sports betting shops. There is only one football betting product available - a pools betting game called Pronósticos Deportivos (Prode) tickets for which can be bought online or at lottery retail outlets. The game records revenues of less than US$100 thousand a year. According to Argentine law Prode is the only company allowed to offer sports betting apart from a small number of online companies and these may only offer their services to those living within the province where they have a licence.

While serving as mayor Mauricio Macri also tried to reach an agreement whereby casinos located in the city would pay back a long standing a debt of between $1.5bn pesos and $2bn pesos in gross gaming back taxes to the city but no agreement was reached during his term in office. Crucially, now that Cristina Kirchner is no longer in power, Lopez who has long been her ally after her husband passed away, has now lost the political protection he had enjoyed while she was president. As a result he is is currently being investigated for money laundering. In addition an envoy of President Mauricio Macri has been sent to inform him that he has one month to repay the tax debt to the City of Buenos Aires of an estimated $4bn pesos for once and for all. HORSE RACING AND OFF TRACK BETTING In Argentina there is one racetrack in the city of Buenos Aires and four tracks in the province - the San Isidro racetrack and the La Plata racetracks are the largest. The others are located in the towns of Tandil, Azul and Dolores. There are also a number of smaller racetracks dotted around the country. The racetrack in Palermo is located near the city centre and boasts one of the best racing tracks in Latin America. It stages 1,700 races a year, including one of the most important events in the racing calendar, the Gran Premio Nacional. The slot machines in the racino have brought customers back to the racetrack, provided vital funding to those involved in the beleaguered horse racing industry and increased the cash prizes for winners. Off track betting for the races carried out in the racetracks in the province are is available at 55 points of sale in the province while there are 8 points of sale in the capital and and 58 other agencies distributed nationwide. Argentines can also take part in a pools horse race betting game called Turfito. Turfito was first given the go ahead by the Buenos Aires Lottery in 2002, and allows customers to make a bet on horse racing in lottery outlets in the capital. In 2004 the lottery

BINGO Bingo halls are controlled and regulated by each state. In Argentina bingo halls are often large scale and in most instances house a large number of slot machines. They are most prominent in the province of Buenos Aires where Spanish company Codere is now the market leader in the sector. In 1991 the company was first granted permission to offer bingo in Argentina and combined Codere now runs just under 5,300 slot machines in its bingo outlets. In 2012 then governor of the province of Buenos Aires Daniel Scioli extended the licences of 14 of the 46 bingo halls in his province in order to meet the shortfall in cash bonuses for state workers. Set to expire in 2013 and 2014 the licences were renewed until 2027 in a deal which saw bingo operators pay a special licence fee. The decision was made through a decree and a resolution. The licence renewal was justified as the funds that it would produce would “ensure the province’s financial sustainability” and “would contribute to supporting the provincial economy as it faces the implications...of the current international financial crisis” according to the decree, signed by Governor Scioli. Under the agreement 5 percent of the resources obtained by the government through this licence renewal was be distributed among the 135 municipal districts in the province. ONLINE Online gaming in Argentina is limited under current rules, and only a very small number of local interactive betting sites are permitted to offer their services and then only in the province where they operate. Generally speaking these sites have faced a number of legal problems and in most cases were closed soon afterwards. The first legally established online sports book went online in Argentina in March 2006.

5

Formoapuesta was granted a licence to operate in the state of Formosa and generated an estimated US$100 thousand in bets per month after going online in March 2006. Initially a joint venture between Argentine investors and UK-listed Company BetonSports, Formoapuestas obtained the licence in the province of Formosa through a government agency called the Institute for Social Assistance in Formosa (IAS). However the IAS revoked its licence shortly afterwards. Similarly vcapuestas.com.ar, which was licensed to operate in the province of Misiones, was also revoked in this case by the State Justice Department. The site was run and owned by Gibraltar-based online gaming company Victor Chandler which announced in 2006 that it had been awarded a licence to operate betting and gaming websites in the province of Misiones. Its licence in Argentina was its first in South America Online gaming is not permitted in the capital of Argentina nor in the province of Buenos Aires. When operators have been found to offer their services outside of the province and capital the government has moved to block them from doing so in the courts. In May 2012, the Buenos Aires Lottery took Bwin to court as players from Buenos Aires province were found to be being using the site while it only had a licence to operate in the province of Misiones. In August 2012, a federal court supported the claims put forward by the Buenos Aires Lottery, arguing that the lottery was the only body permitted to offer sports betting in the province. The autonomous city of Buenos Aires has also been strict when it comes to offshore operators found to be operating locally. In March 2009 a city judge ordered that access to the 888.com.ar website based in Gibraltar be blocked for those living in the city. This was because the company was allowing bets to be made in the city of Buenos Aires in contravention to local law which authorises only those companies with a licence to operate gaming operations within the city limits. As a result 888.com asked for and was granted 48 hours to ensure that its server would no longer allow any bets to be processed in Buenos Aires. The Argentine facing site is now no longer in operation. LOTTERIES Nationwide lotteries in Argentina are run by the government under the Lotería Nacional Sociedad del Estado and money generated from lotteries goes to social welfare programmes. Lotteries in Buenos Aires province are run and overseen by Lotería de la Provincia de Buenos Aires. There are around 3,700 lottery outlets in the province of Buenos Aires. The lottery of Buenos Aires Province now runs a total of twenty different lotteries.

6

BOLIVIA

CASINOS AND SLOT MACHINES Traditionally the gaming industry has suffered due to the lack of a clear legal framework in Bolivia where gaming law dates back as far as 1938 and where casino type gaming has until very recently been banned. The 1938 law banned all types of gaming in Bolivia but due to the rise of gaming the government was forced to grant around two hundred slot parlours a licence to operate in 1997 via a temporary licence. Since then there have been a number of moves to more closely regulate the industry including a number of government led proposals to replace the 1938 gaming act. However, any moves to repeal the gaming act have consistently met with fierce resistance from local municipal governments who under previous rules reaped 85 per cent of the tax benefit of gaming operations located within their jurisdictions.

Set up in 2007 the new gaming board The Authority of Taxation and Social Control over Gaming (AJ) has far wider powers when it comes to inspecting slot parlours and casinos and has initiated a number of high profile raids on illegal gaming facilities. The board issued its first casino licence in 2014 but there are still only two companies licensed to offer gaming in Bolivia: Curucusí Games S.R.L and Max Entertainment S.R.L which have complied with the regulations set down by the gaming board. The other gaming establishments currently operating in Bolivia are all illegal. However while significant progress has been made in Latin America when it comes to regulating gaming, Bolivia still lags significantly behind and the market remains largely unregulated with illegal gaming widespread despite a huge number of raids on illegal establishments.

In 2007 a new gaming act proposed by the administration of President Evo Morales, which would have given the central government full control over gaming, was stalled and then abandoned in the Bolivian Congress. Undeterred the government brought the issue up once again in 2010 before the Congress. The Congress finally managed to pass a new gaming act which allows the central government to reap 70 per cent of the tax income generated by gaming and gives the government total control over the industry via a newly established gaming board.

HORSE RACING The horse racing industry in Bolivia is still limited to local small events and only occurs only at local festivals and national holidays. Horse racing is extremely small scale and there is still no formalised race betting industry in Bolivia.

Although the law does allow for fully fledged large scale casinos it has proven extremely controversial amongst operators as it puts in place an extra tax burden on the both the operators and the players. For the player this amounts to a 15 per cent tax the moment the player buys chips or tokens at a slot parlour or casino and for the operator a 30 per cent tax on gross income is applicable. 30 percent of gaming income goes to the General Treasury of the Nation, 15 per cent goes to the provincial government and 15 per cent goes the municipal government.

BINGO Bingo is popular in Bolivia and many bingo halls are equipped with slot machines. Lotex S.A. won the concession to run bingos in Bolivia and began operating bingo in 2002 in its gaming parlours nationwide under its Bingo Bahiti brand and eventually opened fifteen bingo halls nationwide. Lotex invested over US$12m in Bolivia and announced plans in 2006 to double its investment in the area.

The new gaming act also replaces the previous gaming board within the National Lottery Commission of Charity and Health (LONABOL) which had been hampered by high profile scandals revolving around the illegal extensions of licences. Ex head of the organisation Juan Canelas Morató was found guilty of extortion in 2004 and was handed down a two and a half year prison sentence. In a wide sweeping investigation into the organisation a further handful of high ranking members of LONABAL faced similar charges for offences carried out between 2003 and 2007. This culminated when the Minister of Health was forced to resign from the cabinet, after corruption charges were filed against him for allegedly accepting multi-million dollar bribes in exchange for renewing the license of a casino.

SPORTS BETTING While sports betting is permitted under Bolivian gaming law the sports betting industry in Bolivia is extremely under developed with only a small handful of sports betting shops nationwide.

The largest bingo hall in Bolivia was until 2011 the Bingo Bahiti in Santa Cruz. The opening of the Bingo Bahiti in Santa Cruz was followed by the opening of a US$1m Bingo Bahiti bingo hall in La Paz which opened in 2006. Bingo halls under the Bingo Bahiti brand opened up shortly afterwards in the cities of Cochabamba, Sucre and Tarija. All of the Bingo Bahiti bingo halls offered slot gaming as well as bingo. However in 2011 the government ordered the closure of the Bingo Bahiti halls as they had failed to comply with the terms of their licences. The company was hit with a US$3m fine and the president of the company was arrested. Other members of the board were also charged with a number of offenses while prosecutors claimed that the company had failed to pay US$500m in

taxes. In a corruption scandal which involved a number of local lawmakers the government shut down the bingo halls and confiscated gaming equipment which had been operating illegally. ONLINE In 2012 the Bolivian government conducted a wide ranging study into the issue of online gaming and looked into how gaming is regulated in other jurisdictions such as in Europe and Latin America. However, the government took no action on the issue after the publication of the report and the report made no mention on how online gaming could be regulated in Bolivia. Online gaming remains illegal and there are no plans to legalise online gaming in the near future. However locals still gamble via a large number of offshore betting sites which offer their services locally and it is likely that offshore operators will continue to target the market. The government has not blocked locals from accessing offshore sites and there are no regulations in place which punish players for doing so. LOTTERIES The only institute permitted to run lotteries in Bolivia are those still run by LONABOL which runs a single traditional paper lottery called the Lotería Beneficencia Salubridad, which has the lowest turnover in the entire region. The lottery has been present in Bolivia since 1871 and income made from the lottery goes to the health sector. In the past attempts to revitalise interest in lotteries such as the creation of a special Mother’s Day Lottery have been unsuccessful and ticket sales have remained low. The sector is also fragmented as LONABOL granted companies the rights to run lotteries on its behalf. Some of these companies have failed to award prizes to winners which has led to a lack of confidence in the sector.

BRAZIL

CASINOS SLOT MACHINES AND BINGO HALLS Brazil used to be world famous for its casinos— especially those in Rio de Janeiro. Unfortunately, every casino in the country was forced to close in 1946, when the president banned casinos and all gambling in Brazil (apart from state lotteries). This, however, has not stopped Brazilians from gambling, especially in bingo halls and street lotteries. Bingo halls were first allowed in Brazil in 1993 under the so-called “Zico Law.” Zico was the nickname of famed soccer player, Arthur Antunes Coimbra, who served as minister of sports in the early 1990’s. Under the Zico Law, bingo halls were permitted in order to raise tax income for ailing sports clubs. This law was amended in 1998 by another famed soccer player who also served as minister of sports, Edson Arantes do Nascimento, better known as Pele. Under the “Pele Law,” in

order to raise additional income for sports, bingo halls would be permitted to house slot machine parlors as annexes to their property. Bingo halls began to spread quickly and by 2003 there were over 1,000 bingo halls dotted around Brazil many of which were large scale. By 2004, Brazil had around 100 thousand video gaming machines that could be found in thousands of bingo halls throughout the country. Although the bingo industry was worth an estimated US$2bn per year by 2004, the legal status of the officially regulated 1,100 bingo halls was still uncertain. This was because although the Zico Law was approved in principle, the legislation as to exactly how bingo halls would be regulated never went through Congress. As a result, the majority of bingo halls remained open due to stays of closure or were granted a license by the local government where they were located. In 2004 President Lula da Silva and his party created a commission to look into more fully regulating the sector. Under new proposals, tax income made from the industry would have been designated to combat poverty; the administration also appeared to be paving the way for other types of gambling. Unfortunately, in the same year, the bingo industry became the focal point for one of the worst corruption scandals in Brazil’s history when it was discovered that there were links between bingo halls and organised crime. Worse, gangsters who had made their fortunes running numbers via the so called “Animal Game” had not only become involved in the bingo industry, but they were also found to be bribing members of the Worker’s Party (da Silva’s party) and other high ranking government officials in return for stays of closure and influence. The corruption scandals revolving around bingo halls so early in da Silva’s administration had a profoundly negative effect on the industry as a whole. The president was forced to do an about turn, and in 2004 he announced his intention to close all bingo halls and slot parlors throughout the country. This led to a massive wave of protests nationwide, as the closure of bingo halls meant that 30,000 people would lose their jobs. The act was later declared unconstitutional by the Brazilian Senate, and since then bingo halls have remained open pretty much as they were before 2004. That is to say, in a state of legally enforced limbo. This is because the six hundred bingo halls in Brazil have largely been able to remain open by individual judicial order or via specific legislation now in place in several Brazilian states. In November 2011 before President Rousseff’s new administration went into office, legislators who were allied with the government put forward proposals that were quite similar to the suspended

legislation of 2004. Under their proposals, the industry would be more closely regulated and tax revenue generated per year from the bingo halls and slot parlors would be designated to fight poverty and improve the health sector. New legislation was then put forward in December 2011 to allow bingo halls and slot parlors. Under the new bill, slot machines and bingo games would have to return 70 per cent of the stake back to the player and 14 per cent of gaming tax revenue would be destined for the health sector. But the law was ultimately rejected, by a majority of 212 to 144, under accusations that the industry had illegally sought influence among members of the Lower House and claims that bingos in Brazil were used for money laundering and only added to the problems of organised crime. All the same, there were renewed moves in the Senate to further regulate the sector and green-light casinos soon afterwards. According to proposals put forward by Senator Mozarildo Cavalcanti, casinos would be permitted in certain underdeveloped zones in order to increase tourism. In separate legislation put forward in February 2012 bingo halls would also be permitted. Slot parlors would not, however, be allowed. This was not the first time that legislation had been put forward and in fact, similar legislation to allow casinos had already been on the table in the Senate for more than three years. The real problem was that the executive branch had shown a reluctance to become involved in such a divisive issue ever since the bingo scandals first broke in 2004. However local lawmakers were becoming increasingly aware of the tax income generated by their neighbours via gaming. As a result another attempt to regulate the industry in the senate came in 2014 when Senator Ciro Nogueira, put forward legislation that would authorise casinos, bingo halls and betting around the country. The law would put stiff penalties in place for non compliance including jail terms. Crucially the bill would also legalise the famous “Animal Game” which is estimated to be worth billions of dollars each year. The game is particularly popular in Rio de Janeiro where it is currently controlled by clandestine and criminal organisations. The lottery-type drawing has been illegal since 1946 in 25 of the 26 states with Paraiba being the only state where the game is legal and regulated. According to Senator Ciro Nogueira a state regulated gambling industry would increase tax revenues, create jobs and promote wealth and the legalisation of the animal game would loosen criminal control over the game. The purpose of the bill was to “legalise what today exists even if it is hidden,” according to Nogueira and the bill sought to establish clear rules when it comes to both

7

the online industry and the land based industry. Arguing that Brazil now remains one of the very few member nations of the United Nations who do not allow gambling, the bill was submitted to the Committee on Regional Tourism Development in the Senate. It was initially believed that this law would remain stalled but events took a surprising turn last year. THE NEW LAW While it was initially believed that Senator Ciro Nogueira’s law would in all likelihood languish in the committee stage for several years there could well be fundamental changes to Brazil’s gaming law this year and a move is under way to push forward Senator Nogueira’s law as a matter of urgency. Indeed events are now moving at a fast pace with Brazil closer than ever to allowing casino gaming. This was after it was revealed in September 2015 that Brazil could legalise gambling in order to raise money and help weather the current recession. Brazil’s economy has slumped to a 25-year low with GDP falling by 3.8 per cent in 2015. . The government estimates that a regulated casino industry could generate R$20bn in the first year alone. In September the government unveiled a US$7bn package of spending in order to boost the economy. In the same month President Rousseff and several cabinet ministers met with party leaders from the alliance to see if new proposals which would allow for gaming in Brazil would have their approval. It did and pro gaming legislation based on the bill initially put forward by Senator Ciro Nogueira in 2014 was then put forward to a special committee in the Senate as part of “Brazil Agenda” a business-friendly agenda which is designed to provide a much needed boost to economic growth. In December the Special Committee on National Development approved the new bill. The bill proposes the legalisation of casinos, bingo halls, slot parlours and the “Animal Game.” The text defines the types of gaming that can be played in Brazil, the criteria for how licences are to be granted and the rules for the distribution of prizes as well as how gaming is to be taxed in the future. According to the wording of the new bill casinos must be part of larger leisure complexes, with hotels and restaurants. 35 casinos will be allowed, with at least one per state while some states will be permitted to have as many as three, depending on the population and the economic outlook in each state. The resorts will only be permitted to use 10 per cent of the available space for gaming while the remaining space will be used for restaurants, shops, theatres, exhibition space, as well as others facilities. Bingos will be permitted in municipalities with more than 150,000 inhabitants while the “Animal Game” will be

8

regulated by municipal governments which will also be responsible for tax collection.

out in the face of other types of gambling such as lotteries and bookmakers.

