Casino Enterprise Management

Of 24 companies holding multi-location permits in Mexico today, 14 are already incorporated in the Asociación de Permisionarios de Juegos y Sorteos AC (APJS). This represents fully 75 percent of the authorized gaming locations in the country.

Established in 2007, the relatively new APJS was publicly launched on Sept. 3, 2008, with a one-day roundtable conferences titled “The gaming industry in Mexico: Dynamism with order and sustainability.” The roundtable was held in the Hacienda de los Morales, a beautiful and traditional restaurant in the historic Polanco neighborhood of Mexico City, with participation by a diverse group of leaders from the industrial sector, congressmen from various political parties, authorities and regulators of current and past administrations, and international gaming specialists and observers, including revered gaming law expert I. Nelson Rose, who participated as a keynote speaker. Practically all of the major national broadcasting companies and newspapers covered the conference. Casino Enterprise Management attended and was able to obtain the following one-on-one interview with APJS President Alfonso Pérez Lizaur.

CEM: What are the objectives and mission of APJS?

Alfonso Pérez Lizaur: The association’s purpose is to create a better understanding of the gaming industry by professionals, regulators and the public and to proactively address legislative and regulatory issues affecting the sector in order to promote a compliant regulatory framework and sustainable growth of the industry.

APJS promotes the gaming sector as any other entertainment industry, but our mission and thrust is to push for an organized and responsible development through a long-term vision.

CEM: While it is still growing rapidly, the gaming industry in Mexico does not quite yet seem to have its regulations or standards as effective as they could be. How does APJS intend to change that?

APL: I would not say there are no effective regulations or standards in place. We have an old law (1947) and a recent regulation (2004) that is being enforced by the Secretary of the Interior. The main issue of the law and regulation is that it is oriented toward granting specific permits and licenses that, in some cases, are very “open” while others have more defined parameters. That conveys a sense of injustice and also gives the regulator discretionary rights that are not always applied consistently.

CEM: So far APJS is only comprised of the major group owners for gaming. Why is that? How will smaller operators be allowed to participate in and benefit from the association?

APL: It is true that our founding associates are enterprises with considerable relevancy in Mexico, like Caliente, CIE, Televisa, Codere and Cirsa, some of which are publicly traded companies. But it is also important to note that medium and smaller operators and key suppliers have already joined the association and more are in the process of incorporation. It is not a matter of size, but of the will and commitment of our members. All companies are welcome to join and participate in the association as long as the license that they hold or operate is fully recognized by the regulator and as long as they sign the APJS’s Code of Ethics.

CEM: What is APJS’s Code of Ethics, and what are the consequences of a member not adhering to it?

APL: The Code of Ethics is not a capricious document. It contains basic rules applicable to any professional organization, and it is focused on dignifying the role of the people and the companies that are currently involved in gaming activities. Responsibility is the main spirit, starting with the people that work for our companies—our employees. We also seek responsible behavior in relations with our customers, with the communities that are close to our locations, and with an underlying culture of transparency, fairness and best practices in general.

In cases where an associate does not adhere to the code, the board of the association, as collegiate body, is entitled to determine the consequences of a breach to those rules.

CEM: What are the qualifications for membership in APJS?

APL: To become a member you have to be a recognized licensee (permit holder) or a supplier to our members.

CEM: How is APJS different than CANAJU?

APL: CANAJU is basically a project with the goal of creating what we know in Mexico as a “chamber.” While its efforts to form continue, my understanding is that it has not been accepted or certified by the government.

In APJS, we do not want to represent every participant in the industry since we do not have all things in common with all the variant types of companies and constituents. For example, operators of state and regional fairs can offer gaming in temporary installations, but they concern themselves with totally different games and operating issues than our fixed-location members.

Our founding members decided to form an “association” instead of a “chamber” because an association can be selective when including or approving its members while a chamber cannot.

Finally, because our standards for membership are high and our long-term plans ambitious, we intend to have a vigorous practice of self-regulation and compliance procedures.

CEM: The mysterious appearance of new license holders in Mexico continues to defy explanation by anyone in the government or in the industry. How does APJS intend to encourage the Mexican government to bring this process into the sunlight, in accordance with Mexico’s transparency laws?

APL: We only recognize as a “license” those who are specifically granted and published by the Ministry of the Interior (Secretarial de GobernaciÛn). The only “appearance” was an 18-location permit issued during the year of 2006, but it was eventually included in the regulator’s official webpage in February 2008.  We have a program in place with the government that will enable both the regulator and the licensees to promote changes in the law that will give clarity to those specific rules that have allowed some individuals to gain the right to temporarily operate through a constitutional injunction called “juicio de amparo.” Our legal advisors are analyzing the overall status of all the licenses issued to date.

CEM: What can APJS do to force the Mexican government to disclose all the permits that have been issued but are hidden, so the rest of the industry, investors and existing operators have a clear picture of who will be entering the business?

APL: I recently asked this question to the regulator and the answer was, “All the permits that the government has granted have been disclosed on the webpage.”

CEM: What will APJS do to address illegal operators and illegal types of games that the Mexican government does not seem to want to change?

APL: Recently the federal government expressed to APJS its decision to “clean house within six months.” They already started with one of the largest illegal operators, which had a 30-location permit dated 2005 but was not actually operating under that license. All of that operator’s gaming parlors are now being forced by the authorities to comply with the gaming law. Therefore, we are starting to see results on the compromise given by the government, and we are taking them at their word.

CEM: How will laws and gaming regulations be enforced?

APL: The Treasury Department recently became involved under taxation laws as a result of the new gaming tax. The Treasury Department used that legal mechanism to transfer its authority for funding from the special taxes over to the Ministry of the Interior. With that additional money, the Mexican regulator will now be in a position to effectively enforce the existing law and regulations.

CEM: Will APJS attempt to force the government into creating a legitimate gaming commission, as has been provided in the 2004 regulations?

APL: Yes. We have already discussed this with the regulator and it has expressed its decision to create a legitimate, specialized and professional gaming commission in the near future.

CEM: If self-compliance is a goal of APJS but if the Mexican government is not actively supporting the objectives or enforcing existing regulations uniformly, how can APJS make any improvements in the industry outside of its member companies?

APL: At the end of the day, we know that we are working for the whole industry and not only for our members. In fact, all the changes we are seeking will benefit the industry in general. For example, since the beginning APJS has been participating in the development and adoption of the norms NYCE and GLI in order to set up technical standards for the machines and games that will be and are being used in the legal locations. We believe that the customers deserve fair play for their money. In the same way, we will continue to vigorously seek legality in other areas related to gaming, so there is no doubt that the activities of APJS will bring positive effects to our members and to the general public as well.

Alfredo G. Lazcano is a litigator with many years of experience, including complex civil cases involving gaming interests, as well as the government of Mexico and regulators. He can be reached at (5255) 3187-0690 or als@lazcanosamano.com.

John R. Long has been a product and market development consultant for major manufacturers and gaming companies since 1994. He has also been extensively involved in several gaming projects in Mexico. Long can be reached at suncomjohn@aol.com.