Congress Close to Legalizing Gambling Over Objections of Church and Police

By Kevin Sullivan
Washington Post Foreign Service

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                               © 2002