In March the committee approved a number of minor amendments to the legislation and it is is now set to go before to the lower house for debate where new gaming legislation is also being looked at in the committee stage. The special commission tasked with drafting the regulatory framework for gaming in Brazil held a public hearing in February to hear the opinions of experts from abroad in order to more fully understand the operation of casinos and how gaming is regulated in other countries.

Jockey Clubs own racing tacks and are responsible for running them and each track is granted a licence to offer horse race betting in betting shops in the area in which they are licensed. Nationwide there are now over one hundred and fifty betting shops which are officially recognised by the Brazilian Jockey Club and there are now four tracks nationwide.

At the same time the Ministry of Tourism is carrying out a survey into the impact of the legalisation of casinos and bingo halls throughout Brazil. At the request of the executive branch, the Ministry of Tourism began the study late last year in order to support the proposals that the executive branch will eventually put forward in Congress. It is believed that the executive will initially attempt to authorise the opening of casinos in hotels and will use the findings of the report to defend its new policies. However President Dilma Rousseff’s future looks increasingly uncertain after the the lower house voted overwhelmingly to remove her from office in April this year. For now it is unclear how this could affect gaming legislation. According to senators present at a meeting with President Dilma Rousseff in February, the President is in favour of new legislation which would green light gaming in Brazil. However Rousseff has not publicly come out in support of green lighting casinos and pro gaming legislation is not tied to her political future. In addition consensus is growing for the new bill and it could well go ahead despite the growing crisis. BGC UPDATE According to the public statements made by Federal Deputies Nelson Marquezelli (initiator of the law currently being discussed in the gaming commission) and Elmar Nascimento (President of Senate’s Special Commission on Gaming Regulation) during the 2nd Brazilian Gaming Congress on May 11-12 in Brasilia, the gambling bill is scheduled to be voted out of the committee with a 100% support by the end of May, then in June in the lower house to be passed for approval by Senate in the second semester of 2016. The bill is expected to end up on the President’s desk by October. According to those close to the new president, Michel Temer, he is in support of the quick passage of the bill. HORSE RACING AND OFF TRACK BETTING Like many jurisdictions in Latin America the Brazilian horse racing is in decline. The golden age for the industry came between the 1950’s and 1980’s but the industry has for years been losing

The sales volume stand at around US$193m, while estimations of Spanish company Codere put the potential market at US$542m. Of the R$1bn that racehorses generate a year in revenues, the stakes represent R$600m. The remaining R$400m come from animal husbandry, trade and auctions. Besides the Jockey Club de São Paulo, the main racecourses are Gavea in Rio de Janeiro, Cristal in Porto Alegre, and the Tarumã rack in Curitiba. Codere has 10-year exclusivity agreements with some of the main national Jockey Clubs through licences granted by the Ministry of Agriculture allowing the company to broadcast races live in the company’s sports betting shops. Codere began its operations in Brazil in 2005 with a proposal to develop horse racing. Under brand name Turff Bet & Sports Bar Codere in 2006 announced its intention to open thirty sports betting shops in Brazil over the next ten years. The company now runs a total of seven sports betting shops in Brazil. These are located in Pelotas, Porte Alegre, Rio de Janiero and Curitiba. In 2014 Codere reported income of €2.8m and EBITDA of €(0.4)m from its horse race betting operations in Brazil. Although tracks in some case have had to sell off assets in order to pay off debts they have managed to survive and their global potential is only now being tapped into via recent agreements to simulcast Brazilian races worldwide. Through a number of agreements Brazilian race tracks are now being broadcast live around the world commingling local races into single pools betting which means that the industry could benefit from modern, global pari-mutuel industry standards. And those outside of Brazil can now bet directly on the outcomes of Brazilian horse racing for the first time In May 2015 the Rio Grande do Sul Jockey Club in Brazil also announced the launch of a totalising system that allows the simultaneous transmission of horse racing in Brazil and Uruguay with realtime interaction. The new system will allow customers to bet into one common betting system from either Uruguay or Brazil. The new system will link betting from races taking place in the Cristal Race Course in Porto Alegre, Brazil and with those from the Maroñas and Las Piedras

racetracks in Uruguay. The initiative marks an important moment in the Latin American horse racing industry as for the first time in history two gaming markets in Latin America will be integrated through a totalizing system which places both tracks in Uruguay and the Cristal Race Course into a single system of pari-mutuel simulating. SPORTS BETTING While gaming online is banned and there have been a number of moves put forward in both the Lower and Upper House to block internet access to offshore betting sites, the huge popularity of online sports betting has made the government rethink the issue and consider proposals which would not only provide the national lottery organisation of Brazil (CAIXA) with the right to offer online games but would also end the ban on land based sports betting as well. Sports betting remains banned under Brazil’s gaming laws and the only legalised form of sports betting (apart from a small number of Codere horse race betting shops) is via lottery type games offered by CAIXA. This is nowhere near enough to meet demand and Brazilians have been tuning to offshore gambling sites in increasing numbers. The impetus to regulate both the land based and online industry is linked directly to the declining fortunes of Brazilian football clubs which owe almost a billion dollars in back taxes. In January 2012 CAIXA along with the Ministry of Finance began to look at ways to offer sports betting online and in sports betting shop where locals would be permitted to bet on the outcome of local football matches. One of the most significant findings during its investigation was that the amount bet offshore on Brazilian sports was six times the turnover recorded by Timemania — a CAIXA run sports betting game designed specifically to raise cash for local struggling football clubs.

Brazil’s gambling laws would only grant the Brazilian state lottery the right to offer sports betting via a third party. As a result so far the government response to the issue reflects the somewhat conservative mood of the country with a tendency to keep the 1946 ban in place. As a result while the market seems to be opening up it is only opening up slowly and the sports betting offer is still extremely limited. It is believed that for now that sports betting could be expanded but will be limited short term to CAIXA products. This is a far less controversial solution than green lighting sports betting via the internet or in bookmakers. ONLINE Although online gambling is currently banned in Brazil it is estimated that Brazilians gamble around US$600m a year via offshore sports betting sites. Today it is estimated that about 8.7 million Brazilians play some form of online gambling. While online gaming has grown there have been a number of moves in both the Senate and House of Representatives to ban online gambling outright with the latest attempt in the Senate to ban online gaming coming in 2012. However since then government sponsored studies have consistently proven that the government has been losing out on millions in tax revenue and the government has sought a more pragmatic approach when it comes to the issue of online gaming. The latest development came in in May 2015 when the special committee of the House, which is responsible for strengthening the Program of Olympic Sports, met to try to adopt text that would create the Fiscal Responsibility Law of Sports. The project includes, among other things, the legalisation of online betting on football matches.

As a result momentum began to quickly grow around the issue and later in the same year during a debate in a public hearing held by the Commission for Tourism and Sports in the House of Representatives a number of legislators argued that the opening up of the market would not only be able to generate additional revenue from licences but clubs could also benefit enormously from sponsorship deals with offshore betting companies.

According to the draft proposals, bets would be permitted during Brazilian Championship matches such as, the Brazilian Cup and the State Championships and could be managed by Caixa. Under the proposal, 16 per cent of the proceeds would be allocated for investment in sports in primary schools. According to the proposals money generated by online football betting would be destined for the government and for football clubs so that they could pay off their debts.

However, the government only looks prepared to go so far when it comes to opening up the market. Despite initially promising signs it is becoming increasingly apparent that the government will seek to create a government monopoly over both the online and land based industry and that CAIXA will be the sole operator of both. Under current proposals now being considered by The Finance Ministry any bill that would change

In addition Senator Ciro Nogueira’s bill which is now being debated in Congress would allow for online gaming although for now the terms and under what conditions sports betting would be allowed remain vague. While the main focus for debate has been on the land based sector some foreign companies are already moving to take advantage of the market

should Brazil liberalise the market. Earlier this year Codere launched a portal for online gambling in Brazil in collaboration with the Jockey Club of Porto Alegre. The website launched in its beta stage in order to take advantage of the possible legalisation of gambling in the country. However, those targeting the market from off shore could encounter obstacles in the future thanks to the Brazilian Internet Bill of Rights which was passed in April 2014. The bill made all online transactions subject to Brazilian law and gave the state the authority to block sites accused of flouting local conventions. The bill sets to implement restrictions on the use of unlicensed online gambling and sports betting operators. This could give the government more power when it comes to targeting offshore operators and would give authorities the right to block foreign websites LOTTERIES In Brazil the largest state owned bank runs lotteries while a number of state lotteries are still also permitted. The Federal Lottery was set up in Brazil as a monopoly in 1961. Caixa Econômica Federal, known locally as CAIXA, is the biggest public bank in Latin America. In addition to Caixa, states are also permitted to operate their own state lotteries and they outsource running of their lottery operations to outside companies. Around half of the income generated by CAIXA run lotteries is ploughed back into Brazilian society and is channelled to its beneficiaries. The CAIXA lottery sales network is extremely well developed and extensive and encompasses the entire territory. In Brazil there are a total of 45,333 CAIXA lottery shop terminals which register an average of 13.7 million transactions per day. These include lottery and non-lottery related transactions. There are now 35,000 service outlets nationwide including 13,251 lottery shops. Brazilians can also pick up benefit cheques at lottery offices and carry out basic banking services giving lottery outlets greater appeal. For now betting on CAIXA’s products is limited to its internet banking system. However, plans are underway to offer all of its products online so that the entire federal lotteries portfolio will be available on virtual channels including Smartphones and tablets. Online availability of lotteries is now being developed as a priority and it is hoped that once in effect that it will attract a wide number of newer players and should have appeal especially amongst those who are not in the habit of visiting lottery shops. A number of other changes could also soon be on the way with the Brazilian government now looking to privatise instant lottery tickets in order to increase revenue. Instants are currently run

9

by CAIXA. According to government sources, the privatisation of instant tickets would generate revenue of between R$2.2bn and R$4bn a year while annual revenue for the government would stand at around R$1bn. Under present plans now being studied in the Ministry of Finance a private company would be permitted to develop the business after an initial public offering (IPO) or after a licence tender process was carried out. In addition in August 2015 the government passed a new law which allowed for a new football themed instant game in order to raise revenues for cash strapped football clubs called Lotex. The legislation affects the renegotiating of millions of pounds in back taxes owed to the government by football clubs and is predicted to ensure better management of the sport in the future. In March President Dilma Rousseff extended the themes for Lotex with immediate effect so that from now on the game is not restricted to football. Consequently Lotex can now be based around holidays, cultural events and licensed fictional characters as well as other themes in order to increase the commercial attractiveness of the product

CHILE

CASINOS AND SLOT MACHINES In 2005, the Chilean Congress passed its most significant gaming law in the nation’s history. The law, first driven by the administration of then President Eduardo Frei, had been on the table since 1999 and was aimed at regulating casinos, increasing their numbers, and more equally distributing the tax revenue they generated. After an extremely turbulent time in both the Senate and Chamber of Deputies, the law was finally passed in 2005 and operators were invited to bid for the 18 new licenses on offer. The law, known as Act N° 19.995, also created an independent gaming commission called the Superintendencia de Casinos de Juego (SCJ), which would be responsible for regulating the industry.

to have adjoining amenities ready. However, in many cases operators applied for and were granted permission to expand the investment in their wider facilities on offer surrounding their gaming operations.

where they are based. In addition, the statute provides that from that date onwards, those municipalities will continue to be a home to a casino for a total of three periods of fifteen years each.

As a result, many of the new casinos in Chile are part of a brand new five-star hotel and wider entertainment facility. Indeed, some of the new casinos not only offer gaming in a Las Vegas-style setting, but they also boast conference centres, bars, restaurants and, in one case, even a museum.

Once the last period expires, a license may be renewed for successive periods of fifteen years unless it is opposed by the Resolution Council of Chile, which is a committee made up of members of the lower and upper house. The new law comes as part of a wider package, which seeks to regulate the industry more closely, and the municipal casinos will eventually come under the supervision of the SJC.

One of the reasons it took so long for the law to be approved by both Houses of the Chilean Congress was the issue of exactly how the casinos would be taxed and how those taxes would be divided. Before the new act was approved, tax income generated by casinos went directly to the municipality in which the casino was located, providing major sources of revenue to local governments. Under the new act, gaming tax income generated by the new casinos would be divided between the regional government and the local municipality while the casinos which were already present in Chile would continue to come under the supervision of the municipalities. Apart from the municipal casinos there are now sixteen casinos which come under the supervision of the gaming board. According to the latest statistics released by the gaming board in January gross gaming income stood at $25.7bn (Chilean pesos) an increase of 8.3 per cent compared to the same month last year. The SJC also reported in its latest annual report that casinos in Chile recorded an increase in revenues in 2015 of 14.3 per cent compared to 2014.

Before 2005, there were seven casinos in Chile, which combined generated about US$85m in gaming revenue per year. The new law green-lighted-large scale casinos with both slot machines and table games. As the law was designed to help stimulate tourism, it was decided that five types of gaming would be allowed on casino premises: bingo, cards, roulette, dice and slot machines.

The casino industry will also see a major expansion in the coming years. While Chile’s gaming law of 2005 allowed for the construction of eighteen additional casinos, the seven municipal casinos which were already in operation before 2005 were facing an uncertain future as their licences officially expired on 31 December 2015. However the seven mayors from the seven municipalities which operate municipal casinos in Chile organised a high profile campaign in local media in order to ensure that their cities did not lose out on gaming tax revenue in 2016. Officials warned that changes in licensing could have a significant impact on the local economy as they could lose out from 20 to 40 per cent of yearly revenue should they lose their casino concessions.

Licenses for the new casinos run for 15 years, and during the bidding process the absolute key to winning a licence was an operator’s ability to prove that its project would significantly increase tourism in the area. Once the license was granted, the operator was given two years to get the casino up and running and an additional three years

The campaign paid off and in August 2015 the President of Chile, Michelle Bachelet, signed into law new regulations, which extended the licenses of the seven municipal casinos until December 2017. President Bachelet justified the new law by saying that the casinos in the municipalities already play a significant role in the communities

10

In March the SJC published the requirements for the upcoming tender process for the municipal casino licences. In a statement published on its website the SJC’s Resolution Council laid down the minimum requirements for the new licences including a guaranteed minimum financial bid depending on the size and location of the new casino. This varies from US$526 thousand (for the casino located in Puerto Natales) to a maximum of US$22.3m (for the casino located in Vina del Mar) in order to “foster greater competition” within the industry. In addition the SJC will take into account and welcome any additional projects connected to the casino which will improve tourist infrastructure. According to estimates released by the SJC, the new tender process could help raise tax income generated for the state by the new casinos by as much as 46 per cent on average while gross gaming income (which will be divided equally between the municipality and the state where the casino is located) will increase by 20 per cent. This will herald in a number of new large scale casinos especially as a number of the municipal casino licenses, such as the licence for Vina del Mar, are located in the most popular local tourists destinations. One persistent problem for the gaming board, however, has been the continued growth of illegal gaming in so called “neighbourhood slots” which have been able to grow quickly as local governments have not drawn a clear line between slot machines and Skill with Prizes Machines. Despite the fact that slot machines outside of casinos are strictly prohibited in Chile’s Gaming laws of 1995 slot machines outside of casinos have grown in number considerably. It is estimated that there could be as many as 150,000 illegal slot machines located in slot parlours with a further 50,000 slot machines located in small businesses and shops. HORSE RACING AND OFF TRACK BETTING There are eight racetracks in Chile. The two largest tracks, the Hipódromo Chile and the Club Hípico de Santiago, are located in the capital. Horse

racing is in decline but there have been some improvements in off track betting via the Teletrax network which offers live broadcasts on horse race in betting shops throughout Chile. Teletrax also allows customers to make a wide variety of bets online and provides HD broadcasting of races via the internet. Chilean company Sportech is in charge of developing the online service and the product went live in January 2015 with good results in its early stages. Both the Hipódromo Chile and Club Hípico de Santiago – now offer locals the chance to bet on horse races staged at each racetrack online. There are around 200 Teletrax betting shops dotted around the country and around US$150m is bet on horse racing on the four racetracks that are part of the Teletrax network. SPORTS BETTING Sports betting shops are not permitted in Chile and there is tremendous room for growth in the land based sports market. In addition there is very little to indicate that the government intends to open up the land based market further even though there have been a number of proposals put forward to regulate the online industry in the National Congress. For now sports betting is limited to games offered by the lottery. In Chile FOB sports betting was first offered by lottery company Polla Chilena de Beneficencia which runs lotteries on behalf of the Chilean government. The company was first authorised to offer football pools betting in 1975 under brand name Polla Gol. However, due to a steady fall in popularity the product was temporarily taken off the market in 2004 and then re launched allowing customers to make bets online through the Polla Gol website. Polla Gol allows customers to bet on the results of national and international football matches. In 2007 the company launched a new FOB product called Xperto which quickly became popular in Chile and allows players to bet on the outcomes of a much wider number of sporting matches including international events such as the NBA. Although these games are popular they make up a small proportion of lottery income. BINGO Bingo halls are permitted as long as they are part of casinos and a number of casinos in Chile have bingo halls attached. While bingo was until recently only allowed under special licence by charitable organisations today there are over 2,000 bingo seats nationwide. Bingo is aided by the fact that the game fits in well with local government policy when it comes to gaming in Chile. Due to the more sociable nature of the game and low stakes involved bingo is often seen as a lighter more accessible betting option and bingo in Chile is seen to be in keeping with legislation which seeks to promote casinos as wider entertainment centres.

