Casinos in Mexico? The Endless Question

It's a topic of perpetual fascination to those in the American and Canadian gaming industry, and one that causes considerable head scratching. In the past dozen years, especially in the last few, the matter has sporadically roiled the body politic in Mexico itself. Earlier this year the new president of the Mexican Republic, Vicente Fox, replied to a journalist's query that he would not be opposed to the legalization of casinos.

Fox's remark has apparently raised the hopes of some in the U.S. casino business. A few months ago Bill Wortman, an owner of the Nevada Palace in Las Vegas and another casino in Detroit, was chagrined when word leaked out of his discussions with business and political leaders in Reynosa (near the border with Texas) about the possibility of opening a large casino there.

Wortman says the Reynosa talks were merely exploratory, for when and if Mexico legalizes the games. He says he know Mexico well, and understands that it would be counterproductive to announce he wanted to build a casino in a country where such is still prohibited.

However, there are numerous crosscurrents in the casino debate south of the border. Some are rooted in Mexican culture and history, others are manifestations of larger political and social questions.

The national indecision on the topic has proven frustrating even to Mexican observers. Several years ago a columnist for the Mexico City daily Excelsior wrote, "Legislatures go and legislatures come, and each time they sound the casino theme, which sets off fearful discourses." Knowing a bit about the history of gaming in Mexico helps to understand these debates.

There was no lack of casinos in Mexico in the 19th century, owing to the French influence. (France made a brief, ill-fated attempt to colonize Mexico.) And during the 30-some-year reign of the virtual dictator Porfirio Diaz, French-style casinos especially flourished. The 1911 Mexican Revolution ended the Diaz decades.

As with many social revolutions, this one also had strong puritanical elements, and the doctrine of "revolutionary moralism" impelled some to insist on the closing of both casinos and houses of prostitution. Some were indeed shut down, others were let alone. Americans were heavily involved in gambling enterprises, particularly in the border area.

For instance, gringos owned some of the small casinos in the Tijuana/Mexicali region of Baja, near the border with California. The remoteness of the border areas from the power centers in Mexico City allowed the gaming trade there to continue unabated throughout the social and political turmoil.

Live Racing Ended in 1993, But Caliente Survives

In 1916, after California banned horse racing, a San Francisco boxing promoter opened a racetrack in Tijuana. (This track would evolve into Caliente, a site of many innovations used at racing ovals worldwide. The live racing ended in 1993, but Caliente is now the major player in the Mexican gambling scene.)

In the 1920s a group of gringos known to the press as the Border Barons built the Agua Caliente Casino in Tijuana. This was, by the standards of the day, a luxurious gaming palace that rivaled anything in Europe, and in fact was patronized by both European royalty and the celluloid royals of Hollywood, as well as the notorious, like Al Capone. (The story that it was Capone who built a small casino on an island just off the coast of Tijuana is almost certainly apocryphal, although Bill Wortman and many Mexicans believe it true.)

The governor of Baja had a financial interest in the Agua Caliente casino, which was connected to the racetrack by a secret underground tunnel. Revolutionary moralism was in abeyance, as many lesser casinos thrived throughout the land.

The onset of the Great Depression reinvigorated the puritan sentiments of the revolution and in 1935 the populist president Lazaro Cardenas, after nationalizing the mostly American-owned oil industry, closed down all the gaming in the country. Cardenas believed -- and was probably correct -- that the former president, Plutarco Calles, along with some corrupt cronies, was operating many of the casinos and brothels in the country.

The Caliente racetrack was permitted to re-open in the late 1930s (and in the early 40s Bugsy Siegel, the founding godfather of Las Vegas, attempted to purchase it), but except on a small scale and in limited fashion the wheels of chance have not spun legally in Mexico since that time.

From the 1950s on, virtually every Mexican president or his political appointees have made vague noises about re-opening the casinos. The Mexican people, with the cynicism born of centuries of witnessing high-level corruption, believed the words were simply a signal for Las Vegas to send another bagman down with the mordida (bribe) money, to forestall any such action. The rumors were probably without foundation, but it is worth noting that a former CIA operative once revealed that from the l950s through most of the 70s the agency had on its payroll every Mexican president, so scruples were not an issue.

Certainly, if Nevada did in fact send some sugar south of the border it was not likely turned down in Mexico City. (That Nevada may have feared casinos in Mexico is not without some logic. It is well-known among tourist professionals in Vegas that the single biggest group of casino spenders are visitors from Mexico; legalized gaming in that country would likely keep some of that money at home.)

