Harmen Brenninkmeijer analyzed industry’s growth limitations in Latin America

Brenninkmeijer said that the Latin American gaming industry is continuously in a state of flux, which means that it is difficult to have a long term plan and plan for sustainable growth. He also named corruption as a problem that needs to be fought and  highlighted the importance of a well regulated gaming industry.

He started the presentation addressing the three following issues:

-Political issues: Young democracies. “We need educated people; properly paid. There is turbulence and a lack of transparency that has to be addressed. Clear rules are needed,” he stated.

-Economical issues: Complexity. He put the example of Argentina. “We as foreigners need a stable investment climate in which unreasonable and unforeseen tax increases and import bariers are put up. This will avoid international investors making major investments”.

-Social / legal / technological issues: Inflexible labor laws, lack of the rule of law, the technology is available but today the infrastructure may be outdated.

He then referred to a macro economic analysis about  doing business in Latin America: The overall best, in his opinion, is Chile, followed by Peru and Colombia, and then Mexico. “The most challenging  is Venezuela”, he added. Separatly regarding investor protection, he pointed out that Colombia is  number one. Overall “Latin America is not doing very well in this international ranking”, he said. But improvements are made and he said that Chile is ranking extremely high.

With regard to Micro economic environment, he gave the example of Argentina, and said that it is changing from an international perspective. “International companies now do not feel that Argentina is stable.  Investors feel threatened,” he remarked. Seperately  he discussed that monopolies actually stop economic growth. “Generally Latin America is quite a competitive environment, but they have to be careful with the urge to create monopolies or rule by favouritism,” he stated.

He then commented that Peru has shown a lot of improvements and how it is now focused on controlling the industry. He pointed that highly competitive suppliers now seek to do business there. On the other hand, he said that Brazil is slowly preparing for international competition within the lottery/gaming industry, but named corruption as a negative point. “Changes are needed”, he explained, and added that the Brazilian government is too slow in  taking measures to do it.

Brenninkmeijer then commented on Colombia as a country that has changed positively. “They are in the process of expanding the gaming industry by offering new opportunities to introduce different type of games and game categories and as a result increase the taxation. It is a market to watch,” he assured.

Also, he considers Panama as a reasonably well regulated and quite stable environment. “They still need to control the taxation better as well as how the license approval process operates”, he told the audience. Besides, he said that in Mexico, security issues need to be improved as well as transparency. “Regulations came through a couple of weeks ago, and that was a very positive step”, he affirmed. Finally, he commented that Chile is very well organized but quite monopolized, with a limited number of opportunities.

He explained 8 key challenges:

1) Create and maintain an expert licensing authority. It is extremely important when it is nationally organized (as in Peru and Colombia). “In most countries, when you don’t have an industry regulator, corruption will likely be a major issue. Create a clear regulatory framework”, he said.

2) Reduce uncertainty around license requirements.

3) Clarify and maximize income from the different forms of gaming: Most laws are outdated and do not consider the relevant and up-to-date technological developments. He stated that “fiscal authorities usually do not understand gaming terms”.

4) Operators and suppliers should do more to help the regulators via investing time and resources to understand gaming. Specially, for example which certifications are reasonable and which are not.

5) Representing the interests of providers and operators in a better way. “We have to create industry associations. In some cases they are established but at conflict with one another in the same country. Because one thing is for sure that if they don’t work together they cannot succeed”.

6) “How can we work with problem gamblers, what requirements are needed? And as with any industry, we have an important responsibility to protect players from illegal activity and provide an entertaining experience. There is a lot of innovation in our industry to ensure players are getting an exciting and rewarding experience – from new styles of game features, to 3D and multiple interactive touch screens. In less established markets that have traditionally been unregulated, such as many Latin American countries, it’s even more important that responsible gaming measures are put in place early on, to protect players and the reputation of our industry.

7) “Improve the quality of our people”,  he stated. He said “it’s a big deal. “Many people in gaming don’t really understand gaming, they are not trained. More courses need to be prepared, we really need to train more”.

8) Reduce the impact of political opportunism and the protection of illegal gaming. “It is extremely important to understand that there shouldn’t be too many rules and they have to be clear. But most politicians look at gaming with a short term view and do not have a strategy or understanding of the industry”, he added. “Many operators, instead of reinvesting in the gaming business, they invest their money in other ventures. Whereby they have to consider that that money should be used to create sustainability in the industry.“

CASE STUDIES

Brenninkmeijer named Bolivia as an example of how not to develop a healthy gaming market. He explained that the 2008 political changes in the country meant an attitude change about taxes paid. “There was extreme negative publicity around non-paying operators which was incorrect. Also, more licenses were given despite earlier agreements made” he said. He then referred to Venezuela as another case of political opportunism.

He then commented on the Russia case and how the industry was destroyed: In the early 90’s there were no clear rules. In 1998, due to the economic crisis, a proper tax system was put in place, which revived the industry dramatically until 2006. Starting in 2005, as the industry was expanding rapidly, two associations fought continuously towards the re-organization of the sector, which comprised of over 2,000 operators and employed thousands of people. “Gaming reached every corner,  with at least one gaming location”, he affirmed. After Putin enacted presidential administration powers, several studies were conducted in the country and a proposal was made to create  four  gaming zones.  In July 2009 it was put in force, and 400,000 people lost their jobs and today two casinos are operationally legally in these zones.

In the Ukraine the gaming business was shut down in May 2009, due to a fire in a gaming location which killed nine  people. Political opportunism reigned and many people lost their jobs. That was the end of the industry.

In Romania, there was a 300% increase in taxation, destroying a lot of value but it still has gaming.

Today, in Argentina, they are talking about nationalization. Taxation, is increasing and there are complicated barriers to importation. The result is a substantial decrease in investments especially international investors, and therefore, a substantial decrease in the growth perspectives.

Creating sustainable growth, Brenninkmeijer made some recommendations:

-The industry should talk more with one voice to the governments and a study of national impact should be created by each country “Each state should have one. The only one that I feel was done right (by the government itself) was the one performed in US, when the Indian gaming expanded so fast in the nineties”, he said. In this study they considered the growth and implications from all angles.

  “The jobs that gaming generates must be considered. There is no other industry worldwide that employs so many people, considering the amount of capital invested, as gaming.” Other recommendations he made are to highlight the secondary industries boosted by gaming, contributions made to charity and to communicate the positive developments such as employing more women, disabled people and minority groups and the.

-He also spoke about educating the regulators and finding a way to support them. Showing them how the industry operates and being transparent with them.

-Grow together: Establish associations that represent the industry as a whole. Establish a “brain trust” (a library website or group that is a source of trusted information for the industry in general).

-Inform the public: Communicate the factual information to the public, invite independent international experts to debate about gaming and the training of personnel, collaborate with charity organizations. Through the web and social media.

-Anticipate the challenges: Consider the political issues, avoid hypocracy , and understand the international trends.

He concluded at the end that “The best opportunities are in Colombia, Peru, Mexico, Costa Rica and Panama”.

“The ones interested on receiving Mr. Brenninkmeijer’s pdf presentation, please contact [email protected]”.