About Senator Irajá’s project on integrated resorts casinos

English Edition I 19.03.21

Por: Magno José

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I wonder the model of integrated resorts like Singapore, Macau, Las Vegas and Japan is the best for Brazil?

In an interview by Senator Irajá (PSD-TO) on TV Senado, on PL 4,495 / 20, which legalizes integrated resorts casinos (integrated resort – IRs), the parliamentarian presents estimated numbers of collection and employability with the implantation of a unit by state and Federal District, through a 35-year concession. The senator also defends the IRs model and cites the Singapore, Macau and Las Vegas operations as an example of successful models.

“I believe in the experiences that worked. It is not possible the whole world is wrong and only Brazil is right. These experiences that I mentioned as Singapore, Macau, United States, Japan also have adopted this model of integrated resorts, are all very successful experiences ”, revealed the parliamentarian.

Irajá defend the approval of his project will allow the investment of R$ 47 billion (US $ 8.4 billion), generation of 200 thousand direct jobs and the collection of R$ 18 billion in new taxes, which will be divided between the Union, states and municipality.

“There are other projects that are more audacious, that release almost everything and this is not the idea of ​project. The idea is to start with one experiment per state and if it works, it can be expanded in the medium and long term”, report the senator.

Analysis of estimates 

For lay, the data and figures seem robust, but for experts the senator’s estimates must be adjusted and discussed.

Experts heard by BNL about Senator Irajá’s proposal commented it will be difficult to find investors to implement integrated resorts in 27 Brazilian states. “With only 10% occupancy in the casino area, only Rio de Janeiro and São Paulo will generate interest from investors,” commented one of them. Both cities have a population with a high per capita income, infrastructure and a volume of tourists to guarantee the return on investments. The same source added that the two cities could receive 10 integrated resorts with casinos and dozens of urban casinos.

“Large corporations will prioritize the installation of these enterprises only in cities that meet the capacity to guarantee the return on investments and, in this case, only Rio de Janeiro, São Paulo and, maybe, Brasília would be able to operate these units”, he commented.

Tax revenue 

But the legalization and implantation only of resorts integrated casinos will not solve the problem in the short term of government tax revenue, because besides being few units to guarantee a revenue that justifies the effort of legalization, the time of construction of these units will be of no minimum four years.

According to the American Gaming Association – AGA, the 989 commercial and tribal casinos in the United States had a total collection of US $ 77.33 billion (R$ 433 billion) in 2019, of which US $ 10 billion were paid (R$ 56 billion) in gaming taxes for state and municipal governments in 44 states. The per capita bet of Americans in casinos in 2019 was R$ 1,319.00.

Following the US model of taxation, Brazilian resort casinos would have to raise about R$ 139 billion every year to deliver to the government coffers R$ 18 billion in tax revenues announced by Senator Irajá. To close this account, it would be necessary for half of the Brazilian population (105 million inhabitants) to bet R$ 1,319.00 on these casinos every year to generate this gross revenue.

Singapore Model 

Singapore’s tourist success cannot be credited to Marina Bay Sands and Resorts World Sentosa Casino as announced by the senator. Unfortunately, the lack of knowledge about the world gaming market ends up seducing some parliamentarians, who always cite Singapore, Japan and Macau as examples.

Singapore’s two casino resorts are not a model, as the country has a population of 5.6 million inhabitants and is air hub of Southeast Asia and has the fourth richest in the world, second only to Qatar, Luxembourg and Macau. Singapore and Macau welcome the majority of Chinese players. In addition, the casinos in these two destinations depend exclusively on VIP players, who are attracted by junkets.

Japan Model 

Senator Irajá quotes Japan as a case of success, but it is opportune to register wich is happening in the country. Legalized in December 2016, Japan decided only three integrated resorts will be implemented. Large US operators took their foot off the gas in their desire to invest in the deployment of IRs in Japan with the pandemic. Las Vegas Sands, MGM, Wynn Resorts and Caesars Entertainment have already given up on investing in the country of the rising sun. The most optimistic estimates are predicting the implementation of IRs at the end of this decade. Therefore, Japan cannot yet be considered a success story. On the contrary, the large operators led the lobby by the integrated resort model gave up on investing in the country.

Las Vegas model 

Curiously, groups argue the best thing for Brazil is the exclusive legalization of IRs, have never managed to achieve this type of operation in the state of their headquarters. In Las Vegas, Nevada, there are 1,626 gaming venues, but there are only 61 casinos in integrated resorts.

“Brazilian parliamentarians speak of resorts integrated casinos as the good Catholic sees the ‘10 Commandments’, chooses one or two to follow, discards eight, and says he is religious. Analyzing Singapore’s model without mentioning its proximity to China is not analyzing Singapore. To speak of IR in Las Vegas leaving out gambling operations in bars, supermarkets and gas stations, is not to use Las Vegas as an example. The state of Maryland, one of the last to legalize casinos in the United States, lives peacefully with bingo halls and lottery games. All data indicate that with the legalization of casinos, the revenue of bingo and lotteries increased. A big question: if only legalized gambling will be in IR, does the senator’s proposal include closing the Caixa Lotteries? Singapore did just that when it legalized the integrated resorts casinos. Or is the senator going to leave this commandment out of his analysis? ”Asked Marcus Fortunato, the CEO of Las Vegas-based TicTabs and a supplier of gaming machines to several casinos and lotteries in the United States.

Job creation 

The argument for strong job creation in IRs is uncertain. That is known is the construction a hotel with 300 apartments generates 1,500 direct jobs. Therefore, it is doubtful to say that the legalization of 27 resorts integrated casinos can generate 200 thousand direct jobs. The estimate would represent 7,400 jobs per casino. The MGM Group with 26 hotels and casinos employs 74,500 or about 2,800 per unit. Las Vegas’ Mandalay Bay, which belongs to MGM, has just 1,500 employees. Caesars Entertainment has 18,500 workers for the entire complex.

In fact, the approval of Regulatory Framework for Gambling, through the legalization of all modalities: online gambling, bingo, casinos and video games can generate 200 thousand new employment, in addition to the formalization at least 450 thousand of animal game.

“The debate about legalization of games in Brazil is wrong. There will be no interest in investing in some states in the North, Northeast and Midwest. The country should opt for a hybrid model of urban casinos and integrated resorts. An example. In the United States, Oklahoma City, with a population of 650,000 inhabitants, has 134 casinos with 71,000 machines and 4,100 bingo seats. WinStar Casino in Oklahoma, one largest in the United States, has 8.5 machines on 34,000 m² of gaming area. Nevada has 334 casinos (3 million inhabitants), California has 62 (39 million inhabitants), Colorado has 40 (5.7 million inhabitants), South Dakota has 39 (884 thousand inhabitants), Florida with 35 (21 million), Mississippi has 35 (2.9 million), Arizona with 34 (7.2 million inhabitants)… why does Brazil with 210 million inhabitants must to have only 27 casinos?” asked the expert consulted by BNL.

Reflection 

That is, Brazil should not copy game models from other countries, we have to learn from successful experiences and implement a model that meets the needs of the Brazilian market. The proposal should take into account the large offer of unregulated games in operation in the country to guarantee the necessary investments and the generation of taxes and employment, in addition to reducing illegal games.

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