Macau Opinion | Postcard from Sao Paulo

Last week I was in Sao Paulo, Brazil to attend a conference hosted by my colleague and prominent Macau lawyer, Pedro Cortés, at the Brazil Gaming Congress. Brazil, one of the so-called BRICs, is the fifth largest country in the world with a population of 208 million people and is currently ranked the 8th economy in the world. Despite being one of the richest countries in on the planet, Brazil is facing its deepest recession since at least 1901. A complex cocktail of rising inflation, droughts and corruption scandals has engulfed the country, and the impression I have after talking with several different local stakeholders is that the light at the end of the tunnel is still quite far away.

For those who are not paying attention to the matter one of the solutions to overtake the said crisis is the legalisation of gaming operations in the country, something that has been considered for more than a decade. This is happening because despite being illegal Brazilians are enthusiastic gamblers and if gaming operations were legal in Brazil the country could easily rank as the third largest gaming market in the world by revenue right after Macau and Las Vegas.

There are several different types of (illegal) games in Brazil. The most curios example is Jogo do Bicho, launched in 1892 by a Brazilian baron in Rio. As he was the owner of a zoo that’s how the game got his name: game of animal in the Portuguese original version. The period in which the game was created was marked by intense financial speculation and gambling on stock markets that ended in a trade crisis. To stimulate sales, traders created raffles and premiums to attract buyers. The baron observed these new ideas and decided to create a cash prize in his zoo. The visitor who received an animal card equivalent to the one randomly selected by the zoo would win the prize at the end of the day, when one of the 25 animals would be announced.

Today, the game is played on a very large scale in the streets of major cities despite being considered a crime under Brazilian law. Like Jogo do Bicho there are many other (unlawful) gaming operations throughout the country like illegal bingo and sports betting houses and stands generating amounts in excess of 25 billion Brazilian Real (equivalent to US$7 billion-plus) every year.

Despite these figures, the Brazilian Government does not share any slice of the illegal gaming industry pie and if there’s one thing all Brazil stakeholders agree on it is that in the current economic crisis the country is facing the proceeds of taxes to be charged to legal gaming operators could be a strong contributor to the state coffers and help the Administration in its quest to eradicate poverty.

However, Brazil is still a country influenced by a powerfully religious community (mostly the evangelical church which amongst others owns media groups and controls seats in the local Senate) who strongly (and hypocritically) fight gaming legalisation despite the strong presence of gaming operations and activity in the country.

Moreover, the criminal syndicates that currently operate illegal and very lucrative gaming operations may not be that happy to share a chunk of their profits with the State.

Given this background, one may conclude that the legalisation of gaming in Brazil would benefit all Brazilians who could see the profits of the industry shared with society. However, the challenge of legalisation could be compared to a Herculean task requiring a difficult agreement amongst all relevant stakeholders.

Let’s hope this can be reached.