Although bingo in these establishments accounts for only around 0.3 per cent of GGY the game has since proven to be an integral part of the newly revitalised gaming industry in Chile as it fits in so well with the aims of the gaming act of 2006. The majority of the casinos in Chile now include bingo parlors some of which are large scale with the largest housing over three hundred bingo seats. ONLINE While online gaming is expressly banned under its gaming laws of 2005 Chileans gamble an estimated US$12m a year online and many operators have already made significant inroads into the market even though the government has been quick to sanction any online gambling company which have sought to promote themselves in local media. For some years lawmakers have been eyeing European legislation to see the outcome of the liberalisation of the market in places such as Spain, Italy and France and could in the future begin to offer licences to offshore companies looking to get on board. In June 2012, Senators. Antonio Horvath and Ricardo Lagos submitted legislation that would grant have granted a limited number of online licenses to casinos that are already licensed to operate in Chile. In 2013 their plans were put before the the Finance Committee. The law also proposed regulatory standards, both for operators and players alike. While introducing the bill the senators highlighted the fact that: “The situation created by the emergence of new technologies and remote channels, has led to the appearance in the gaming market of new operators for which the current legislation does not provide adequate regulatory control . . .” and added that “this growing form of online gambling on offer has generated the need to establish clear a regulatory framework.” The law however became stalled in the Senate and was never passed. Other proposals on how to regulate the industry have come from the lottery. In September 2012, Polla Chilena - the Chilean State Lottery requested that the government grant it licenses to run an online casino. According to lottery officials, this would help the lottery adapt to current market conditions and would also curb illegal betting via unlicensed offshore betting sites. However despite the very real need to address the issue and proposals coming from different sides the government has not taken a clear stance on the issue and Chileans continue to gamble via offshore betting sites. LOTTERIES Polla Chilena de Beneficencia is a state owned company that operates and administers national lottery games including Lotto, numbers draws and instants as well as sport betting games in Chile. Polla Chilena is now one of the most

important state owned companies in Chile and its product sales account for over 63 per cent of the lottery gaming market. In January 2016 Intralot signed a contract with Polla Chilena for the management of its online games. Under the terms of the agreement the company will redesign Polla Chilena’s online gaming portal and offer an updated number of mobile applications, for lottery and sports betting to Chilean players. It will also update the lotteries sports betting games such as Xperto. The only other company that is authorised to run lotteries in Chile is the Lotería de Concepción. The Lotería de Concepción was created in 1921 in order to provide financing for the then newly established University of Concepción. 25 per cent of profit made from ticket sales still goes towards the University and a further 5 per cent is divided and shared between various charities. The Lotería de Concepción products are Kino, Kino 5, Imán and Boleto Lotería.

COLOMBIA

CASINOS AND SLOT MACHINES Generally speaking Colombians really like to gamble and it is estimated that 61 per cent of the adult population regularly use a part of their monthly income on gaming. According to some estimates Colombia will need at the very least 30,000 more slot machines to meet growing demand in the coming years. The Colombian casino sector continues to thrive due mainly to the approval of Law 643 in 2001 which initiated a system of control against illegal gaming and improved the management of resources earned from all types of gaming in the region. ETESA, the gaming regulatory body in Colombia, was set up in 2001 with the aim of raising income for the dilapidated health sector. Over the following years gaming tax revenue increased by over 500 per cent. Illegal gaming though was still a serious problem in Colombia and accounted for around 20 per cent of all bets made before 2008. Of the 65,000 slot machines that were operating legally a further 20,000 slot machines were operating without a licence and together were generating around $650m a year. This provoked then President Uribe to grant ETESA more powers to combat illegal gaming but despite a crackdown the illegal gambling sector continued to grow at a fast pace. In 2009 ETESA awarded ten new gaming licences, allowed nine gaming centres to expand their operations and renewed twenty two contracts. Gaming licences were awarded for a minimum of three and a maximum of five years and were renewable. However casinos and slot parlours nationwide were hit with an extra tax in February 2010. In order to raise a half a billion dollar shortfall in the health budget the government

11

imposed a series of taxes as part of an emergency health care bill. Taxes were hiked on cigarettes, alcohol and gambling and were designed to provide emergency funds through until the end of 2011. For casinos VAT was raised from 5 per cent to 16 per cent. There was more bad news for the industry in late 2009 when newspaper reports began to emerge accusing ETESA officials of extorting casino and slot parlour owners. Several arrests were made and a full scale enquiry was launched as it was discovered that members of ETESA were routinely turning a blind eye to illegal slot parlours in return for monthly cash bribes. In late January 2010 President Uribe officially announced that he had issued a decree whereby ETESA would gradually be phased out.

operations. According to the latest figures released by the Colombian Gaming Control Board 40 per cent of households have at least one gambler in their family while the gaming industry generates revenues of more than $10bn pesos a year and has grown on average between 4.5 and 5 per cent per year. Slot machines, casino games and bingo are granted permission to operate via licence on a concession basis to any private company that is able to operate them. Casinos in Colombia are categorised in the same way as slot parlours. A fixed monthly fee per slot or gaming table is then paid to the board, whilst a sales tax is also paid on each slot. The minimum number of slot machines per parlour is 80. Licences can be granted for no less than three years and no more than five.

In 2012 a new board called Coljuegos was created. Made up of members from a number of government ministries and with its director directly appointed by the president, Coljuegos almost immediately began a sustained attack on illegal gaming with raids nationwide, closures and the decommissioning of illegal slot machines. Despite this illegal gaming still remains rampant. According to a study carried out jointly by Coljuegos and the National Federation of Merchants (Fenalco) in 2015 at least 2,000 local businesses in Bogota are operating illegal slot machines on their premises. This is despite the fact that heavy penalties are now in place for non compliance with those found guilty of offences liable to pay of up to $50m pesos (around US$20,000) per illegal slot machine as well as six to eight years in prison.

Today there are an estimated 3,200 slot parlours, bingos and casinos in the country, with 83,558 slots nationwide run by 384 licensed operators. According to figures released by Coljuegos, the sector reported growth of around ten per cent in 2014 and taxes generated for the health sector increased by 25 per cent in the same year. According to the latest figures they generated around U$756m in 2015.

However the outlook is looking increasingly positive for the industry. With a larger staff, a wider remit to enter and inspect casinos and technological advances regarding the online monitoring of gaming operations now at its disposal, under current plans tax revenue generated by the industry is set to increase over the next two years by as much as $1bn according to local estimates. In addition, according to a study carried out by research group Quali on behalf of Coljuegos, there is still a huge opportunity to bring newer brands into the market as there is rising demand amongst younger players and Coljuegos is expanding the number of games that can be played.

The online monitoring of slot machines involves a total of 54 operators and 396 gaming operations in all. Although the new system might bring a greater level of accountability to the industry local operators have been less enthusiastic with the new move which they say has come with a multimillion dollar price tag. Operators were permitted time to become part of the system gradually until all of their slot machines were connected to the government server.

Indeed despite illegal gaming Colombia has consistently proven to be a bright spot in the Latin American casino industry and the number of slot machines and casinos has more than trebled over the last ten years. While it is estimated that illegal gaming still accounts for around 20 per cent of all bets made in Colombia the legal sector has continued to grow year on year with operators such as Spanish company Codere reporting significant growth in their Colombian

12

Slot machines are the most popular form of gambling: 9.2 times higher on average than other types of games. All slot machines in Colombia are now obliged to be connected to a centrally government controlled server. The connection of all slot machines online was first considered in 2008 when Colombia changed its gaming laws and was then passed into law in 2010.

HORSE RACING AND OFF TRACK BETTING According to Colombian gaming law bets on horse races staged either locally or from abroad are legal and are licensed by the municipality or district where they are located. Licences are granted for ten years. In its heyday the horse racing industry employed over 40 thousand people in Colombia but a total of eleven tracks have closed over the years due to decreasing popularity while the industry was singled out for high taxes in the 1970’s and 1980’s with taxes ultimately reaching 30 per cent which meant that a large number of tracks were forced to close.

However recent amendments to Colombia’s horse racing laws are having a beneficial effect on the industry with the opening up of thirty betting shops scheduled to open later this year and a major racetrack set to open soon. Amendments to Colombia’s horse racing laws will cut taxes to just one per cent, extend licences for ten years and give local municipalities more say over the industry. Previous Head of Coljuegos Cristina Arango outlined the reasons for the move in November 2015 and explained why the industry tax rate would be lower compared to the tax rate for other popular games in the region such as Baloto – a lottery which runs twice a week and Super Astro – a lottery type game based around the signs of the zodiac. “This rate is lower than Baloto which stands at 32 per cent and compared to sports betting which stands at 24 percent and Super Astro which pays 10 per cent. It’s a significantly lower rate as what we are trying to encourage is this type of business which involves large investments with coordination between horse breeders horse track operates, jockeys and track staff,” she said. In December 2015, the government awarded the Hippodrome San Francisco SAS the right to operate horseracing in the department of Cesar. The 3,000 person capacity track will be run by a group of businessmen who will re launch the Racecourse San Francisco, near Valledupar. The track was also granted the right to offer its races online and is permitted to simulcast its races in betting shops throughout Colombia. The company also plans to open up 30 betting shops by the end of this year, of which half will be in Bogota while others will be located in Medellín, Cali, Barranquilla, Eje Cafetero, los Santanderes and Valledupar. SPORT BETTING In October 2013 Coljuegos announced that it would allow pari-mutuel sports betting. The bidding process ended in April 2014 after Coljuegos had carried out two public hearings on the issue with the aim of selecting a single national operator to operate the game nationwide. The licence was awarded to local gaming company Corredor Empresarial S.A. which also runs a Super Astro. The company was granted the right to operate pari-mutuel sports betting after winning against GTECH (now IGT). The company will provide the public health sector with 24 per cent of gross sales generated by the game which could exceed $50bn pesos (US$26,291,483.52) over the duration of its contract. Pari-mutuel sports betting is limited to football matches after an agreement was reached with Colombia’s first division (DIMAYOR) but

it is believed that this could be expanded to encompass a much wider variety of sports in the future and locals can already bet on the outcome of matches outside of Colombia. The game went live in October 2014 and should eventually be available in around 4 thousand points of sale There are no bricks and mortar sports betting shops in Colombia. Rather the sports betting offer is strictly limited for now to pari-mutuel betting via terminals located in lottery outlets. With the granting of the licence for pari-mutuel betting it is believed that the sports offer in Colombia could begin to expand in the near future but this expansion will in all likelihood be limited. As yet the gaming board has given no indication that it plans on broadening the industry to include sports betting shops. BINGO In Colombia licences to run bingo halls are granted in the same way that they are for slot parlours and casinos, but the minimum number of seats depends on the size of the population of the municipality in which the bingo operates. Bingo is becoming increasingly popular in Colombia and the number of bingo halls has more than tripled since 2002. The number of bingo positions grew 13 per cent from 21,398 in 2013 and to 24, 677 in 2014 according to the latest figures available. The market leader is Codere. ONLINE Interactive casino type gaming and sports betting are not allowed over the internet in Colombia. Despite plans announced by ETESA in 2008 to allow online betting via licensed operators or by the state these plans were overshadowed by the scandals that hit ETESA in the same year. Colombian gaming law grants the gaming board the right to offer online games on an exclusive basis. In 2013 Coljuegos released a statement to the press saying that it was “carrying out the necessary studies to regulate games of chance on the internet, in order to offer new alternatives for the market.” The board is becoming increasingly vociferous in its statements aimed against offshore operators which are offering their services locally. In 2013, in what was to be believed to be a move ahead of the creation of a set of new regulations, the board issued a number of warnings to unlicensed operators accusing them of undermining the funding of public health services. The board’s increasingly tough public stance on the issue could herald major changes in the near future. In the past Coljuegos has been strongly protective of its monopoly over gaming and while illegal gaming has proliferated the board is waging an increasingly visible war on illegal gaming in the media. It is believed that this will soon

expand to online gaming and could lead to the implementation of a number of measures which could include the blocking of offshore operators in Colombia and possibly penalties on players found to be breaking the law. In November 2015 the then Head of Coljuegos Cristina Arango announced a major crackdown on online gaming and also announced plans to block offshore gaming sites offering their services to locals. The new rules followed the largest crackdown in Colombian history on the land based sector. The board plans to block sites via local police agencies in what could herald one of the strictest polices again online gaming in the entire region. “We have identified around 200 sites and the idea is to control them via a program in conjunction with the Ministry of Technology and Information and the Cyber Crimes Police. With them we are setting up a similar scheme to the struggle against child pornography in order to block these gambling pages on football, poker and some online lotteries,” Cristina Arango said. However, the debate on exactly how Coljuegos would go about preventing offshore operators from targeting the market is at an early stage in terms of providing concrete solutions. But once Coljuegos permits online gaming it will in all likelihood seek to protect its monopoly and enter into an agreement with an operator to offer online gaming on its behalf. In addition as part Colombia’s National Development Plan 2014-2018 which is aimed at setting the guidelines for growth and improvement in the country Coljuegos began to seek permission to offer a number of new games such as instants and online games and sports betting over the internet. Online games are not covered in current gaming law and the federal government is seeking to gain control over the online space as it considers itself the ideal body to launch and operate new games. LOTTERIES The lottery market in Colombia is extremely varied and there is a wide and extensive sales network throughout Colombia. The most popular lottery games in Colombia are Chance, Baloto and Super Astro. Combined all lottery games represent around 1.5 per cent of Colombia’s gross domestic product. Baloto began fourteen years ago while Chance started over 60 years ago and Super Astro began in 2000. The Chance Game, also known locally as “Apuestas Permanentes,” first began in the late 1970’s in the region of Antioquia and quickly spread nationwide although it was illegal. It was finally legalised in 1982. In 2014 sales for Chance reached US$860m.

Chance is offered via a sales network Paga Todo Grupo Empresarial en Linea S.A. (GELSA) which is the largest privately-owned Chance gaming company. In 2002 GTECH (now IGT after the companies merged in 2015) and GELSA joined together to officially launch ‘Apuestas Permanentes’ (Chance), utilizing GTECH’s technology. In January 2011 GTECH announced that it had signed a five and a half year contract extension with Grupo Empresarial en Linea S.A. (GELSA), to continue providing online lottery technology and commercial services in Colombia. Baloto runs twice a week and there are around 10,000 points of sale nationwide in 420 municipalities in Colombia. GTECH was initially awarded a 10-year concession contract to bring the Baloto game to Colombians in December 1999 and the first draw was held in January 2001. In its first ten years GTECH recorded sales of over $1.5bn pesos for the game. Meanwhile, the current concession of Lotto game Super Astro came to an end in April 2015 but was re awarded to Colombian company Corredor Empresarial S.A which has operated Super Astro since 2010. The new licence grants the company the right to offer the game for another five years during which time it will return 24 per cent of gross income back to the health sector. Besides Chance, Baloto, and Super Astro there are also a wide number of games offered by each state. However, the local lottery sector per region is in decline and the products have been losing popularity for over ten years. They have also been plagued by a number of corruption scandals. The most recent of which was in March 2015 when ex head of the Lottery Board for the state of Huila, was arrested along with a former legal representative of a lottery firm, for alleged irregularities in the awarding of a lottery licence worth millions of dollars. As a result of falling revenues and corruption scandals it is looking increasingly likely that local lotteries could be put under the control of Coljuegos in order to raise revenue. As already mentioned plans to take lotteries out of the control of local governments and place a number of new games under the control of the Coljuegos are now underway as Colombia debates the National Development Plan. If the clauses introduced by the national government are approved this could lead to major changes in the Colombian lottery sector. New plans now being discussed would affect online gaming, sports betting and a number of lotteries. However local leaders are arguing that the federal government is seeking to wrestle financial control of lotteries and other games away from local districts in a bid to strengthen federal authority over local districts. In all the

13

Government has introduced three articles to Colombia’s National Development Plan 20142018 which would affect the gaming industry as it seeks to make way for new games which have yet to be developed on a large scale including instant lotteries, online gaming and sports betting. However, the Federation of Departments have argued that plans to move lotteries from state control to federal control would be unconstitutional as the Constitution grants the 32 departments control and exploitation of all local lotteries and changes to that law could not be made via the National Development Plan.

