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Rod Smith

Mexico May Be Opening to Casinos, Could Benefit Las Vegas

19 August 2003

Developments in Mexico are improving the odds that the country's Congress will legalize casino gambling after it reconvenes early next month, former Nevada Gov. Bob Miller said Monday.

Most important to the changing political landscape, Mexico President Vincente Fox "received the resignation" of the former minister of tourism on July 29, and, "stunning" most observers, appointed his press secretary, Rudolfo Elizando, to the key position.

"This is the first time Mexico has ever had a tourism secretary who is an open advocate of casino gambling," said Miller who just returned from a fact-finding and consulting trip to Mexico.

"Rudolfo is an outspoken proponent of casino gaming and his appointment was a strong sign the (Fox) administration wants to push forward on casino gaming," said Miller, now a partner in the Las Vegas-based Jones Vargas law firm.

"(There is a) lot of movement and increasing activity (that is pushing gaming legislation forward) in advance of the upcoming Congress in early September," he said.

John Bowen, director of graduate studies at the University of Nevada, Las Vegas' College of Hotel Administration, said the development of resort casinos in Mexico will not represent a competitive threat to Las Vegas, but an amenity for American visitors that will help Mexican resorts.

Miller and University of Nevada, Las Vegas, professor Bill Thompson, in fact, said legalizing gambling in Mexico represents an opportunity for Las Vegas-based companies such as Las Vegas Sands Inc., MGM Mirage, Harrah's Entertainment, Park Place Entertainment Corp. and Wynn Resorts that have been aggressively pursuing casino developments overseas.

Mexico has the second-largest and fastest-growing middle class in the Western hemisphere, making it an attractive investment opportunity for companies with substantial cash flow that are targeting such demographics.

In addition, the development of gambling in Mexico should help create new feeder markets there for Las Vegas, Miller and Thompson said.

Both affluent Mexicans and American visitors who find gambling in Mexico an attractive hotel amenity are more likely to want to visit Las Vegas as the ultimate gambling destination, they said.

The lower chamber of the Mexican Congress in December passed legislation that would have legalized gaming, but excluded casino gambling in resort destinations.

"Frankly, I thought that represented the best chance ever for legalizing gambling in Mexico," Miller said.

Progress faltered, however, when disagreements arose over whether the process for licensing casinos should be open or on a bid basis, and "proponents of resort casinos got the bill sent back to committee, in effect killing it for the last legislative session," but carving out the potential for resurrecting resort casinos in the upcoming Congress.

Adding momentum as Mexican lawmakers get ready to convene, a meeting of key national hotel officials is set for today to see if they can coalesce on the process to legalize gaming, Miller said.

"There is renewed optimism they can get it passed out again in a form this time that will allow for casino gaming," Miller said.

Neither Miller nor gaming expert and University of Thompson would predict casino gambling will be legalized quickly, however.

"I wouldn't bet my life savings on it," Miller said.

Thompson said: "Even if they legalize gambling, there will be so much money crossing hands, I wouldn't expect it in the next five years."

Miller said one constant in conversations with Mexican leaders has been the understanding that gambling will have to be tightly regulated, transparent and void of even the appearance of corruption.

"Otherwise, it'll be killed, and they understand that," he said.

Thompson said the economic imperative might keep the legislation moving forward, but it will be important that earnings be retained in Mexico to address economic development issues there.

Miller added that one of the key concerns raised by opponents is that Americans will just use gambling as another opportunity to take money out of Mexico.

Thompson said the development of resort casinos could be constructive in adding to economic development, but Mexican leaders will be missing the mark if they think it will solve the country's current fiscal problems.

The Mexican Chamber of Commerce has estimated casinos could attract another 11 million visitors to Mexico yearly.

The Mexican Association of Hotels and Motels estimated an initial expense of $1.8 billion to build 10 casinos could generate $3 billion in total revenues a year and create 115,000 jobs.