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A Gambling tale from Brazil by Andrew Cosgrove

A Gambling tale from Brazil

Casino Gambling and Brazil are the buzz words of the moment and having had the privilege of previously working in the Brazilian gambling market I can’t help but feel excited at the prospect of regulated Casinos becoming a reality in the world’s 5th biggest country and 8th largest economy. On a global scale Brazil remains, without a shadow of a doubt, one of the last great untapped frontiers for regulated casino gambling to extend its reach, and any major operator with an ounce of ambition has been dreaming about becoming a part of it for quite some time as Brazil has the potential to quickly become the number one Casino market in Latin America and one of the largest in the world.

Hopefully by now I’ve grabbed your attention and you’re as excited as I am and with so many possibilities and a population of just under 210 million it’s not difficult to understand why so many people get intoxicated by simply hearing the words “Casino” and “Brazil” used in the same sentence. Having already lived the experience I can safely say that words like “potential” and “excitement” seem impotent when describing the plausible future awaiting this sleeping giant.

 This is more than just gambling tale from Brazil and it’s relevant to know that some forms of gambling are legal in Brazil such as the state run lotteries and horseracing. Poker is also legal because it’s considered a game of skill in Brazil and has a huge following via BSOP and Poker Stars. Brazilians can also currently bet online as long as it’s through foreign based operators although attempts have been made to block such websites. For those not so familiar with the history of gambling in Brazil below is a brief summary

  • 1941, Brazil adopted the Criminal Contravention Act, which prohibits unauthorized sports betting.
  • Another law followed in 1946, forbidding many other forms of gambling in the country, including the operation of any brick and mortar casinos.
  • In 1993 the "Zico Law," was passed to permit the operation of electronic gaming machines throughout Brazil. This legalized slot machines by giving individual states and districts autonomy over these sectors of the gambling industry. The noble idea behind the Zico Law was to revitalize national sports teams by devoting portions of bingo and slot tax revenue to infrastructure and development
  • Then came bingo halls with attached slot parlors which were widespread throughout Brazil, and in 1998 the "Pelé Law," was added to strengthen federal oversight. Each bingo hall was permitted to house up to 400 slot machines, and both types of gambling games became increasingly popular among the local population.
  • 2000 – law passed decreeing that no more new licenses could be issued for Bingo halls or slot parlours
  • By 2004, the tide turned regarding bingo and slot machines, as the Supreme Federal Tribunal ruled that state autonomy over the regulation of gambling only extended to lotteries. Both the Zico Law and the Pelé Law were abolished, and in 2007 the "Súmula Vinculante 2" (2nd binding order) led to the closure of all official bingo halls and slot parlors.
  • Currently bill 186/2014 and 442/91 are pushing for different forms of gambling to be legalized including Jogo do bicho, Casinos and bingo halls.
  • According to the Brazilian Legal Gaming Institute (Instituto de Jogo Legal – IJL), the approximate amount of R$20 billion ($6.4 billion) is generated annually from illegal gambling services. What is more, the Jogo do Bicho market could be worth around R$12 billion ($3.8 billion). In terms of stakes placed, the local market could be valued at around R$55 billion ($17.6 billion), the IJL has noted in a report on Brazil’s gambling market.
  • Given the fact that gambling is strictly prohibited in Brazil and only conducted illegally, the IJL has suggested that the country annually loses R$6 billion ($2 billion) in what could be contributed to coffers in gambling taxes.

My first experience of Brazilians gambling was aboard a cruise ships where I worked for 2 seasons during the mid-nineties. I remember our first cruise like it was yesterday as the customers were lining up in eager anticipation while waiting for the casino to open. When it came to opening time it was like opening the starting stalls at the Grand National or the Kentucky Derby and to this day I’ve never witnessed anything quite like it. The sea days were long ones and we actually had to switch the electricity off at the breakers to close the Casino. TV celebrities, models, film stars, professional football (soccer) players and big business owners all headed for the Casino and as I was one of the few Casino staff that spoke Portuguese I had a lot of work and enjoyed every minute of it.