COSTA RICA

CASINOS AND SLOT MACHINES In common with many other countries in the region casinos were first permitted in order to boost tourist infrastructure and were only allowed in hotels. The regulation of gaming in Costa Rica began in 1922 whilst a law in 1974 saw a law specifically for gaming and betting. In 1987 a number of changes were introduced concerning tax laws for casinos and gaming halls and casinos were permitted in three stars or above hotels as required by the Costa Rican Tourism Institute. From the early 1990’s casino began to develop rapidly and by 1999 there were 21 casinos whilst in 2006 this had shot up to 46. The law for casinos was designed initially with the tourism industry in mind and casinos were permitted in hotels with the number of tables and slots dependent on the number of stars the hotel possessed. Most casinos in Costa Rica are understated and on average have around six table games and between 50 and 100 slots. With around 45 casinos now operating nationwide the vast majority are located around the most well-known beaches with another handful located in the capital. Unfortunately, casinos in Costa Rica have been consistently singled out for special attention from the Department of the Treasury and have been hit by a series of additional taxes and restrictions over the years. In 2011 the newly elected government of Laura Chinchilla promised to raise taxes in order to raise money in order to combat growing crime and a tax hike was proposed along with an additional yearly licence fee for operators in 2012. The law also allowed for the establishment of casinos outside of hotels for the first time. Despite the fact that the bill had the backing of President Chinchilla the law in its original form struggled through the Costa Rican assembly with lawmakers objecting most strongly of all to the free-standing clause in draft legislation. However, casino legislation fared far better in 2012 and revised legislation was met with widespread approval in its second reading in June. Passed by 42 votes to 1 the “Law on Casino Taxation” regulates both casinos and call betting

14

centres in Costa Rica. According to the law, new casinos are only permitted in hotels rated four stars and above. The law also raised taxes by imposing a 10 per cent tax on net profits on all casinos in Costa Rica. In addition casinos have to pay 60 per cent of the equivalent of a basic worker’s salary (US$720) per table on the premises and 10 per cent per slot machine. This amounts to US$432 per table and US$72 per slot. Due to the very high tax rate the casino industry in Costa Rica has been showing continued signs of decline. According to industry insiders the industry has not been profitable for over three years now and there have been a number of significant closures of late due to additional obstacles such as a smoking ban, high taxes and illegal gaming which have forced other larger operations to reduce their running costs. In November 2014 two casinos were forced to close which left 200 people out of work while a number of casinos are running at a loss and could soon close as well. Faced with a declining industry in December 2014 The Costa Rican Tourism Board launched a new campaign aimed at ending illegal gaming on the island and began to enforce new powers granted to it by Law No. 77 which was passed in the same year. Violation of the provisions of the new Act carries fines ranging from US$5,000 up to US$10,000 per violation. In addition, criminal penalties may also now be imposed on those found to be breaking the law. The new act was welcomed by operators but it has done little to reduce illegal gaming and the tax burden still stands. The Treasury Department estimates that there could still be as many as 75,000 illegal slot machines operating in Costa Rica today. HORSE RACING AND OFF TRACK BETTING The last horse race track in Costa Rica closed down in 1995. Wagering is possible on races simulcast from other countries particularly from those in the US in the small handful of betting locations on the island. SPORTS BETTING Sports betting is also permitted in Costa Rica but the offer is extremely limited. There are only a small handful of sports betting facilities located in casinos. BINGO Bingos are permitted but funds raised are for the Red Cross. ONLINE Online gaming sites may not offer their services to locals but Costa Rica initially proved an attractive proposition to online casino operators. This was because set up costs were low, there was no special tax on online casinos and foreign investors did not pay taxes on revenues generated by their

gambling businesses. In addition there was and still is no governmental or regulatory framework governing online gambling. Combined this makes Costa Rica a unique jurisdiction as companies can operate without a gaming license. Bookmakers were initially attracted to Costa Rica in the 1990’s due also to the strong technological infrastructure, educated workforce, stable government, close proximity to offshore banks and loose laws. By 1999 online gambling operations were receiving on average 20 thousand calls per week and by 2000 Costa Rica had transformed itself into a highly significant gaming centre and was home to around 125 online betting businesses. This quickly increased to 300 over the following years. Internet gaming services could also in theory tap into the American market The US Federal Wire Act of 1961 bans interstate wagering via telephone or telegraphs and is widely interpreted to legislate against online sports gambling in the US. According to the act it is against the law to use phone lines or wires to place bets on sports across international borders. However, operators flocked to Costa Rica in order to take advantage of a supposed loophole in the act where it is legal to use the telephone to make a bet if the bet is being made in a country where gambling is legal. However in July 2006 a federal grand jury returned a 22 count indictment against eleven people and four corporations on charges of racketeering, conspiracy and fraud. The indictment accused Gary Stephen Kaplan the founder of U.K Company BetonSports and ten others of engaging in unlawful activity because of the operation of their internet gambling businesses in Costa Rica. As a result the number of online gaming companies in Costa Rica declined rapidly and prosecutors and law enforcement agents continue to pursue those involved in operating sportsbooks in Costa Rica. Meanwhile there have been a number of attempts to establish a gaming control board for online gaming and regulate the industry. President Solis, who was elected in 2014 announced plans to establish a gaming control board for online gaming. The Finance Ministry has also released draft plans for regulating the industry where a tax would be implemented on online gaming of 0.5 per cent of gross income to help fund the control board. Additionally, a 5 per cent tax would be levied for the fight against crime. The new board would report to the Minister of Interior and Police and would process six-year gaming licenses at a suggested annual fee of US$$50,000.

LOTTERIES The Loteria Nacional de Costa Rica is run by the Junta de Proteccion Social (JPS) which is a social welfare group which operates the lottery and other games of chance. The first lottery was launched in 1885. Today prize draws are run several times a week and there are thousands of retail and street vendors. JPS runs the National Lottery, Chances Loteria Popular, Tiempos, Pega 1, Pega Millones, Instant Lottery, Lotto and Pitazo. The JPS gave the concession to GTECH (now IGT) in August 2011 to set up an online lottery system in Costa Rica, which came into force in May 2012 and this covers the sale of electronic lottery and sports betting. The contract, in partnership with BOLDT Gaming SA from Argentina, is for an initial six years with the possibility to extend for two additional periods of two years each. GTECH also announced plans to set up 1,000 lottery machines throughout the country plus 400 in the metropolitan area with outlets being open 10 hours a day at least and seven days a week. Transactions are located in supermarkets, kiosks and shopping centres as well as via around 400 street vendors.

ECUADOR

CASINOS AND SLOT MACHINES In September 2010 the left wing President of Ecuador Rafael Correa announced that his government was seeking to ban casinos. Claiming that casinos in Ecuador had become hotbeds of corruption and money laundering Correa told local press that his administration would put the question before the Ecuadorian people as part of a referendum. If the Ecuadorian people agreed with the President’s views on the issue then all of the fifty five casinos and bingo halls in Ecuador would be closed down forthwith. As a result of the move operators immediately stated their opposition claiming that if the new law was approved then it infringed upon their property rights as enshrined by the Ecuadorian Constitution and would also lead to a wide proliferation of illegal gambling nationwide. Under previous legislation, casinos operating in Ecuador had to offer - in addition to slots - at least four different types of table gaming in five-star hotels and two to three types of table gaming in three- and four-star hotels, respectively. This was then changed in 2008 when the “Regulation of Casinos in the Tourism Law” was approved by President Correa. According to article 5 of this act casinos could in the future only be part of a “hotel de lujo” meaning in a five star hotel located in a tourist hot spot. There were thirty two large scale casinos which fell under this category. A great part of the problem for the casino industry had been the proliferation of standalone slot machine parlors which were not attached to

casinos and which had not attracted tourists but local players. These slot parlors were in most cases allowed to operate via a licence granted to them by local municipalities. At the same time the number of illegal slot machines had expanded in bars, nightclubs and other public places. As a result of the rise in illegal gaming slot machines outside of casinos were banned by Articles 91 and 92 of the Tourism Regulation Law in December 2002. Then in 2005 the government decreed that any business apart from a casino which had a slot machine had to remove it from the premises or face prosecution. The decree also granted the police the power to confiscate and destroy illegal slots. Unfortunately the government did very little to put this law into practice with the result that there were, according to government figures in 2008, 121 slot parlours which housed over 3,000 slot machines (although some estimates put the total of illegal slot machines as high as 7,000). These slot machine parlors alone employed almost 1500 people and accounted for an estimated 70 percent of the gaming market in Ecuador (not including lotteries). Due to the ruse of illegal gaming and despite the fact that legitimate operators had invested millions in upscale casinos in hotels the date of the referendum was finally set for May 7 2011. Almost four million Ecuadorians (47.7 per cent of the voters) voted that that they were in favour of banning casinos and slot parlours meaning that many skilled and experienced casinos workers, many of whom had been working in the industry for almost fifteen years were left jobless. It also meant that the government lost around US$20m in tax revenue per year from that point onwards. While it was initially believed that the casinos would be given a further two years to recuperate some of their investment, the ban went into effect in March 2012 meaning that Ecuador’s short lived casino industry came officially to an end. OTHER SECTORS There is no organised horse race betting industry in Ecuador and there are no legally organised sports betting shops. In addition bingo halls are also now illegal under the new law while online sports betting is unregulated. LOTTERIES Compared to lotteries in other Latin American jurisdictions the lottery in Ecuador is small scale. H. Junta de Beneficencia de Guayaquil, a private non-profit charity institution founded in 1888, has the exclusive right to promote and operate lotteries in Ecuador and provides the charity with 50 per cent of its budget helping it to meet the expenses and the support it provides to hospitals,

education centres, hospices, homes and schools. As well as the economic aid it provides to the charity, the sale of products from the Lotería Nacional such as Lottery, Lotto, Pozo Millionario and Raspaditas provide care to a large number of Ecuadorians. In 2015 the institution began to offer instants and in 2003 it began to offer a roll over jackpot lottery called “Pozo Millonario” the results of which are announced on television.

EL SALVADOR

CASINOS AND SLOT MACHINES Casinos first began to operate in El Salvador in the mid 1990’s. Licences were granted by local mayors in the capital city of San Salvador and soon began to spread to other cities such as Antiguo Cuscatlán and San Miguel. According to Article 4 of the Municipal Code, which has since been repealed by the government, city majors had the power to grant casinos licences and the tax income generated by the casinos has gone directly to the local government where they were located. The direct licensing of gaming establishments by city majors had made casinos arguably one of the most controversial issues in the entire region with the Legislative Assembly trying to close them down all together or attempting to wrest control of gaming from the local government to the central government. The situation is made more controversial still by the fact that a number of leading politicians are strongly opposed to gaming on principle and the majority of locals, according to a number of opinion polls, are also opposed to gaming. Despite this local officials continue to green light gaming establishments in their jurisdictions in order to generate additional tax income while debate continues as to who should control the industry. The issue first came to a head in 1999 when the Legislative Assembly banned all casinos in the country and announced that they would close them down within a year. However, those casinos which had already been issued a licence before the act of 1999 argued against the ruling in courts and were in many cases granted stays of closure while local government have refused to shut down casinos operating within their jurisdictions. Undeterred the Legislative Assembly in 2002 published an official reading of the “Police Law” ( Ley de Policía) which contained the only gaming related legislation in El Salvador. Dating back to 1879 Article 68 of the Police Law expressly bans all types of gaming in El Salvador. The Assembly reaffirmed the validity of the act and decreed that any kind of authorisation for the opening of gaming establishments was illegal. It also ordered local mayors to close down all gaming establishments in their jurisdictions. As gaming continued to proliferate on a local level, in 2007 the Supreme Court reaffirmed the legal validity of the Police Law act when it came to

15

gaming. Both moves have had very little impact on the industry as casinos and other gaming establishments continue to be granted licences on a local level. The situation was made less clear still in 2011 when the government revoked the Police Law and replaced it with “The Law of Violations and Citizen Coexistence” (“Ley de Contravenciones y Convivencia Ciudadana”). The new legislation, which is designed to promote more harmony when it comes to the law and peaceful coexistence amongst citizens, gives more power to local municipalities, the Attorney General’s Office and the police when it comes to intervening in local disputes. While the old law had been ineffective when it came to gaming it was at least clear in that it banned gaming. The new law revokes the ban on gaming but covers gaming in a few sentences stating that the marketing, the installation or the operating of “electronic recreational gaming machines” is banned “without permission.” This has led to speculation that the law gives local municipalities the right to grant licences to gaming establishments. Under what terms and exactly how is unfortunately not covered by the law. Consequently gaming in El Salvador continues to exist in what to amounts to a state of legal limbo with casino operators urging the government to pass a comprehensive gaming act. Unfortunately for now there are no signs of this happening in the near future. OTHER GAMING SECTORS Other sectors of the industry are extremely underdeveloped. There is no horse racing industry, only a small number of bingo halls and no developed sports betting industry. In addition there is no online gaming regulation currently in place. LOTTERIES The Lotería Nacional de Beneficencia de El Salvador operates the lottery. It is a government agency originally created to help generate funds for the hospital of San Salvador and now contributes to many different social programs. However, its product offering is limited to instants and a traditional roll over jackpot lottery called La Millonaria which was first launched in 2003. The game has become increasingly popular due to the increased prizes on offer which have now risen to US175,000. Instants known locals as Lotins are particular popular and are supplied by Oberthur Gaming Technologies.

GUATEMALA

Although gaming is expressly forbidden by article 477 of the Penal Code which puts in place heavy fines and prison terms for those found to be operating casinos or slot parlours, gaming has proliferated widely throughout Guatemala and slot parlours have swiftly spiralled out of control

16

unchecked and have, as a consequence, been infiltrated by organised crime. Known widely as “video loterías” slot parlours in Guatemala also in a great many cases house table games and can be large scale. While there are no official statistics it is believed that the illegal gaming industry could be worth over US$120m a year and while there have been a number of attempts to crackdown on the industry they have proved ineffective. The situation is made worse still by the fact that although the law prohibits the existence of casinos, video lotteries are often granted a licence via administrative decisions made by members of the Interior Ministry. This is despite a decree published in 2006 by the Interior Ministry itself which ruled that such licences should be revoked. In the face of such a chaotic landscape there have also been a number of legislative attempts to regulate the industry and progress is being made to pass a new gaming law albeit slowly. In 2011 members of the Partido Unionista, brought forward a bill to Congress which would legalise all gaming establishments in the country so that the government would be able to regulate the industry and combat money laundering. The proposal, which received a favourable opinion by the Commission of Economy, Trade and Government in 2012 also proposed strict controls over who could run gaming in the country as well as a 10 to 20 percent tax on monthly income. In September 2014 the Economic Committee of the Guatemalan Congress issued a favourable opinion on an initiative that seeks to regulate gaming in casinos, video lotteries, and bingo halls. The bill seeks to create two regulatory bodies which would be responsible for the monitoring and control of the industry. The National Commission of Gaming (Comisión Nacional de Juegos de Azar) would be made up of members from the Ministry of Economy, the Tax Office, The Superintendent of Banks, the Guatemalan Institute of Tourism as well as a second gaming body which will be called the Superintendence of Gaming. This body would run a decentralised oversight of gaming, investigate licensing and ensure the implementation of administrative and judicial actions or steps necessary for the collection of all tax revenue, license fees and the collection of fines for non compliance. In addition the law also contains clauses which prohibit the entry of those who are under the influence of alcohol or drugs and includes strict anti-money laundering measures. The bill not only proposes a new gaming board but also seeks to impose a specific tax for gaming. The new law proposes a US$800 per month fee per gaming device with a value of less than or equal to US$15,000 and a fee of US$1,500 for any

gambling device the value of which is less than or equal to US$15,000. For devices that are worth more than or equal to US$30,000 the fee would amount to US$3,500. A tax will also be imposed on all winning bets. Although the bill seemed to be gaining ground in the Guatemalan Congress it has lost impetus and is still awaiting approval. In the meantime the government has not addressed the issue further. OTHER SECTORS Other sectors of the gaming industry remain unregulated and underdeveloped. There is no horse racing industry and there are no legally established sports betting shops either. There are only a very small handful of bingo halls and online gaming is not regulated. LOTTERIES The Santa Lucia lottery is the only lottery in Guatemala and runs a total of twenty five separate lottery draws. Money raised goes to help the deaf and blind. Each year the lottery runs 40 draws with a prize of Q600,000 (Quetzal). Four draws with a prize of Q2.2m and five draws with a prize of Q1.3 m. The lottery also offers one annual draw with a prize of Q3.5m and another annual draw with a prize of Q4m.

