20 minute read
Latin America
from SBC Leaders Issue 22
by SBC Global
CHILE: CREATING THE PERFECT SCENARIO FOR LAND-BASED AND ONLINE TO CO-EXIST
AS CHILE PREPARES NEW
REGULATIONS for sports betting and online gambling, Former ACCJ President Juan Francisco Muñoz discusses the changing landscape across the country and the importance of harmonising the landbased and online sectors
BY LUCÍA MOURIÑO
The gambling industry in Chile is on the verge of introducing new regulations for sports betting and online gambling - two activities that have been operating in the shadows for quite a while without any contributions to the state.
As a result, sponsorships between sports clubs and sportsbooks may suffer from a total ban if new rules don’t come into effect soon.
Speaking to SBC Leaders, Juan Francisco Muñoz, the Former President of the Chilean Association of Gaming Casinos, explained why an online gambling regulatory framework is needed and called for casino operators to have priority once the process to obtain a permit opens.
SBC: What does the ACCJ expect from the online industry in Chile? Do you anticipate it to be operational in 2022?
JF: We must be very clear in pointing out that currently, online betting in Chile takes place outside of the regulatory framework, meaning that the activity is illegal. In this regard, this raises concerns for the industry, since black market operators represent dishonest competition, but also a greater risk for society.
Indeed, the law and regulation in Chile explicitly authorises this business if it’s subject to a series of procedures that ensure the quality of the game, to control access to minors, problem gambling, money laundering or other illegal activities, and to supervise the payment of the respective taxes which benefit Chile at a national, regional and communal level. None of this exists in the current online operations. Thus, it’s essential to move towards a regulatory framework for online gambling.
However, legalising online gambling is not one of the legislative priorities of the current administration. As an association, we will seek to contribute
in the legislative debate. We hope that the legislators are interested in moving forward with the regulation as soon as possible, especially given the growing increase in online betting in our country and the aforementioned risks. Additionally, we’re interested in supporting the competent authority to prosecute the current operators that violate the law, even through advertising.
SBC: Since 2021, the local gambling regulator has filed over 20 complaints with the Public Ministry about illegal operations. How do you think the current case would affect the industry if the companies involved are largely the ones that would apply for a licence in the future?
JF: Authorised casinos have adhered to the law. That is, we have not participated in the business, as we’re waiting for an online regulatory framework. In Chile, games of chance - physical or online - are only allowed by specific provisions such as Polla Chilena de Beneficencia, Lotería de Concepción, some racetracks and casinos under Law 19,995.
Any other activity is expressly prohibited by the Civil Code (article 1466) and the Penal Code (articles 275 et seq.). Undoubtedly, the situation of online platforms that have started operations illegally is one of the issues that the law should clarify.
SBC: Are you interested in current licensed casinos being prioritised when it comes to obtaining a permit to operate online?
JF: We think that’s reasonable; these are companies that have been established in Chile, subject to close supervision and that make a great contribution to the territories where they’re located. And when I say contribution, what I mean is the payment of a specific tax that has represented the delivery of $895m to municipalities and regional governments between 2008 and 2021. This is in addition to the promotion of tourism, job creation, culture, gastronomy, music and shows generating a range of services associated with the promotion of the regions and therefore with decentralisation.
Casinos have made a real contribution to decentralisation and regional development for the past 18 years, fulfilling the obligations established in the law and generating $267m annually in taxes.
To me, licensed casino operators seem like the most appropriate place to start for the legal exploitation of online gambling. They already comply with all the regulations, control and inspection processes, and they also know their clients. In this sense, they can ensure that the controls that regulate the external negative threats around gambling are well controlled from the very first day of operations. It would be wise and fair to have the priority to obtain permits to operate online.
SBC: What initiatives will be proposed at a legislative level to establish a fair and legal competitive framework for online gambling?
JF: Given the proliferation of online betting platforms that operate illegally in Chile, having a regulatory framework that offers security and guarantees to providers and users is urgent. Illegal gambling means less protection for users, less taxes, a greater risk of money laundering and represents unfair competition since the illegal operator doesn’t assume any of the costs required from authorised companies.
It’s necessary and urgent to provide the regulator, the Superintendency of Gambling Casinos (SCJ) with greater powers so that it can effectively prosecute all illegal gambling operations. Mechanisms must be established to fight money laundering, as the Financial Analysis Unit (UAF) currently does with regulated casinos.
We also believe that there should be a moratorium on the granting of licences to those who have engaged in illegal practices, as has happened in other countries. A priority of the new regulation will be to adopt measures to ensure responsible gambling practices in controlled and safe environments, especially when it comes to protecting minors and vulnerable people. In regards to benefits, the tax rate should be set at a level that doesn’t represent hurdles when trying to formalise a permit.