In the mid 1970s, during one of the periodic spasms of Mexican nationalism (which always expresses itself as anti-Americanism), the government stripped from the American operator the concession to run Caliente, which by that time was also booking races from American tracks. This concession was awarded to a Mexico City newspaper publisher and horse owner, who later sold it to one of Mexico's wealthiest and most prominent families, the Hanks. In retrospect, this was of some importance to the possible resurrection of gaming in the country. But that would come later.

In 1985 the Hotel and Motel Owner's Association of Mexico tried to pressure their government to allow casinos back into the country. At the time Mexico had suffered a series of devastating devaluations of the peso. They needed an inflow of dollars, and casinos seemed the easiest way to bring them.

However, nothing happened, and the association president, Rafael Suarez, told me at the time, "There has been very, very strong pressure coming from Washington -- reacting to the concerns of Las Vegas, I think -- to discourage Mexico from legalizing the casinos." Another source who requested anonymity suggested that Nevada Senator Paul Laxalt prevailed upon his good friend, President Ronald Reagan, to tell Mexico to forget it. This charge is also without supporting evidence, but it says a lot that many Mexicans believed it.

Caliente Gets Permission for Sports Betting

In 1989 the Tijuana-based Caliente operation received permission from the Mexican government to offer sports betting. Caliente enlisted well-known Vegas linemaker Mike Roxborough to assist and advise them, and began to make other key contacts among American gaming companies and executives.

To this day Caliente and other sports book operators in Mexico offer a smorgasbord of bets on American and European sports, as well as attention-getting wagers on the Oscars and U.S. presidential elections. (They do not, though, book the outcome of Mexican elections.)

Caliente is the largest race and sports book company in Mexico, with over 50 wagering parlors, plus phone betting. Although they do have competition in some tourist resorts in the interior, they have a de facto monopoly on betting in the lucrative Baja market, which is right next door to heavily populated Southern California.

This monopoly is likely due to the great political power and wealth of the operators, the Hank family. The recent death of the family patriarch, Carlos Hank Gonzalez, may change the dynamics regarding Caliente. Reputedly, his sons, Jorge and Carlos Jr., do not possess the old man's key connections, nor do they have his extensive alliances.

Jorge Hank Rhon runs Caliente, and he has gathered around himself some notoriety. Reportedly, he knows the Arellano Felix brothers, the kingpins of the brutal Tijuana-based drug cartel (and subjects of the movie Traffic). He is also widely believed to have had a hand in the 1988 assassination of a muckraking Tijuana journalist, who regularly ridiculed the family. The person actually convicted of the crime was a guard at the Caliente racetrack. (He now runs a clothing factory inside the walls of the Tijuana penitentiary; somehow he managed to find a way to export the garments to the U.S.) This case has drawn international attention.

The other son, Carlos, has incurred the censure of American authorities for irregularities in the Laredo, Texas, bank he owns, due in part to charges of money laundering. However, considering the vast wealth at the disposal of the Hank boys it would be a mistake to write them off as players in any future gaming in Mexico. Caliente has certainly been a force thus far in most attempts to bring in casinos.

Other than race and sports books, the legal gambling in Mexico consists of Jai Alai and horse and greyhound racing. Also, the national lotteries have been around for hundreds of years, and in the past decade American-style scratch-off cards have been added. U.S. companies like GTech have supplied their technology and expertise to several forms of the national lottery, and the sports books employ the services of American corporations like Autotote.

All gambling in Mexico is controlled by the federal government, through an agency called Secretaria de Gobernacion, which is equivalent to the U.S. Department of the Interior.

One form of gambling quite popular in Mexico is cockfighting, with partisans of one or another rooster wagering among themselves. Many in Mexico believe that cockfighting in Mexico is legal if conducted inside a palenque, a cordoned-off section of a state or city fair.

But a knowledgeable gentlemen in Mexico's tourist industry assures me that cockfighting is "illegal in Mexico. What I've heard they do is to 'request' a permit for cockfighting and gambling during fairs all over Mexico. At the end of the fair the permit is denied, but meanwhile you have a paper stating you are requesting the permit."

If this man is correct, and I feel sure he is, it's simply another example of the intricate Mexican system of bribery, and the games that are regularly played to circumvent the laws. In years past I have seen at the palenques full-fledged casino games, out in the open: craps, blackjack, roulette, big wheels, just about everything but the slots.

In more recent years, I'm told, these games have disappeared, to be replaced by a popular, heavily-bet card game that resembles gin rummy. These are probably allowed to operate while the application for a permit is being reviewed, always to be ultimately denied. Such are the way of things in the beautiful land of sombra y sol, shadow and sun.