HONDURAS

CASINOS AND SLOT MACHINES Gaming in Honduras remains very small scale and gaming law has remained in many way unchanged since 1977 when Honduras passed its first gaming act. The act was designed specifically so that casinos would attract more tourists and improve tourist infrastructure and allows for table for both games as well as slot machines. Licences are valid for twenty five years and are renewable after that period every five years and casinos must be part of a five star hotel or resort. The law has been amended twice: in 1988 the government amended the law raising the age limit from 18 to 21 but the most significant change came two years later in 1990. Although the law was designed to promote tourism it was found that casinos were marketing themselves almost exclusively to locals and not to foreign tourists. As the vast majority of visitors were locals the government changed the law making it illegal for Hondurans to play. Consequently, there are only three fully-fledged casinos which cater exclusively to tourists. They are located in the three largest cities of Guatemala: La Ceiba, San Pedro Sula, and capital Tegucigalpa. Calls for a repeal of gaming laws in Honduras began to grow in 2014 amongst claims that the industry is not paying enough tax and is being used for money laundering. Deputies belonging to the Partido Anticorrupción (Anti Corruption) Party allied alongside members of the Libre (Free) Party to call for major reform which would affect both

casinos and slot parlours nationwide. Together they called for a repeal of gaming laws arguing that the industry does not generate sufficient income for the treasury and also has a harmful effect on many people especially the poor due to gambling addiction. In addition, they argue that taxes for slot machines were reduced too dramatically under the previous administration from US$1,300 to US$210 - a reduction of almost 80 per cent compared to the previous rate. In September in the same year a major new proposal to change Honduras’s gaming law was put forward by Deputy Augusto Cruz. The new law would re-establish the previous tax rate which would affect slot machines in casinos, grocery shops, convenience stores, markets, bars, cafes and restaurants as well as other establishment nationwide. The new tax rate, once in place, would be managed by the local mayor’s office. However, the proposals were not adopted and there has been no impetus coming from any of the political parties to address the issue since then. OTHER SECTORS Other sectors of the industry remain extremely underdeveloped. There are no laws in place to legislate over online gaming and while bingo is allowed there are only a small handful of bingo halls. In addition there is no organised government sanctioned sports betting and no organised horse racing industry. LOTTERIES The state run lottery which began in 1892 is very small scale and only offers two traditional lottery games: La Chica and El Grande.

MEXICO

CASINOS AND SLOT MACHINES Gaming law in Mexico dates back to the Betting and Raffles Law of 1947, that banned casinos and gaming throughout Mexico. While there have been almost innumerable attempts to replace the act, all attempts have failed thus far. But although slot parlors and bingo halls are ostensibly banned, that doesn’t mean that there are no slot parlors in Mexico. In 2005 Vicente Fox, who was President at the time, attempted to do away with the old gaming act. While he was ultimately unsuccessful he did manage to insert an amendment in the form of an appendix to the old law that allowed for sports betting, as well as the opening of bingo halls and slot parlors nationwide. The Secretary of Government (SEGOB), Mexico’s interior ministry, was given responsibility for the granting of licenses for these betting facilities. While there was initial controversy surrounding the large number of licenses initially awarded by then-head of SEGOB Santiago Creel, his decision was upheld by the Mexican Supreme Court in 2007. By the end of the following year, the Mexican gaming sector had grown by 110 percent. Since then, gaming has continued to expand at a fast rate in Mexico, with

an estimated 7,000 slot machines nationwide and around 300 slot parlors, many of which are large scale. Furthermore, although slot parlors and bingo halls are not permitted to house table games, slot parlors in Mexico are attaining an increasingly casino-like feel. This is largely due to the fact that SEGOB gave Class III slot machines the green light in August 2010. Previously, only Class II electronic-based bingo slot machines were allowed in Mexico and numbers, not symbols, were drawn electronically. For some years a number of attempts have been made to repeal the old act. The push for new gaming legislation has traditionally been motivated by a desire to improve the tourism industry as it was believed that Mexico could offer Las Vegas-style gaming in five-star hotels located in tourist hotspots. Now the impetus comes out of concern over the fast expansion of gaming nationwide, and controversy gathering around SEGOB’s issuing of licenses. Lawmakers also have been keen to put an end to the so-called umbrella licenses whereby operators have been able to operate a number of slot parlors and sports betting shops under a single license. More calls for reform came closely on the heels of the tragedy in Monterrey in 2011 when a group of armed men attacked, and then set fire to, the Casino Royale, located in an upmarket neighbourhood of the city of Monterrey, leaving 52 people dead. In February 2013 a congressional committee was charged with investigating how licences had been granted throughout the nation. The committee, made up of 11 deputies, was charged with looking into how licenses had been granted by the Interior Ministry (SEGOB) after growing reports of corruption and allegations that former members of SEGOB had trafficked licenses. The committee was also charged with drafting a new law which would regulate the gaming industry, safeguard the rights of players and make the licensing process more transparent. Crucially, the new gaming act as it was developed in the committee found universal consensus from across all parties in the Lower House and was developed closely with industry experts, including the Mexican Gaming Association (AIEJA). In addition while the committee looked into the issue, the Interior Ministry closed a number of establishments in the states of Nuevo Leon, Coahuila and Chiapas, with the government suspending around 50 casino licenses in 2014. The House of Representatives finally approved the new Federal Betting and Raffles Law in December 2015. Under present proposals, operators currently operating a license under the terms of the old

1947 Raffles and Gambling Act will be allowed to operate until their licenses expire but will then have to reapply for a new license and meet the requirements stated by the new act. Each casino or gaming establishment will be issued a single license per gaming establishment. Licenses will be valid for 10, 12 or 15 years and will be renewable only once for the same period. The minimum entry age will be raised from 18 to 21. Anti-money-laundering measures will include provisions requiring that all bets made must be registered electronically and that operators must also report any suspicious activities to the newly appointed gaming board. Slot parlours and sports betting shops will no longer be able to rely on stays of closure and protection from local courts if they are found to be in contravention of their licenses. The new bill also creates a new gaming control board. Speculation had been growing, especially since the tragedy in Monterrey, that a new gaming board would be made up from members from a number of government departments and that it would no longer be in the hands of the Interior Ministry. However, SEGOB will remain firmly at the helm, and it will be the head of the Interior Ministry who will appoint the head of a newly created gaming board called the National Institute of Gaming and Raffles (Instituto Nacional de Juegos y Sorteos). Meanwhile, the Interior Ministry will also retain control over the opening and closing of all casinos and other gaming establishments, including sports betting centres and race tracks. The new act also gives operators already active in the marketplace the opportunity to expand their businesses for two years as it gives operators permission to make use of any licenses they have not yet made use of for that period. At present there are a total of 340 casinos, which are registered with SEGOB. However, if operators decide to expand their operations and make use of all of the licenses currently granted to them, then this could more than double to 800. The law was passed onto the Senate where it quickly became stalled in the committee stage. Meanwhile opposition to the new act has been growing and a number of hotel and tourist associations have joined forces to criticise current proposals which would allow for full scale casinos in Mexico. Opponents argue that the new gaming act would leave Mexico vulnerable to corruption, money laundering, and would lead to an inevitable increase in organised crime. A number of organisations including the National Chamber of Tourist Commerce (Concanaco Servytur) as well as some hotel associations have questioned the business interests behind the new act and asked if Mexico was ready for new casinos

17

if they are authorised. Gaming legislation has now been delayed for over a year but has been earmarked as a matter of priority for the latest legislative session in the Mexican Congress which began on February 1st. Earlier this year the Head of Mexico’s Interior Ministry Miguel Ángel Osorio Chong urged senators from the ruling Institutional Revolutionary Party (PRI) and their close allies from The Ecological Green Party (PVEM) to pass Mexico’s new gaming law quickly. Speaking at the opening of Eighth Plenary Meeting of the PRI and PVEM parties the official said that the country was in need of a new law which would more accurately reflect the reality of gaming in Mexico and which would grant the government tighter control over the industry. Meanwhile Mexico’s Supreme Court of Justice in January endorsed the use of slot machines in casinos. In its ruling the court declared that those playing slot machines are taking part in sweepstakes and the outcome does not depend on skill unlike card games which are defined as gambling in Mexican gaming law. In so doing the Supreme Court ended a long running legal battle which began in 2013 when President Enrique Peña Nieto enacted a number of amendments to Mexico’s gaming laws by Presidential decree. The chamber of Deputies challenged the decree before the Supreme Court, arguing that the executive and the Interior Ministry had encroached upon powers reserved for the Congressional branch. The decree stated that operators may no longer assign the rights to operate gaming establishments to third parties. It also set a 25 year limit for gaming licences and granted the Directorate General of Gaming within the Interior Ministry, wider powers when it comes to end the licences of those operators found to be operating illegally. The law also allowed for the continuation of slot machines in casinos.

slot machines outside of casinos such as in small businesses and shops will remain illegal. HORSE RACING AND OFF TRACK BETTING Horse racing in Mexico is small scale. Compañía Interamericana de Entretenimiento (CIE) runs the only large scale horse racetrack in Mexico: the Hipódromo de las Americas race track in Mexico City. Over 1500 races are staged at the track each year. Attendance at the track is increasing slightly but the vast majority of wagering on horse racing is still made on simulcast races from the United States screened at a growing number of sports betting shops. SPORTS BETTING Mexico has permitted sports betting since 2005. Since then sports betting has spread quickly and sports betting shops are often part of much larger gaming establishments. Leading operators Compañía Interamericana de Entretenimiento (CIE) and Caliente run a number of racing tracks in Mexico and sports betting shops. Both have signed agreements with Spanish company Codere. Codere provides gaming management services and hall development services to Caliente and in 1999 CODERE signed a joint venture agreement with CIE where Codere would develop and run its bingo halls and sports betting shops. BINGO In Mexico bingo halls, almost without exception, contain slot machines and like sports books they are usually part of a larger gaming centres. The three largest gaming operators in Mexico Caliente, CIE (Compañía Interamericana de Entretenimiento) and Televisa all run bingo halls as part of their betting establishments.

In its ruling in January the Supreme Court unanimously upheld five articles of the 2013 regulation arguing that they did not go beyond the terms of the original Gaming and Lotteries Act and were therefore legal. Crucially, the Court also declared that slot machines are considered a form of sweepstakes of numbers or symbols which are permitted by Article 2 of Mexico’s gaming law as they do not involve the use of skill on behalf of the players which is prohibited in Article 1.

ONLINE According to current law online gaming is only permitted via special license to land based operators located in Mexico. Despite this Mexicans bet via offshore betting sites in great numbers. According to AIEJA (The Mexican Operators and Providers for the Entertainment and Gaming Industry) the online gaming market in Mexico is now in fourth place behind Japan, Europe and the United States. Mexicans gamble an estimated US$300m a year via offshore sites making it the fastest-growing online gaming market in Latin America. This is helped by the fact that there are no restrictions in place when it comes to advertising. As long as advertisements include minor protection and responsible gaming disclaimers online gambling companies can advertise freely in the Mexican media.

The court also confirmed that the Directorate General of Gaming within SEGOB is the body which has the right to authorise the establishment of businesses which carry out sweepstakes. However, the court’s decision will only benefit operators of slot machines located in casinos as

Due to the rise in gambling via off shore sites, in November 2012, Mexico’s Interior Ministry, announced that it would be working closely with two of the most powerful Mexican gaming associations, as well as the Association of Mexican Banks, to identify, control and supervise sites

18

targeting the Mexican market from offshore. The agreement was, it was believed at the time, designed to pave the way for new government policy, which would have restricted the activities of offshore operators in the Mexican market. This would have included the blocking of banking transactions with offshore operators. Mexico’s Interior Ministry would also keep a database of unlicensed offshore operators that continued to target the market. However, the initiative was never passed. Mexico’s new gaming bill does not address the online space to a significant degree. Nor does it offer an in depth analysis on how online gaming should be regulated in the future in Mexico. The new law states that online gaming has been the subject of serious analysis in the European Union, and points to a number of studies carried out in Europe which highlight the urgent need for Mexico to address the issue. The law then goes onto highlight the dangers associated with online gaming which have already been pointed out in other government sponsored reports. The law also highlights a number of factors that can foster the development of gambling addiction and other negative consequences of online gaming. The new law proposes that Mexico should adopt strict player protection measures as adopted by other jurisdictions in Europe specifically in line with France and the U.K. such as verification of the identity, age and address of the user through existing third-party systems. Strict control of advertising would also be put in place along with systems which would apply automated controls on betting and gaming activity, including full self exclusion. Furthermore the web site established by the licensee must be defined with domain name com.mx. However the bill’s primary focus is the land based sector and the online section of the bill takes up less than a page. It merely provides suggestions on how online gaming should be regulated into the future. As a result it is likely that the government will address the more pressing issue of the land based market first before addressing online gaming. Meanwhile a number of foreign operators have signed agreements with licensed land based operators in Mexico who have been granted permission to offer online games by the Interior Ministry. The most recent is Ladbrokes which in 2015 announced that it would operate in the Mexican market through Sportium, a joint venture with Spanish operator Cirsa. Ladbrokes was permitted to launch a new regulated website in Mexico due to Casino Life, Cirsa’s Mexico land based casino

business, which was authorised by SEGOB. The new website (www.casinolife.com.mx) offers sports betting and casino products, bingo and over 200 slot games. SportiumBet is the sports betting service on the site and carries a broad range of betting markets with particular focus given to football, basketball, baseball and American football. Another firm to gain a foothold in the online market via an agreement with a local operators is Jackpot digital. In 2011 Las Vegas From Home.com Entertainment Inc. (Now Jackpot Digital) signed an agreement to acquire a 99 per cent equity interest in Poker from Home de Mexico, a private company licensed by SEGOB to operate online bets and online casino gaming activities in Mexico. The Federal Mexican Gaming Permit was originally issued by SEGOB and is valid until May 24, 2030. LOTTERIES In Mexico there are two state owned lottery organisations: La Pronósticos para la Asistencia Pública, and La Lotería para la Asistencia Pública. While lotteries have traditionally been run by the central government the first state lottery was granted to the state of Baja California in 2015. It looks likely that other states will soon follow suit and could also begin to operate their own state lotteries. This could lead to a rapid expansion of the market in the near future. The Lotería para la Asistencia Pública (The Lottery for Public Assistance) offers traditional draws and instants and has since 2005 run sales points via HSBC ATM machines. Today the lottery allows players to buy tickets via the internet and mobile phone. The other state lottery, Pronósticos para la Asistencia Pública (Forecasts for Public Assistance) went into operation in 1978 and initially let Mexicans make a bets on the outcome of the World Cup in Argentina. Soon afterwards it launched the weekly Progol product - a football betting game. Since then the lottery has considerably increased the number of products on offer. In 2006 Pronósticos was permitted to run lotteries as well as sports betting games and now runs instant tickets, Lotos, numbers games and lotteries. Today it is the main online lottery operator in Mexico. GTECH (now IGT) has been working with Pronósticos since 1987 and in 2015 signed a six-year deal to provide lottery products in conjunction with Pronósticos para la Asistencia Pública. The deal will see GTECH provide a number of instant ticket and draw-based games through the country. The deal will see GTECH supply the Mexican lottery with at least 11,000 draw-based lottery terminals that will replace previous machines used by Pronósticos. GTECH will also be tasked with upgrading the company’s communications network and providing ongoing

services both online and at retail locations, including the development of new retail channels, maintaining its online terminals, and helping develop their customer service operations. The private lottery in Mexico is operated by Apuestas Internacionales, a subsidiary of Televisa. Televisa, is also the owner of several casinos operating under the PlayCity brand across the country. Televisa is the largest media company in the Spanish-speaking world. Sorteos del Trébol its lottery and raffle brand is dedicated to commercializing number and instant raffles. It has over 5,300 points of sale in Mexico. As well as offering traditional raffles such as Superlotto it also runs sports pools games such as Gana Gol.

NICARAGUA

CASINOS AND SLOT MACHINES In 2001 Nicaragua passed a wide sweeping gaming law, which placed slot parlours and casinos under the control of the Ministry of Tourism. Casinos would, it was hoped, be a further boost to the tourism industry and would be permitted in night clubs and hotels only. The minimum investment varied depending where the casino was located with a minimum investment of US$250,000 in capital Managua and US$100,000 elsewhere. However, the law made very little impact as illegal gaming nationwide continued to thrive and went generally speaking unchecked. As a result the gaming law of 2001 went up for debate once again in 2006. The new law, as it was debated in the National Assembly, sought to allow casinos but only if they were part of a five star hotel. To begin with the law appeared to have the backing of the majority of the deputies especially after a special investigative committee was charged with investigating the issue and it did appear for a time that Nicaragua would soon pass its second major gaming law. Unfortunately, due to a backlog of more pressing issues the law became stalled. However, while gaming legislation languished in the National Assembly, casinos and slot machines came under special attention from the tax collection agency. In order to pay back some of the money owed to the International Monetary Fund (IMF) in 2005 the government looked to casinos to raise part of the necessary tax income. Initially, it looked like casinos would have to pay an additional US$30 a slot and US$300 a table per month. In March 2006 this was in principle approved but with some changes. A fixed tax was set at US$200 per table as opposed to US$300. The tax on slots varied depending on the size of the casino between US$18 for the smaller casinos to US$25 to the largest (those with more than 601 slots). The new emergency tax meant that taxation on casinos increased by more than 123 per cent over the next six months.