SBC: After a turbulent period, due to the global pandemic, how do you see the casino industry today? How has the recovery process been? When do you think they will be able to exceed pre-pandemic levels of trade?
JF: We took a big hit from the pandemic. Casinos closed on March 18, 2020, and partially reopened in November following a plan called “Step by Step”. GGR fell 75% in 2020. The pandemic continued to limit operations in 2021 and revenues were down by 25% when compared to 2019.
Due to the health restrictions, some casinos were closed for 17 months - a period that represents 10% of the
validity of a concession. They were unable to offer remote gambling, despite a proposal being made to the authority in 2019, because their licences do not include online platforms - but the illegal operators did.
As a regulated casino industry, we were able to improve in 2021, mainly in the second half of the year when sanitary restrictions were relaxed. Then, the figures looked similar to those of 2019, which still showed a slight 5% drop when compared to 2018. According to SCJ’s figures, a total of $98.2m in taxes were contributed throughout 2021.
Furthermore, the tax contribution in 2021 saw $45.2m paid to the communes and regional governments where the physical casinos regulated by the SCJ are located. None of this is reported by current online operators.
SBC: What will be the main goals of Juan Francisco Muñoz as head of the ACCJ?
JF: The first goal will be to collaborate with the authorities and partners to keep the industry active and continue the recovery trend. We are the only national industry that contributes with taxes directly to the territorial development of the cities and towns where we’re located, which is why it is key to continue with the recovery.
At the same time, as a trade association, we have a great challenge due to the increase in online betting, which today is illegal. A regulatory system that establishes a framework that provides security and guarantees to both providers and users is urgently required. The ACCJ will seek to be a contributor in the legislative debate, so that a fair and legal competition framework for online gambling is established, as well as in support of the regulator's oversight work.
SBC: Does the ACCJ intend to confirm Muñoz as President, or will there be a new process to find another executive?
JF: The ACCJ is currently carrying out a process to choose the best candidate for the presidency. I’m working on an interim basis and my permanent position is Corporate General Manager of Marina del Sol. •
A CHANGE OF PERSPECTIVE: WHAT EUROPE CAN LEARN FROM LATIN AMERICA
AS MORE COMPANIES SET THEIR EYES ON
Latin American expansion, are there key learnings that can be taken from Europe on what to do, and more importantly, not what to do?
Xabier Maribona, CEO of Grupo RETAbet
BY LUCÍA GANDO
The development of the Latin American gambling industry has arrived a bit late to the party, but that doesn’t mean it isn’t making its presence known. So it came as no surprise that some of the most successful and ambitious companies have turned their focus to the continent to expand their international footprint and provide a welcome boost to their businesses which may be already established in other regions.
With Argentina, Brazil and Colombia all joining the roster of countries introducing a legalised betting framework, the spotlight on Latin America is becoming brighter and brighter. But currently, there are only a handful of companies reaping the benefits of a Latin American presence.
Such is the case of Grupo RETAbet, which began its journey as a landbased betting brand in Spain in 2002 - and currently has over 63 shops in operations. It also began its online journey in the Spanish market, and anticipating the interest that the region would generate around this vertical, it expanded to Peru in 2019, becoming one of the most established groups.
Xabier Maribona, CEO of Grupo RETAbet, will be one of the speakers taking part in the “Local partnerships across Spain and LatAm - building the right market strategy” panel at the upcoming SBC Summit Barcelona, which takes place from 20-22 September at Fira Barcelona Montjuïc.
Maribona will share the complete experience of the group in this transition from Spain to Latin America, highlighting the influence that the European country is having on the new regional regulations, considering the effect that the latest trends in Spain can have on the development of the industry, especially when it comes to advertising.
Joining Maribona on the panel will be David Plumi, Managing Director for
Spain and LatAm at PressEnter Group. Ahead of the event, Plumi advised those considering Latin American expansion to consider their audience.
He said: “The most valuable advice is to know your audience and the country where you are going to carry out the operation. Each country is independent, even if they are all in Latin America. This may seem very basic to us, but it is where European companies fail the most.”
This year, the online casino operator is venturing into Latin America for the first time with its UltraCasino.com brand and is on the cusp of launching a new sports betting company which it believes is “very different from the rest and with some important qualities.”
JD Duarte, CEO of Betcris; Zeno Ossko, CEO of Betwarrior; Gonzalo Pérez, CEO of Apuesta Total; and Gonzalo Rossell, CEO of La Tinka will also take part in the panel discussion, while Karen Sierra-Hughes, VP of Latin America & Caribbean at GLI, will be on moderating duties.
The road to regulation in Latin America
As the global pandemic fuelled a shift towards the online space, many Latin American jurisdictions rushed to regulate the markets, taking advantage of the potential economic revenues offered by the digital entertainment space.