During my many travels up and down the Brazilian coastline I began to notice Bingo halls, Jockey clubs and the well-known Jogo do Bicho (animal lottery) locations and was curious to find out more about gambling in Brazil. To add to the equation I caught Brazil fever and on 2 occasions went to Brazil on vacation and it was during this time that I actively began to look for employment.  Brazil was quickly becoming my home away from home and after getting a lucky break I landed a job for a slot machine operator that leased machines all over the state of Bahia which is the 5th largest state in Brazil and more than twice the size of the UK.

When I started working the company was relatively new and had around 600 machines and a lot of potential. The one thing we didn’t have to worry about was the machines making money as the demand far exceeded the supply as we couldn’t buy, configure and install machines fast enough. The company was growing faster than its ability to cope with the demand so we had to restructure, hire more staff and introduce new policies and procedures. Within 2 years the company went from 600 to 3000 machines. It was a great experience and I worked with some of the most talented and resourceful individuals I have ever met. We made bench test machines out of old parts, fabricated our own voltage regulator boards, created our own automated dispatch system and much, much more. We owed a lot of our success to the GM who, when he started with the company, didn’t know a thing about gaming. His secret to success was listening to the staff, holding them accountable and engaging them with the vision that nothing was impossible when working as a team. He was a hands on boss who went out of his way to help the staff and he also recognized a job well done.

 The time came at the end of the nineties when there was already a lot of pressure on the government as scandal after scandal and lack of ethical business practices and regulation threatened to abolish bingo houses and slot machines on a national level. The operators knew the situation was becoming serious when the government stopped issuing licenses in 2000. This marked the beginning of the end for this kind of gambling in Brazil. Various attempts have, and are being made to approve and regulate Casino gaming and the pro gambling lobby is stronger than ever. However, there exists an equally as strong opposition.

The main opposition groups are against gambling mainly due to the lack of transparency and a history that has been tainted by links to organized crime. Therefore the following list of negatives that are linked to gambling in Brazil come as no surprise:

  • money laundering and tax evasion
  • corruption scandals involving public officials
  • counterfeit money operations
  • drug trafficking and prostitution
  • embezzlement
  • violent crimes
  • addiction
  • lack of religious or moral values

The arguments for the introduction of regulated Casino gambling are appealing especially as the Brazilian economy finds itself is in such a fragile situation. Benefits such as, direct and indirect job creation, an increase in tourism and increased tax revenue are all very real and positive arguments but without adequate regulation and the strong history of negative publicity surrounding gambling in Brazil it’s easy to understand the opposition’s argument. However, there are a lot of people who are betting on a brighter future for their country and regulation needs to be the first item on the agenda. Major foreign operators have already stated that they won’t invest without regulatory guarantees so new laws need to comply with the highest international standards. On a federal and state level the following may be considered to ensure compliance by the operator 

  • Creation of a federal government body charged with regulating and controlling gambling activity on a national level and creating the laws that each state must comply with such as amount of casinos per state, maximum slot machines per state and license requirements for companies and key employees.
  • The state gaming division is responsible for issuing, limiting or revoking of gaming licenses in accordance with federal law and have the responsibility of adopting regulations to implement and enforce the state laws governing gaming. Audits, compliance reviews and special investigations are also essential functions of the state gaming division as is the technology division who insures that all types of gambling meet technical standards and requirements as approved by recognized independent testing laboratories.

A promising industry went bad due to lack of control, poor licensing requirements and infrastructure during a time when regulated gambling had already proven successful time and time again for both operators and governments all over the globe. Successful gambling regulation can easily be achieved in Brazil and although the future may seem distant the time to act is now. One of the added advantages of a well-managed gambling environment is that as it becomes more controlled, transparent and accepted by society, the criminal element will gradually disappear.  Brazil is Casino gambling’s last sleeping giant and deserves to be woken up by a sweet samba song about its own success story and with the happy ending that this gambling tale from Brazil deserves. To be continued…?

 

 Would you like to discuss this post or receive others? contact Andrew directly at andyscslots@gmail.com

 

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