In 2009 the issue of gaming was discussed once again in the House of Deputies and deputies began to consider a new law which would permit casinos to operate in three to five star hotels with a minimum of thirty rooms. A new gaming law was finally passed a year later and went into effect in December 2011. The new act divided gaming establishment into four separate categories and heralded the beginning of a crackdown on illegal gambling especially on slot machines found to be operating outside gaming establishments. From December 2011 onwards, gaming establishments in Nicaragua have been divided into four categories while slot machine parlors have been categorised according to the number of slots on the premises. Category A establishments house a minimum of 71 slot machines and a minimum of three gaming tables; Category B are slot parlours with 25 to 70 slot machines; Category C may have from 16 to 24 slot machines on the premises while Category D establishments may house a minimum of 10 and a maximum of 15 slot machines. Each category also requires a minimum investment ranging from US$10,000 to US$50,000. It was estimated that the new act would increase government revenue made from the sector from US$1.7m to US$46m a year. However illegal gaming continued to thrive as did tax avoidance. In 2014, in a move which took many observers by surprise, the Nicaraguan government announced that it would take the industry out of the control of the Ministry of Tourism and put gaming under the control of the Ministry of Finance and the Financial Analysis Unit – the local tax collection agency. The executive branch in its preamble to the new initiative, explained that the transfer was necessary due to the fast rise of gaming in the country. Describing the gaming industry as an increasingly lucrative business, change was necessary and, “the most appropriate institution to regulate this activity is the Ministry of Finance.” These reforms were passed after MPs unanimously approved the amendments to the Special Law for the Control and Regulation of Casinos and Gaming Rooms. The amendments created a new “Casino Control Council” which together with the Ministry of Finance is now responsible for regulating all matters related to gaming. The new Council meets at least once every three months, to develop strategy and monitor compliance. Meanwhile, the Treasury is now responsible for enforcement by granting, modifying and cancelling licenses. In addition, the amendment to the act creates an office of casinos and gambling halls, which is responsible for controlling the importation

19

and manufacture of all gaming equipment. An increasing number of government inspectors will also be empowered to close temporarily or permanently any establishments found to be operating outside the terms of their licences. Inspectors will have much wider powers when it comes to inspecting premises and will work alongside local police forces to ensure that operators are paying the correct tax while ensuring that slot machines pay back at least 85 per cent of the stake back to the player. However, concern is still growing around illegal gambling which continues to rise in small businesses. There are still an estimated 11 thousand to 13 thousand unauthorised slot machines located in pharmacies, markets, shops and bars in the country. OTHER SECTORS Other sectors of the gaming market are underdeveloped. Bingo is permitted under Nicaragua’s gaming laws but there are only a small handful of bingo halls. There are no horse race betting tracks in Nicaragua. While sports betting is permitted under local law it is limited to sports betting facilities based at Pharaoh’s Casinos. Pharaoh casinos are owned by market leader Thunderbird which operates five Pharaoh casinos in Nicaragua. Meanwhile online gaming is yet to be regulated. LOTTERIES In Nicaragua there is a state run national lottery called the Lotería Nacional de Nicaragua which has been in operation since 1995. Loto is also popular and began operations in Nicaragua in 2011 after an agreement was reached between the Lotería Nacional de Nicaragua and the Canadian Bank Note Company. The Canadian Bank Note Company provides electronic lottery systems to the Loto in Nicaragua and there are now four Loto products available in more than 700 LOTO outlets located in 31 cities across the country.

PANAMA

CASINOS AND SLOT MACHINES Before 1998 there were only a small handful of casinos in Panama all of which were state run. In 1998 the government passed a wide sweeping gaming law, which permitted casinos as long as they were part of five star hotels with a minimum of 300 rooms. Since then the casino industry in Panama has grown rapidly and is now home to one of the most developed gaming industries in the region. This boom coincided with Panama’s growing tourist industry and subsequent building boom - the largest of its kind in the history of Latin America. The key guiding principles behind the gaming act was that casinos should attract tourists. But it has been largely Panamanians who have fuelled the revenues in casinos. By 2005 it was estimated

20

that 85 per cent of all those who visited casinos in Panama were locals leading to calls to restrict the number of licences, increase taxes and bar entry to low income bracket Panamanians. This has been made more acute by the rapid expansion of slot parlours, which are also becoming increasingly popular amongst Panamanians. Consequently casinos and slot parlours have been repeatedly singled out for increased taxation and fees. At the beginning of 2012 Panama’s National Assembly initially proposed to increase the taxation rate of 19 per cent of gross income generated on slot machines to 22 per cent. However, in the third reading of the act the tax on slot machines was actually reduced from 19 per cent to 18 per cent while the tax rate on table games was set at 12 per cent of monthly gross income. In May the new act was signed into law by President Ricardo Martinelli and the new taxes went into effect in January 2014. The rise of slot parlours in poorer areas has become an increasing cause for concern with lawmakers admitting that urgent measures are necessary to tackle the issue. The Gaming control Board (JCJ) has stated that it considers Type C machines, to be the main causes of pathological gambling, since they are located in nearby low income neighbourhoods and in rural areas. Type C slot machines may only pay a maximum of US$200 per machine in prizes. In addition according to local press reports, the state is currently unaware of the exact amounts which are bet via Type C slot machines located in slot parlours. This is because, unlike slot machines located in casinos and categorised as type A in Panamanian gaming law, slot machines located outside of casinos are not connected to a central government controlled server. However Secretary of the Gaming Control Board (SJC) Eric Ríos told press last year that the government was working on a project to connect type C machines slot machines online. Mr Ríos said that the board was currently in the analysis stage and that the system could be operational this year. Despite the fact that the economy’s growth rate has decreased by around six per cent over the last two years the industry has until recently continued to grow. However the industry was hit by a new tax in May 2015 which applied a tax on cash withdrawals from casinos of 5.5 per cent. The previous law stated that seven per cent was payable on payouts of US$300 or more via slot machines. However the 5.5 per cent tax applies now to all cash withdrawals made in casinos, including tips to employees, who have already expressed their complaints on the grounds that tips form part of their salary. Complicating the matter further is the fact that tax deductions are made even if the customer cashes in chips without winning.

The new tax has been blamed for falling revenues and job losses. In November 2015 it was announced that revenues were down for the gaming industry with operators putting the blame squarely on the new tax. Between July and August that year gaming revenue fell by 9.1 per cent after experiencing an increase since the beginning of the year of 5 per cent. In January this year according to a report released by the Gaming Control Board gaming revenue in Panama decreased by as much as 14.4 per cent. The decreased revenues mark the end of a decade of increased revenues for gaming companies In March this year it was revealed that falling visitor numbers and the new tax had also led to layoffs. Since June 2015 a total of 1,200 workers have lost their jobs, 900 of these layoffs occurred after December 2015 while during the first two months of this year alone 300 people were made jobless. However, the government has defended its decision to raise taxes in order to combat gambling addiction and raise US$60m of the US$74.8m needed to increase pensions. HORSE RACING AND OFF TRACK BETTING Race wagering is contracted to private companies by the gaming board and is heavily taxed by the government. Horse racing has been on offer in Panama since the 19th century. Horse racing reached its peak in the 60’s and 70’s but slowly lost popularity in the following two decades. However the sport saw the beginning of a resurgence when the President Remon Racetrack track (which first opened in 1956) was privatised and in October 2005 Spanish company Codere won the contract to become the new concessionaire of the track under its subsidiary company Hipica de Panama SA. Codere now has a contract for 20 years to operate the track. At the end of 2006 Codere also purchased Crown Casinos and the following year opened up the Racino Crown Casino at the track. Codere invested around US$13m into the racetrack which included the re-modelling of the track. Codere also operates horse race betting off track, at its six Turff Bet and Sport Bars SPORTS BETTING Sports betting is also allowed in Panama. Codere Group controls 81 betting shops, making it the largest bookmaking franchise in the country. Sport books can be located at betting shops, at the racetrack or in casinos and bets can be placed on most sporting events. BINGO Bingo is permitted under Panama’s gaming laws. However the activity is in sharp decline. Activity in bingo halls continued its downward trend in 2015 after falling 85.7 per cent and totalling just U.S2.4m. This compared to 2014 when revenue grew by 558 per cent and stood at over US$17m.

ONLINE Panama’s Online Gaming Act came into law on 12 November 2002. One of the largest consultancy firms operating out of Panama today is International Cybergaming Corp which was given full authority by the Panamanian government to designate others to operate under their license and supervise Internet gaming enterprises. This means that every online operator in Panama is sub-licensed by Cybergaming Corp and only they can issue online licences to third parties. In addition Cybergaming is responsible for collecting the fees, monitoring game payouts, recording all transactions and making them available for inspections and compiling with regulations. They must also ensure that there is compliance with international money laundering regulations. A licence fee to operate online gaming costs US$40,000. There is also an annual licence fee of US$20,000. However as Panamanians are not allowed to bet through online casinos operating in Panama, the income constitutes “income from foreign source,” therefore except for payments corresponding to the Gambling Control Board, online gaming companies in Panama are not be subject to payment of income tax, tax on dividends and profit participation. LOTTERIES Lotteries have existed in Panama since 1872 when the first lottery was established to benefit the education system. The Loteria Nacional de Beneficencia (The National Charity Lottery) was founded in 1914 and the profits were initially used to cover the cost of the maintenance of the public hospitals in Panama. Today proceeds are destined for government sponsored social welfare programmes. Currently, the National Lottery of Panama operates traditional draw-based lottery games through a network of 13,500 lottery vendors. Draws are held on Wednesdays and Sundays at 1pm. In 2013 Scientific Games signed a 10 year contract with the Loteria Nacional to supply instant tickets under a cooperative services programme. It was the first time that instants were available in Panama. In 2014 Scientific Games announced that it had signed an amendment to its contract to provide the country’s first online lottery game, Pega 3, under the company’s existing agreement.

PARAGUAY

CASINOS AND SLOT MACHINES Casinos have been permitted in Paraguay since 1997 and under current rules may be located in provinces with more than quarter of a million inhabitants with only one casino being permitted in capital Asunción. The 1997 act also created a gaming commission called El Comisión Nacional de Juegos de Azar (CONAJZAR). Although casinos

have been permitted now for almost fifteen years the casino industry remains underdeveloped with little foreign investment in the industry and illegal gaming has remained rampant. Furthermore, the licensing process has been fraught with difficulties with three tender processes being abandoned. In 2009 and again in 2010 and 2011 CONAJZAR was forced to halt the bidding process over accusations of irregularities and other issues mostly revolving around the fact that bidders were not meeting the minimum requirements set out to by the gaming control board. However, after the failure of the last bidding process the head of the board along with the Ministry of Tourism began to seek out a much larger investment in the sector. In 2012 CONAJZAR announced that the bidding process would be open once more with the goal of permitting ten large-scale casinos throughout the country. The aim of the new bidding process was to attract large scale foreign investment which would include other amenities such as five star hotels in order to build tourist infrastructure in the region. However that too was unsuccessful and a new bidding process is now underway. In 2015 CONAJZAR announced plans to discuss the bidding process for casinos in three departments in Paraguay. According to CONAJZAR President Javier Balbuena, the successful applicant will be required to invest in hotel infrastructure and the board will impose a minimum amount when it comes to the investment. While a number of further specifications will be published before the tender process is launched, the exact details of the process will not be announced until the board adopts further regulations governing the process. Once these are agreed upon, the process will begin with licences being awarded for casinos in the Central department as well as the departments of Alto Parana and Amambay. In July 2015 the gaming board also announced that the bidding process would also include two tender processes for two casinos in the capital. In July 2015 it was also announced that Paraguay’s Minister of Tourism Marcela Bacigalupo and Javier Balbuena had signed an interagency cooperation agreement that aims to coordinate action, knowledge, criteria and efforts to promote the development of tourism based around gaming. Through control mechanisms implemented to comply with current legal regulations the agreement means that the boards may promote the development of events aimed at promoting tourism and entertainment through gambling. While the market it set to expand in the future gaming tax revenue is on the rise thanks to tougher measures and new online controls. Tax revenue generated by the gaming industry in 2015 was up

by over 7.6 per cent compared to 2014, according to figures released by CONAJZAR and stood at U$S18m at the end of 2015 – the highest for five years. Of this amount 30 per cent was allocated to the Department of Social Welfare and Assistance, 30 per cent to the departmental governments, 30 per cent to the municipal governments and the remaining 10 per cent was generated for the treasury. Gaming tax revenue is likely to rise significantly long term with the licensing process for the construction of a Hard Rock Hotel and Casino in the city of Ciudad del Este now underway. Hard Rock International first announced plans to install a casino and hotel in the city of Ciudad del Este in 2014. The hotel will, it is believed, have 250 rooms while the casino will house 500 slot machines and 30 gaming tables. The decision to launch in Paraguay was made after a wide sweeping study was carried out by a team of local specialists who provided advice on marketing, strategy as well as financial planning, government oversight and local gaming law. There has, however, been some controversy regarding the planned location of the casino and hotel. Last November it was announced that the casino would be located on land belonging to the headquarters of Paraguay’s National Ports Authority (ANNP) which has become increasingly abandoned. However trade unionists have asked a judge to block the move arguing that there is a ban in place which prohibits further development in the area. HORSE RACING AND OFF TRACK BETTING In Paraguay horse racing accounts for less than 1 per cent of the gaming industry as a whole. Apart from the largest racetrack which is located in the capital of Asuncion and is run by the Jockey Club del Paraguay horse racing is still small scale and restricted to small localised racetracks. In addition there is no off track betting offer. SPORTS BETTING Land based sports betting is currently limited to a single location attached to the racetrack in Asuncion and there is no other bricks and mortar sports betting option. In 2015 CONAJZAR announced that a sport betting tender would also be launched in the near future as the board opens up the market further. However the board has not revealed any details of how sports betting will be regulated in the future and under what terms. BINGO Bingo has been permitted for over twenty years in Paraguay but it has been steadily declining in popularity. Only bingo on television is popular. ONLINE Online Gaming is not covered in the gaming act of 1997 but in 2008 CONAJZAR announced that it aimed to put draft legislation in front of the

21

Chamber of Deputies before the end of 2009 that would allow for online casinos. However, no progress was made on the issue. There are, however, moves afoot once again to allow for online gaming as the board seeks to widen the variety of games on offer and expand the market. In January 2015 Javier Balbuena told press that Paraguay was close to regulating online gambling with proposals on the table which could be approved before the end of the year. While no regulation has been out forward since then it is likely that the board will address the issue in the near future as part of the board’s current plans to open up and expand the market. LOTTERIES Before 2010 the lottery sector in Paraguay was in decline and lotteries were run by Repsur owned by local businessman Eduardo Hrisuk. Repsur’s licence to run lotteries ended at the end of 2009. The lottery sector has slowly showed signs of improvement although Quinela remains by far the most popular lottery product. Meanwhile lotteries are becoming more established in the capital. This was after CONAJZAR awarded newly established company Entretenimientos Generales, the right to operate lottery games in Asunción in 2013. GTECH supplies lottery technology and support services for the company under a five year agreement signed in the same year. It also provides system implementation consultation and training as well as marketing support to ensure the expectations of the Paraguayan government are realised throughout the term of the concession contract. The most popular lottery type game in Paraguay is Quiniela which in sales far supersedes slot machines, casinos and sports betting combined. CONAJZAR initially awarded local company Mepshow the right to run Quiniela in return for a monthly fee of US$1.5m and 2 per cent of net gaming revenue per month. This was after the rights to run Quiniela were offered to other companies in Paraguay in a public tender process. However while the licence officially ended in 2015 the company continued to run Quinela until May as the handover of Quinela took place to the winning bidders Paraguay Technology Development (TDP) which was awarded the licence to run the game for the next five years. Taxation over the game was changed from a fixed fee to a one per cent tax on revenues as the game was transferred to the new company. This has had a dramatic effect on gaming tax revenue for the state. In October 2015 Javier Balbuena announced that the fixed rate on quinela alone had already increased gaming revenues for the state by as much as 25 per cent