Both Plumi and Maribona agreed that regulators in the region have shown a more open dialogue than their counterparts in Spain. “I think that on a general level, administrations need to see us as a client that generates jobs and investments,” said the CEO of RETAbet.
Plumi added: “We see that the dialogue is very open with the regulators, where, for example in Colombia, their proactivity and constant work to improve is appreciated.”
“In Spain, many things have been lost, the rules have been changed and continue to change, which leads to instability. This also means that companies that could be starting in Spain refrain from doing so, and decide to invest in other regions where regulations are less volatile.”
This is exactly why PressEnter has set its eyes firmly on Latin America, especially after the approval of the Spanish Royal Decree which bans sports sponsorships and advertising in all media.
Spain is not the only European country cracking down on the presence of gambling advertisements, with the Netherlands introducing similar, while regulation is also expected to be introduced in the United Kingdom.
But as European markets continue to tighten legislation, this means that emerging markets are beginning to look more attractive.
For Plumi, it’s not about “easing” or cancelling the regulations, but “being more stable and persecuting those illegal operators that don’t comply with them,” so that the gambling industry can continue to make economic contributions - whether that be through employment or taxes.
“The Spanish regulator should be more protective of regulated operators, increase the persecution of illegal operators, which is where the problem really lies, and stop applying changes and new excessive restrictions," he said.
The obvious consequences of excessive regulation, for Maribona, will be seen even later. He warned: “Many restrictions have been placed because they sound good as headlines in the newspapers or to the public that does
ON A GENERAL LEVEL, ADMINISTRATIONS NEED TO SEE US AS A CLIENT THAT GENERATES JOBS AND INVESTMENTS WE SEE THAT THE DIALOGUE IS VERY OPEN WITH THE REGULATORS
David Plumi, Managing Director for Spain and LatAm at PressEnter Group
not know the sector, but I think that in most cases what is being done is not going to have a direct effect on what they’re trying to protect.”
The synergies between the old and the new
As the Europeans arrive in the region, "the big companies will continue acquiring the local champions who give them a chance to succeed,” said Maribona. He acknowledged that “the smaller companies know how to operate, have profitability and much better results.”
The Grupo RETAbet CEO believes that these operating models are “logically a win-win situation” for the market and can emulate the M&A strategy that is being seen on the continent “with economies with tremendous potential and where companies can scale their platforms, marketing, acquisitions and more”.
Plumi explained that even though it is true that “it is a very attractive option, we must bear in mind that to make an acquisition there is a long process involved and that daily operations must be maintained, absorbing the know-how very quickly.”
That’s why he considers the agreements with a “key” local partner as the preferred strategies: “If you’re clear about your shortcomings and find a partner that contributes and to whom you can also support, success is guaranteed.”
“Especially when the partner is knowledgeable about the market and you can make technology available to them, which is undoubtedly one of the most important legs of the business,” he clarified.
Maribona also deviated from what may be considered a traditional attitude and shared that Europe will end up learning much more from Latin America's versatility and experience than is expected.
“Fintech companies in Latin America are going to provide many solutions to the sector that, due to necessity and less banking, can be an example in Europe,” he said.
Both speakers agreed that competition in the region is becoming increasingly fierce, so it is important to stop underestimating the knowledge of each market.
“Trust and a good product is what sets us apart, but you have to know how to understand the market, the country's retail and the payment methods,” Maribona said.
Plumi concluded: “Latin America is boiling and it is time to attract groups that invest and enrich the market. There are still opportunities: the markets continue to grow, banking is higher every day, and so is the digital impact. The pandemic was a trigger for this, but society continues to tend to become more digital, and now it’s happening even faster.” •
EUROPE WILL END UP LEARNING MUCH MORE FROM LATIN AMERICA'S VERSATILITY AND EXPERIENCE THAN IS EXPECTED WE MUST BEAR IN MIND THAT TO MAKE AN ACQUISITION THERE IS A LONG PROCESS INVOLVED
PERU: IDENTIFYING POTENTIAL IN A TUMULTUOUS REGULATORY ENVIRONMENT
THE PERUVIAN GOVERNMENT has made headway with the introduction of a new regulatory framework for sports betting and igaming. But local operators argue it falls short of the finished article thanks to a tax regime that fails to levy overseas firms
BY FERNANDO NOODT MOLINS
Agambling industry has been established in Peru for many years despite a lack of clear regulation for the sector, allowing the development of a mature market. However, policy makers have recently set out a new regulatory framework and approved a fresh piece of legislation to set the ground rules.
Having passed Bill 2070, the Executive Branch was unable to see it enacted in its original form due to a lack of political consensus, which ultimately led to earlier Bills 1923, 168 and 2206 being integrated into the final version of the text.
Gonzalo Rosell, CEO of La Tinka
Consequently, Peruvian operators are not entirely satisfied with these new regulations according to Gonzalo Rosell, CEO of La Tinka, who described the measures as "a step in the right direction, but with critical issues yet to improve".