22

PERU

CASINOS AND SLOT MACHINES In 1994 slot machine parlors and casinos were finally permitted in Peru. Before then, slot machines were only permitted in cinemas, but due to the new gaming act of 1994, the number of slot machines increased exponentially nationwide and almost overnight. Unfortunately, the vast majority of slot parlors did not come under any government control. Ten years after the act was passed, there was an estimated total of 63,000 slot machines in Peru, of which only 5 percent were registered with the government. At the same time, only 57 slot machine parlours were registered nationwide, while almost 800 slot parlors still operated under judicial stays of closure. By 2007, the outlook for the gaming industry was very bleak indeed. By the end of 2006, only 3,000 slot machines were officially registered with the Peruvian government and a further 59,000 slot machines were operating nationwide without a license. Illegal gaming had reached almost epidemic proportions. In the face of gaming going unchecked, the Peruvian government was forced to take drastic measures and the clampdown really began in earnest in 2004. The government gave casinos and slot machine parlour owners a year to get their house in order: pay tax, register their slot machines and provide evidence that they were operating fairly. But the new legislation was, in most cases, simply ignored. And when the government did intervene to try and shut down a slot parlour, invariably the operator appealed to the courts and received an extension of their license. However, in 2005, the government began a series of high-profile raids. In August, around 500 slot machines, which were found to be operating illegally in off licenses, near schools and in supermarkets, were confiscated and then destroyed. Confiscations and raids continued apace in 2006. In that year, a court ruling allowing for slot parlors and casinos to remain open finally became void, and in December the Peruvian government passed the “Reordering and Formalization of Casino and Slot Machines Law.” The law not only created a gaming control board with wide-sweeping powers, but also declared that court order granting stays of closure, under habeas corpus rulings were invalid. The new law also ruled that from January 1, 2007 onward, slot machine parlours and casinos had to register their operations with the Department of Foreign Trade and Tourism (MINCETUR) or face immediate closure. Over the following months, MINCETUR received over 600 applications from slot parlour and casino operators for permission

to formalise their businesses and register with the government. As a result of increasing government control, the gaming sector is almost unrecognisable compared to how it was before 2007, and the Peruvian government has begun to reap the tax benefits of a more closely regulated industry. At the same time, gaming professionals have welcomed the government clampdown on illegal gaming and have been keen supporters of the new measures to further regulate the sector. Today, 30 percent of all tax income generated by gaming goes to the local municipalities where the slot parlour or casino is based. Thirty percent goes to the province or state. Fifteen percent goes to sports funding programs. Fifteen percent goes to the public treasury, and the remaining 15 percent is destined for the coffers of the Department of Foreign Trade and Tourism. In addition gambling equipment in Peru is now monitored online and in real time by a central government-controlled server. Operators had until July 2012 to comply with the new online regulations. According to MINCETUR thanks to the new system tax revenue steadily began to increase and the government continues to put stricter rules in place when it comes to monitoring the industry. In April this year the regulatory and supervisory authority in Peru over banking and financial institutions the Superintendence of Banking, Insurance and Private Pension Funds (SBS) approved a raft of new measures designed to counter money laundering and terrorist financing in casinos and slot parlours. The new measures have the approval of the Financial Intelligence Unit of Peru (FIU) as well as MINCETUR and applies to those who run casino games and slot machines authorised by MINCETUR through the Directorate General of Casino Games and Slot Machines. The new money laundering prevention system must be overseen by a compliance officer who will monitor the full and proper implementation and operation of the new rules. The rules are applicable for those operators who run five hundred or more slot machines in total, as well as those operators whose gaming establishments are located in the regions of Tacna, Puno, Ucayali, Loreto, Tumbes and Madre de Dios. Under new rules operators must implement a money laundering prevention system by managing the risks to which they are exposed and the new proposals state that operators will be required to maintain a record of all those clients who make bets of US$2,500 or over as well as the winners of high payouts. In addition operators must carry out due diligence on all staff, confirm the identity of their clients and maintain records for five years. Any suspicious financial transaction

regardless of the amounts involved, must be entered in a register of suspicious transactions and must also be reported to the Financial Intelligence Unit in a period not exceeding 15 working days. The new rules will go into effect on June 1 2016. The increasingly regulated landscape has meant that Peru has seen a number of investments of late with more on the way. In March this year it was announced that Chilean gaming company Dreams recorded a net profit of $10.4bn (Chilean pesos) an increase of 15 per cent compared to last year due in part to the launch of new casinos in Peru. Dreams operates six casinos in Chile and it has recently expanded into Peru where it operates four smaller gaming establishments in Lima and has plans to expand further in the region. In addition in February 2015 Dreams and Sun International announced that they had entered into a memorandum of understanding to merge their Latin American operations as part of Sun’s International plans to expand into the Latin American gaming market. Peru is seen as a key market for the newly merged company. HORSE RACING AND OFF TRACK BETTING Horse racing has a long history in Peru but attendance is now in decline. There are two racetracks in Peru. The Hipodromo de Porongoche is located in the city of Arequipa in the far south of the country and the other larger track, the Hipódromo de Monterrico, is located in capital, Lima. Horse racing though is still quite popular off track and there are 101 off track betting shops nationwide known as “telepódromos.” In addition Monterrico Televisión, a cable television station, broadcasts races live from the track in the capital. SPORTS BETTING Intralot launched sports betting game Te Apuesto in 2011. The game is offered in selected points of sale of Intralot de Peru’s retail network, covering the whole Peruvian territory. It also allows customers to bet online via its sport betting portal Te Apuesto.com. However bricks and mortar sports betting is extremely limited and sports betting for now is limited to sports betting pools via Te Apuesto point of sales along with a number of independent bookmakers located mainly in capital Lima. BINGO Bingo halls come under the same law that was passed at the end of 2006 that regulates casinos and slot machine parlours. There are only a very small number of bingo parlours and bingo is becoming increasingly less popular. ONLINE Peru was one of the first jurisdictions to adopt online gaming in the region. The board has issued a small number of licences to online operators. In 2008, Betsson launched its first online gambling

site in Peru. The site offers poker, virtual instants, poker and sports betting, including betting on local football matches. Since 2008 Intralot Peru has also allowed players to take part in a number of lottery games via the internet, and there are a number of online licensed platform which offer a large variety of bets. Although growth in the sector has been slow, it is believed that gambling via these platforms will gradually become more popular. The most recent online operator to offer its products in Peru is Offsidegaming. In 2012, Offsidegaming launched Inkabet.pe, the first local online operator in the Peruvian market. The site offers sports betting, casino and slots games, and is the first online casino that caters specifically to the Peruvian market. The site also now offers a live casino option. There have been a growing number of reports that Peru could soon address the issue of online gaming and open up the market further. In June 2015 Director General of the Peruvian Gaming Control Board Manuel San Román Benavente announced that Peru could soon give online gaming the green light and that the gaming control board is working on a draft legislation which would permit an expansion of the market to offshore operators. According to local press reports, the tax for online gambling operators would stand between fifteen to and twenty per cent. This will be significantly higher than land based operators which currently pay 12 per cent. The reason for the difference, according to Mr. Benavente, is that casinos help create jobs locally and they also have a number of “video systems and a number of controls in place.” Although the exact details of the new bill are unknown it is believed that any operators offering their services locally will have to have a domain name ending in .pe but servers will not necessarily have to be locally based. However, the board will implement a system whereby it will be able to be monitor online transactions locally and in real time. LOTTERIES Intralot was first awarded a ten year licence in 2001 to run and administer state sponsored lotteries. Intralot lottery operations in Peru commenced on December 1 2003 with the launch of a daily lottery called Gana Diario (Win Daily) which was initially distributed through 1000 points of sale. In October 2015 the company announced plans to further consolidate its operations in the region and strengthen its position as market leader. In order to achieve its goals the company will invest over US$4m to expand its outlets from 3,600 to 5,000 by the end of 2016.

URUGUAY

CASINOS AND SLOT MACHINES There is no cap on the number of casinos nor is there a limit on how large they can be in Uruguay. There have been casinos in Uruguay for more than a hundred years, and compared to its Latin American neighbours, where casino gaming has been a divisive and politically charged issue, casino gaming has been relatively uncontroversial. This is largely in part due to a rather unusual way of regulating casinos called the “mixed system.” Casinos in Uruguay had been state owned and run since the 1950’s. Then, in 1996, the government began to offer licenses to the private sector. Setting no limit on the number of tables or slot machines, the government, in return for 35 to 45 percent of profits, would run the casino while the investor would be responsible for equipping and furnishing the casino, overseeing security, and promoting the casino, particularly to tourists. Many feared that the involvement of the state would negatively impact profits, but this has proved not to be the case. In fact, year-on year gaming income has increased instead, and many traditional tourist locations that had fallen into a state of disrepair have, with the help of the private sector, been brought back to their former glory. Today, around 80 percent of gaming tax revenue comes from the casinos operating under the mixed system. Beginning in 2013 the newly appointed head of the Uruguayan Casino Board Javier Chá initiated a number of renovations of state run casinos which had been recording record profits over the previous years. Combined the entirely state owned casinos along with those casinos operating under the mixed system recorded profits of $100m in 2012. 2012 also saw a number of important casinos opening and major renovations including the $70m renovation of the iconic Casino Carrasco in capital Montevideo. The casino industry has continued to perform well. According to the Uruguayan Casino Control Board, gross gaming revenues stood at around US$212.7m in 2015, a seven per cent increase compared to 2014. In the same period slot parlours recorded a net income of US$36.5m – 9.5 per cent more than in 2014. However an increasingly pressing issue has been the growth of illegal slot parlours and slot machines located in shops and small businesses which have led to calls for reform. In 2014 the government of President Tabaré Vázquez sent a bill to the House of Representatives which would ban slot machines outside of casinos and slot parlours.

23

The bill had already already been stalled for seven years but was dropped due to growing controversy and a lack of consensus on the issue. During the the first Vázquez administration (2005-2010), the executive sent a bill to parliament banning slot machines in shops and established a restrictive policy on gambling but the bill was never passed. Then the administration of José Mujica (2010-2015) put forward regulation which would allow slots in local shops with three slot machines being permitted per establishment with provisions in place that they could not be in close proximity to schools, colleges and sports centres. The latest attempt to change Uruguay’s gaming law are now up for debate again and the Chamber of Deputies could approve a new gaming act in the coming months. As well as addressing the issue of slot parlours and slot machines outside of casinos the new law shifts gaming control away from parliament to a new gaming control board and the executive branch. It also aims to grant the executive and the new board the right to give the green light to new games - something which has traditionally been the role of parliament. According to the draft of the new law, the government is also seeking to create a new governing body called the National Management of State Gambling and Casinos (Administración Nacional de Casinos y Juegos de Apuestas del Estado) which would exercise state control over all types of gambling. While there is opposition to the new act support is growing as the new act addresses the long running issue of slot parlours outside of casinos. Although there are no official figures it is estimated that there are around 20,000 illegal slot machines in Uruguay. Combined they generate around US$3.2m a week. HORSE RACING AND OFF TRACK BETTING There are two major racetracks in Uruguay. El Hipódromo Nacional de Maroñas was first established by the British community in Montevideo in 1847. In 1997 the Jockey Club went bankrupt and in 2002 the government auctioned it off. Five years later Hipódromo de Maroñas Hípica Rioplatense S.A (a joint venture between Codere and the Sociedad Argentina de Medios S.A) bid for and won the right to reopen the track. Codere also runs a racino at the track. Codere also operates Las Piedras Racetrack, following the granting of a new license for the ownership, use and operation for a period of 30 years. Las Piedras racetrack opened in 2012 and Codere also operates a racino at the track. In addition Codere runs a number of off track betting shops in Uruguay. However horse race betting via betting shops fell by 6.4 per cent and stood at US$1.9m in the first nine months of 2014 according to the latest statistics released by the gaming board

24

There have though been a number of positive developemtns of late within the industry. In September 2015 betting on local pools at the Uruguayan racetrack of Maroñas and the racetrack of Las Piedras began in the United States via The Latin American Racing Channel (LARC). It marks an important milestone for the Uruguayan horse racing industry as it seeks to expand its audience to the United States and it’s the first time that customers based in the United States are able to place their bets directly on the pari-mutuel pools from Uruguayan racetracks. BINGO Bingo is not popular in Uruguay and is limited to charitable bingos SPORTS BETTING Sports betting is permitted and Codere runs twenty seven sports betting shops in Uruguay. ONLINE Ex Director of the Uruguayan Gaming Commission Fernando Nopitsch in 2008 outlined his intention to legalise online gaming. Representatives of the state casinos met in the same year to discuss how online gaming could be regulated in Uruguay but these plans were ultimately abandoned. At present online gaming continues to operate in a grey area in Uruguay. There are currently no regulations in place that establish a legal framework for online gaming nor are there any penalties in place for players gambling via offshore websites. As a result Uruguayans can bet abroad via offshore gaming sites by using international credit cards without fear of prosecution by the authorities. However, the new bill now being considered in the Uruguay Congress does seek to address the issue and would green light online gaming. While the bill does not directly regulate the conditions under which it will offer online gambling in Uruguay, it is the first step as the government seeks to become the only authorised provider of online betting. Crucially, the new bill would give the state the monopoly over interactive and phone betting while off shore companies would be banned from offering their services locally. LOTTERIES Banco de Quinielas is licensed by the government and is a private company that administers Uruguay’s lotteries under the control of the government agency, The National Directorate of Lotteries and Quinielas. The new proposals now under debate in the Uruguayan House of Deputies seeks to create a new Betting and Gaming National Comptroller’s Office (Dirección Nacional de Contralor de Apuestas y Juegos de Azar) which would be responsible for the supervision of the quality of accounting and financial reporting of State Lotteries. This body would replace the

Uruguayan Board of Lotteries and Pools Betting (Dirección Nacional de Loterías y Quinielas). Lottery and Quinela betting is on the rise and increased by as much as 15 per cent in 2015 compared to 2014 reaching US$387.3m. The most popular game was Quinela (pools betting) with revenues standing at US$154m. In second place was Cinco de Oro. Revenues for the lottery game, which is drawn twice a week, reached US$84.1m, an increase of 30.8 per cent compare to last year. Revenues had fallen by 5.4 per cent in 2014. In third place was Tombola with gross gaming revenue standing at US$82.7m, an increase of 13.9 per cent. Revenues for instant product Quinela Instantánea stood at US$32.4m recording an increase of 45.9 per cent. Sales for sports betting game Supermatch grew by 15.3 per cent to US$10.1m. Meanwhile betting on the national lottery also grew albeit less so increasing by 2 per cent and stood at US$23.7m. According to Director of the Lottery Luis Gama part of the reason for the growth of lottery gaming is that the number of draws have been reduced and there has been an increased focus on its core products. Meanwhile, the sharp rise in popularity of other games such as instants have been down to successful adverting campaigns.

VENEZUELA

CASINOS AND SLOT MACHINES The Venezuelan gaming sector is increasingly under siege by a government fundamentally opposed to gambling on principal and the gaming landscape has seen a remarkable transformation since 1996. In 1996 the market looked potentially lucrative for operators as Venezuela passed a gaming which allowed for casinos to be built in five star hotels with a minimum of 200 rooms. In common with many gaming laws in South America the main purpose of casinos would be to encourage tourism and add to tourist infrastructure in the region. It was estimated that within a very short time at least thirty new casinos would be up and running in Venezuela as long as they were part of a hotel. Three years after the act was passed and Hugo Chavez was elected to power. Chavez did not ban casinos or bingo outright but the industry saw a great number of closures during his fourteen year long rule which saw huge tax increases across the bingo and casino sector. Combined the closures left an estimated 100,000 people in the industry out of work. Although the crackdown began slowly it went into overdrive in 2011 after the National Commission of Casinos, Bingo Halls and Slot Machines under the Ministry of Justice was given powers over the industry whereas before local governments were allowed to approve casinos and bingo halls.

Since its establishment the commission has carried out numerous onsite inspections and raids which have almost always ended in closures. These closures continued apace especially in 2011 when the Commission closed down almost all of the bingo halls and slot parlours in the country and revoked licences which had been granted by local authorities. Chavez’s successor Nicolas Maduro seems equally opposed to gaming and it is estimated that the industry will continue to decline under his leadership. HORSE RACING AND OFF TRACK BETTING Horse racing has been a popular sport in Venezuela for over sixty years and is the second most popular sport after baseball. The government via the regulatory body SUNAHIP tightly controls betting at the country’s four racetracks and 1,200 off-track betting houses. According to The National Superintendent of Horse Racing Activities (SUNAHIP) on any given Sunday tax gaming revenue from the largest racetrack - La Rinconada in Caracas stands at around US$3m. Illegal gaming remains an issue and it is estimated that illegal betting on horse racing is around 50 to 60 times the amount that is bet via official channels. Criminal gangs have made inroads into the industry and have been accused of bribing race officials, jockeys and drugging race horses. Illegal gambling is driven by the government’s limit of 1,000 bolivars on bets (US$158 according to the official rate and US$10 at the unofficial rate). The illegal operations often operate from inside state licensed gambling halls. As well as the betting limit imposed by the government the industry has been impacted negatively by the socialist government’s political stance on gaming. While in power Chavez publicly came out against the industry especially when it came to the resources spent on the raising of thoroughbred race horses and initiated a number of moves which hindered the growth of the industry including a temporary ban on the broadcasting of races on radio and television. Under his successor Maduro, organised crime has continued to make inroads into the industry. Apart from off track betting shops and tracks Venezuelans can also bet on the results of horse races staged in Venezuela nationwide in the Selco Group run lottery outlets. Selco has a nationwide point-of-sale network for lottery tickets and allows customers to bet on the outcomes of local horse races in a game called 5y6. The game allows customers to bet on the results of one to six races in tracks all over Venezuela. SPORTS BETTING Sports betting is permitted and the largest provider of sports betting is NIGHT - National Group Development Technology. Other companies which offer sports betting are

Inmejorable, Kingsportbet, Sport Play de Venezuela, Corporación Turf e Inversiones Turf, Universal Circus Games, Castanhola Sistem and Grupo Cordialito Replay. The government is currently conducting an investigation into these companies to ensure that they are complying with the terms of their licences. Selco lottery machines also offer sports betting via its terminals. Venezuelans can make a wide variety of parlay bets on a number of sports including baseball, football and boxing. Bets can also be placed online via its website www.parley. com.ve BINGO In Venezuela, where in 2010 there were just over sixty bingo halls, which in many cases were attached to a hotel, there now remain only a small handful in the wake of the continued crackdown on the gaming industry. ONLINE Online gaming is not currently permitted under Venezuela’s gaming laws. LOTTERIES There are both instant and draw lotteries available at over 3,000 points of sale throughout Venezuela. The oldest lottery in the country, established in 1926, is the Lotería del Táchira. Other major lotteries in Venezuela are the Oriente Lottery, Caracas Lottery and the Zulia lottery. All lotteries are overseen by the Comisión Nacional de Lotería. Illegal lottery gaming still continues to thrive. There are an estimated 36,000 outlets operating illegally in Venezuela. The Triple Gordo lottery is drawn every Sunday and is the leading lottery game in Venezuela and is run by the Selco group, a Venezuelan company. Selco designs, develops and merchandises lottery games, including online games for horse racing and other sports betting games in Venezuela and works closely with a number of state owned lotteries. While the casino sector is in sharp decline lotteries remains very popular in Venezuela. Per day in Venezuela there are around 32 separate lottery draws.

The gaming law (Ley de Juegos de Azar Num. 221) was initially introduced in 1948 and this states that casinos can only be situated in hotels and the specifics are then divided into three territorial zones: • Zone 1 – San Juan (not including the historical zone), Carolina, Loiza and Rio Grande. In this zone the hotel must have a minimum of 300 rooms and total cost of project must not be less than $30m, hotel must have a swimming pool or be near to the beach. • Zone 2 – Includes the rest of the geographical area and territory not included in Zone 1 or 3. In this zone the hotel must have a minimum of 200 rooms and investment cost of not less than $20m It must have a beach or swimming pool facilities and facilities can include golf. • Zone 3 – This is the historical part of the city and the international airport zones. In the historical zone hotels must have a minimum of 125 rooms and investment of not less than $10m. Hotels in the airport must have 100 rooms minimum and investment of $5m minimum. Each operator will pay a certain amount for the gaming franchise based on earnings. So for example those with total gaming revenues of $25m pay $50,000 annually for the franchise. Those with $25-50m pay $100,000, those with $50m-100m pay $150,000 and those over $100m revenues pay $200,000. Players must be over ages of 18 years. Each casino can have 1.5 slots per player in proportion to the number of playing seats at the gaming tables up to maximum of six slots per player. In August 2013 the proposal to legalise slots outside of casinos was defeated. The final version of the House Bill 394 and 916 (Act 48) was signed and this omitted any reference to introducing VLTs and AEMs. The Bill had been a heated discussion for months.

CASINOS AND SLOT MACHINES All casinos must be located in hotels by Puerto Rican law and are a huge pull for visitors to the island although it is said 90 per cent of casino clients are actually locals. There are 21 casinos in total open at the moment and the main large casinos are found in San Juan and there are relatively few in the south of the island.

The initial proposal was to introduce video lottery slots in bars, shops and other areas in a bid to stamp out illegal operations. If illegal machines were eradicated the industry claims a further $180m could be added to the revenues. The argument against however stated that if slots were legally permitted outside of casinos this could have a huge adverse affect on casino incomes. Since 2005 casino revenues have dropped consistently.

The casinos are overseen by the Compañia de Turismo and the Division de Juegos de Azar which looks after the locations, taxes and regulates the sector. Tourism is responsible for six per cent of the island’s GDP.

In a bid to reduce the government’s deficit (around $35bn) the possibility of introducing slots (House Bill 916) outside of casinos was discussed at length and EMPRECOM (Empresa Puertorriqueña

PUERTO RICO

25

de Recreacion Comercial), which is a company managing the business of entertainment machines on the island, fought against the proposals. They claimed the bill, which would permit a foreign company to operate the machine halls, which would force many small and medium businesses to close. The idea was to regulate up to 20,000 slots in small shops although some suggested an amendment to permit them in ports and airports only. As an example some 300 slots are operated at Luis Munoz Marin Airport in Isla Verde privatised through Aerostar Airport Holdings and produce the treasury $12m per year. Casinos are a huge tourism pull in Puerto Rico and last year the government received some $61m from gambling taxes which represents 72 per cent of its revenues. At the moment illegal slots operate outside of the gaming act rules and do not pay taxes or have operating licences and also pay cash prizes which is not permitted. Many players say they prefer gambling in seedy bars on illegal video slots due to the payout percentages which are substantially higher than those in the casinos. Although in August the House Bill 916 did not permit slots outside of casinos it did however bring some changes. Firstly the number of slots machines allowed in casinos has been increased to eight machines per player seated or standing in proportion to the number of gaming tables. The slot machine revenue distribution formula has also been altered and now after the first $315m to $495m the government will then retain 55 per cent of the funds whilst the casinos retain 45 per cent. The excess after the $495m is split 80-20 in favour of the casino operator. Previously the casinos kept 80 per cent after the first $315m. In 2014 funds to distribute only reached $296m, a drop of $19m from funds back in 2008. Meanwhile the Internal Revenue Code was signed in Act 40 which means a B2B tax will not be introduced for the casino industry. Ismael Vega of the PRHTA said: “Even though we are satisfied with the accomplishment with the intent to legalise slot machines outside of the casino, the law does not look after the issue of illegal slot machines. Our intention was to block the Department of Treasury from continuing to issue licences to operate entertainment slot machines. This is a subject that we continue to follow up. “We need to eliminate illegal slot machines so that the money flows through the casino’s regulated system. We need more flexibility in our operations and that a model is adopted where weight is given to those who exceed long scrutiny.

26

“The government intervention should occur only when something is wrong and a sanction applies. The government should not enter in the daily operation and its business strategies. It is necessary to promote strategies so the island could be an ideal gaming destination and for more people to travel to Puerto Rico to sponsor casinos.” The PRHTA estimate there are 7,300 slots in casino hotels and 25,000 more illegally operated slots. In 2012 slots generated revenues of $313m of which hotels received $156m and government saw $157 and the Universidad de Puerto Rico (UPR) received $61m whilst the treasury received $24m. This revenue is a drop of $1.8m from the previous year which is attributed to the proliferation of illegal casinos or slot halls. Apparently this has caused some casinos to close including the Hotel El Conquistador in Fajardo and the Gran Melia in Rio Grande and Pichi’s Convention Centre in Guayanilla.. The closure of El Conquistador meant a loss of $900,000 in income for the government plus a loss in room tax. Hotels with casinos pay 11 per cent room tax whilst hotels without casinos pay nine per cent. Ismael Vega president of PRHTA and also finance executive at the Ambassador Condado says they have laid off 30 employees and the casino industry is going through one of its worst times with lowest all time revenues of $19m. Many illegal machines are made by parts smuggled into the island and whilst legal casinos invest around $16,000 per slot machines and also obtain permits whilst illegal machines cost as little as $2,500 each and owners keep 60 per cent of the profit whilst the establishments hold 40 per cent. Meanwhile there is just one thoroughbred horse racing track in Puerto Rico – El Commandante, or Hipodromo Camarero, as it has since been renamed. Horse racing has existed on the island since 1882 when the first racetrack was built in Ponce. There are 2,500 slots operated at the racetrack and they say illegal machines are to blame for a $58m loss over the last four years at the racetrack. In 2014, tote betting operator Sportech did a deal with Camarero racetrack to operate the island’s first online gambling site called ganadondesea. com. Sportech has supplied the track with parimutuel technology for the last 20 years. Recent developments include the Hyatt Place Bayamon in Puerto Rico. Construction began in March 2012 and opened in January 2014. It has a 156 room hotel with an adjoining 11.500sq.ft Tropical Casino.

Meanwhile Hyatt Place Manati and Casino is a 104 room hotel with adjoining casino of 10,000 sq.ft being built in Manati, and opened in January 2014. It has been constructed on five acres of land and includes meeting areas, fitness centre and swimming pool.

ARUBA

CASINOS AND SLOT MACHINES Gaming is legal in Aruba and is actually the island where Caribbean Stud Poker was invented back in 1988 and today is often called the Las Vegas of the Caribbean. Casinos in this country first opened in 1959 and today there are 12 casinos. For a time gambling was the island’s main attraction and the casinos are elegant and large and offer table games and slots whilst some also offer bingo and sports betting. The sector is governed by the Comision Nacional de Juego (CNC) and governed by the law Hazardspelen AB 1990 no GT 44. In February 2013 Colonel Danny Ferrer was appointed as National Casino Inspector of the National Commission of Casinos The law gives the Minister of the Justice and Public the right to authorise casinos which must be located in hotels with a minimum of 250 rooms. The fee is AWG2,500,000. Casinos open around midday and can stay open until dawn and the currency used is the US dollar. Aruba is home to a family of five Divi Resorts which offer accommodation along the beaches on the Aruba coastline. The island is also host for many professional poker tournaments and houses slots from progressive jackpots to nickel machines. The majority of casinos are located in the Palm Beach area in the large resorts and also in downtown Oranjestad. Stellaris Casino at the Aruba Marriott Resort and Crystal Casino at the Marina Hotel are the only two casinos open 24 hours a day. Players must be over 18 years. The control of the market is said to be ‘shockingly bad’ in some reports and there are certainly levels of corruption and illegal gambling. Apparently the law states an Aruban resident can only visit a casino eight times per month maximum although whether this is actually checked or implemented is another question. Gaming tax is levied on the gross receipts from the gaming operations of a casino which is four per cent monthly and this resulted in tax revenues of around US$12m in 2006. Slot revenue is determined at a factor of 1.55 times the slot win and outcome then taxed at four per cent.

THE BAHAMAS

CASINOS AND SLOT MACHINES The Gaming Board for the Commonwealth of the Bahamas governs the gaming sector and operates under the Lotteries and Gaming Act Chapter 387 and the Accounting and Internal Controls Regulations 1993. It is headed by Chairman Andre Rollins. The gaming board was established in 1969 alongside the gaming act and there have since been many amendments to the act including a 1978 amendment which allowed the Hotel Corporation to be the only entity allowed to grant a casino licence. Today casino gaming remains a special form of entertainment aimed at the tourism market and there are three casinos currently open. Players must be aged 18 years. There are several issues with gaming in the Bahamas. Firstly it is only permitted for tourists. Locals, even residents with work permits, cannot gamble in casinos. Many are calling for regulations which make it fair all round and they want to bring all forms of gaming operations into conformity with the laws and this also includes introducing a national lottery. This has been talked about since the 1990s but a referendum was held in January this year and was rejected by votes despite reports it could bring the government an extra $20m in tax revenues. The law banning Bahamians from casino gaming was made in 1965 when it was also illegal for locals to work at casino tables. The government later reversed this latter decision. If the casino industry is modernised it is said the Bahamas could see anything between $17m and $30m in additional tax revenue plus further employment opportunities. The Bahamas has not updated its laws since 1969. At the moment there are a reported 45 odd illegal gambling houses in New Providence and 12 in Grand Bahama whilst is it said some $2m is gambled locally and abroad weekly. Meanwhile online gaming is not legally permitted although Atlantis does offer mobile gaming and tourists can play games on smart phones or tablet devices by downloading Cantor Gaming’s application and inputting a password and account information. This is the first casino to offer such technology here. The government has passed legislation to allow mobile gaming and sports betting in the Bahamas. The Gaming Bill 2013 replaces the 1969 Lotteries

and Gaming Act and gives the country a chance to embrace tourism and take advantage of a very lucrative market. The Gaming Act permits casinos to offer sports betting, in-play betting and online gaming, incentives for junket trips plus iron out several other issues such as removing prohibition on non Bahamian residents to gamble. The act was passed on September 16, 2014.. The Bahamas currently nets around $146m each year from its gaming industry with annual revenues per casino reaching $48.6m on average. The government hopes to now triple this figure and also increase the $15m the government currently receives in taxes. Over the last five years the Bahamian casino gaming gross revenues had fallen by more than one third from $220m back in 2007. Although some of this is down to the recession the bulk of the decline happened in 2008-09 when there was a $50m drop. The Bahamas is also still lacking an independent testing laboratory, private salons for VIP gamers, liberalised gaming credit and the enforcement of gaming debt. There are 163 million Americans living within 1,000 miles of the Bahamas and the idea for a new gaming law would cash in on those figures offering visitors something more than sun and sea. There are 276 flights to the Bahamas each week and 18 of the 25 wealthiest US counties are within one hours drive of an airport which has direct flights to Lynden Pindling Airport. The Bahamas could see a minimum of 200,000 new tourists annually thanks to the new law.

The Cable Beach Casino opened in 1983 and in 1988 underwent renovations and was then renamed the Crystal Palace Resort and Casino. Many other casinos have opened and closed over the years and at the moment there are only three resort casinos now open. Casinos have seen revenues decline over the last few years. Crystal Palace saw revenues down by 18.5 per cent to $22m in 2011. The Bahamas charges between five and 25 per cent tax on winnings and takes around $15m from the sector in taxes annually.

SINT MAARTEN

CASINOS AND SLOT MACHINES Casinos have always been a huge part of the island’s tourism industry and as such they have been permitted to open under fairly lax rules. There are casinos attached to hotels and other stand alone sites primarily in Philipsburg which also serves the cruise ship market. In 1995 when Hurricane Luis arrived there were 10 casinos of which three were stand alone. Today there are 14. Although there is a mix of locals and tourists in the casinos, back in the late 1990s there was a call to re-look at the market and how best to proceed with new gaming establishments. A study was conducted and consultants focused on issues such as capacity, expansion, fiscal impact, licensing and internal controls. The study also called for a Gaming Control Board to govern the sector after it reported too many casinos and an uncontrolled sector.

The first casino to open was in Nassau in the late 1920s called the Bahamian Club which was followed by the opening of a small casino on the island of Cat Cay. At the time they were seasonal and frequented by tourists.

The report showed that the government was not receiving its fair share of revenues compared to other competitive destinations and administration and financial control issues needed to be addressed.

In 1964 the first major casino opened called The Monte Carlo at the Lucayan Beach Hotel until it later closed in 1974.

Following the report the government then published its casino policy in 2011 under the title Rules of the Game. Today the casino sector is not really governed but operates under the Ministry of Finance’s Rules of the Game policy.

Meanwhile another casino called El Casino then opened in Freeport in 1966 but then closed in 1978. It changed ownership and until 1983 operated under the Grand Bahama Management until Princess Casino Limited was granted a licence to operate the facility. They changed the name to Princess Casino and in 2000 it was purchased by DVI Freeport Casino Limited and renamed the Casino at Bahamia. In 1967 Paradise Island Casino opened and in 1987 it was purchased by Donald Trump then resold to Merv Griffin in 1988. In 1994 it was acquired by Sun International and the name was changed to Atlantis Paradise Island Casino

This stated that casinos should restrict local player access to just four times per month maximum. Sadly this was not enforced and has left the government wondering if there is really now any need for this to be in place. The paper also introduced a maximum number of casinos on the island and limited it to three stand alone casinos in the capital which would be permitted to run alongside the two current establishments, bringing the total to five in the Philipsburg area.

27

Plus a further three more stand alone casinos would be allowed on the ‘strip’ (Simpson Bay) in addition to the two existing casinos already there bringing the total to five in Simpson Bay area. There is also ceiling limit of 10 stand alone casino in total. Meanwhile casino in hotels, which are part of hotel developments, will need to be linked to those with at least 200 rooms. They cannot be located 50m near to sensitive buildings such as churches and schools. Minimum age is 18 years. There is still no gaming board set up despite consistent calls. In March 2014 a draft budget was presented by the government and the 14 casinos now must contribute more to the society and under consideration is a fixed fee per table and per slot machines or a 10 per cent levy on payouts. The budget assumes a fixed fee which means the casino will contribute some G7.5m to the state. The government aims to collect G1.8m in arrears from the casinos. Finance Minister Roland Tuitt is behind the plans whilst the Casino Operators Association is emphatically against the decision. Casinos do not pay turnover taxes but monthly fees of G50,000 for tables and G10,000 for slots.

28

Brazilian Gaming Congress Brazil  •  Coming soon in 2016 braziliangamingcongress.com

To apply for your place visit juegosmiami.com @BgCongress 29

juegosmiami.com

30