In his assessment, he referred to the most controversial point of the new law: the tax on remote gaming and remote sports betting.
Rossell has welcomed a 20% reduction in the tax base, as originally proposed, to just 12% and the removal of a potential tax on bettors. However, he argues that only national operators and foreign companies with branches in Peru will be liable for tax, while offshore businesses will be able to work free of tax burdens. "This affects the industry as it does not generate tax equality before the regulator. It can also affect local employment and investment that will most likely choose to migrate to operate from abroad," he explained.
Apuesta Total CEO Gonzalo Pérez is at odds with having different conditions within the same sector, explaining that if there is no equal treatment for local and foreign companies, "tax neutrality would be violated".
“Foreign and local investment should be encouraged on equal terms,” he explained. “Otherwise, a distortion is generated in the market, with benefits for some companies over others.”
Rosell and Pérez are also President
FOREIGN AND LOCAL INVESTMENT SHOULD BE ENCOURAGED ON EQUAL TERMS What the approved legislation says
Peru approved the bill that regulates sports betting and online gaming on 15 July. To do so, the legislators of the different political sectors first reached a consensus which involved a combination of different proposals introduced earlier in the Congress.
The Substitute Text of PL 168, 1923, 2206/2021 and 2070/2021 finally received 91 votes in favour, seven abstentions and no negative votes to establish the legal framework for remote gaming and sports betting. It will enter into force 60 days after its publication in the Official Gazette.
The regulations declare the Ministry of Foreign Trade and Tourism (MINCETUR) as the regulatory authority for the sector. It will have responsibility for enforcing the law and regulator control once it is published, with a maximum term of 120 days to do so.
Operators must be registered in the Single Taxpayer Registry (RUC), have a legal representative in the country and have the “.pe” web domain on their platform to receive a licence. In addition, they will be subject to a tax of 12% of the tax base (monthly net income minus platform maintenance costs, whose value is set at 2% of monthly net income).
The tax will be imposed on companies located in Peru, either with a physical presence or only with a locally established representative.
In addition, it incorporates measures to safeguard the protection of vulnerable sectors, banning minors and self-excluded players from betting online.
It also establishes a minimum walking distance of 150 metres between landbased betting shops and temples or schools.
Although the Bill was approved in July, its publication and regulations are still pending before it comes into force, by which time operators hope that those much-needed modifications will have been made.
Gonzalo Pérez, Apuesta Total CEO
and Vice President, respectively, of the Peruvian Sports Betting Association (Apadela), a group created to defend the nation’s operators and fight for the best market conditions.
Both agreed on the difficulties inherent in regulating a market amid a possible scenario without clear rules. Nonetheless, both have remained focused on defending the industry, promoting investment and competition.
“Apadela believes that regulation is very important because, even as we can legally operate in Peru at the moment, there must be clear rules that allow us to continue investing and developing the industry,” Pérez explained.
“This means that requirements must be established that allow operators to compete fairly and that also provide greater protection to the player.”
Rosell also emphasised the need to protect the 275,000 jobs generated by the sector, which has been operating for more than 10 years in the country.
Carlos Portugal, Operations Manager at Inkabet, also weighed in and agreed that "at no time was the voice of the operators included in the drafting of the law" and that there is "little understanding of how the business works in terms of profitability”.
He pointed out that the bill, as it is set, can make "the investment of new capital and the development of the already existing industry unfeasible in the country”.
According to Portugal, the impact of regulating the sector in the same year as the World Cup in Qatar could be very positive "if the necessary points are corrected". "Peru has many aspects in its favour to become a solid market and a benchmark for the entire region in terms of the gaming industry," he said, noting that local operators have always worked with transparency in terms of responsible gaming, safety controls and concern for customers.
PERU HAS MANY ASPECTS IN ITS FAVOUR TO BECOME A SOLID MARKET AND A BENCHMARK FOR THE ENTIRE REGION BUREAUCRATIC BARRIERS AND TAX DISPARITY WILL NEED TO BE ELIMINATED
Apuesta Total’s CEO mirrored Portugal’s sentiment, adding that it is vital to reach out to specialists and industry actors in order to draft a proper bill, although he stressed that a new regulatory framework "will give bettors greater confidence" in the segment.
In addition, Pérez highlighted the increase in internet accessibility, with the number of affected households growing to 56.9% in the first quarter of 2022, compared with only 46.8% a year earlier, and highlighted the "significant potential" of the Peruvian market.
His colleague at La Tinka offered a similar assessment, highlighting the potential of the Peruvian industry to earn a place behind Brazil and Mexico in gaming's Latin American pecking order. But bureaucratic barriers and tax disparity will need to be eliminated, he said, for the market to reach that potential. •
