09/19/2003 12:00AM

Mexico may be next stop for casinos


Gaming has been on a growth fast track the past few decades. But the fantastic growth has been slowed lately by state governments rapidly increasing gaming taxes.

The casino industry has discovered that the current budget deficits incurred by dozens of state governments is a double-edged sword. The states may embrace more gaming and its revenue stream, but at ample cost in higher tax rates.

Nevada and New Jersey made modest increases to their gaming tax rates. Nevertheless, two states, Illinois and Indiana, nearly doubled their tax rates, which has alarmed gaming industry leaders.

"Whether it's killing the golden goose or wringing its neck, these guys are going too far," said Frank Fahrenkopf, president of the American Gaming Association. "Governors and state legislators have to understand that they need to balance sufficient return to the state with fair return to the companies."

Governors may be looking at gaming as a sin tax, similar to the huge tax increases heaped upon tobacco and alcohol products. One big difference is the large number of people employed by the gaming industry in each state.

One reaction to large gaming tax increases in the U.S. is that the leaders of many giant casino companies are looking outside the U.S. to expand. One country that could benefit in the future is Mexico.

Former Nevada Gov. Bob Miller joined the Las Vegas law firm Jones Vargas in January 1999. During his tenure, he was a proponent of doing more business with Mexico. The relationships that he forged as the governor could come in handy in the sensitive dealings that lie ahead.

Mexican President Vincente Fox was elected on a platform that included support for the reintroduction of gaming to the country. That future tax revenue could spur more economic development and job creation.

It has been a slow process for Fox, but he won a major victory recently when he was able to appoint his press secretary, Rudolfo Elizando, to the minister of tourism. Other obstacles, including resistance from the Catholic Church and from hotel and resort operators, apparently have been overcome.

With a key ally in Elizando, Fox is looking to move forward.

"You don't get a second chance at a first impression," Miller said. "Mexico has to have a licensing structure that is totally free of corruption and from even the appearance of corruption."

He said he hopes meetings he set up between Mexican officials and the Nevada Gaming Control Board will help facilitate the formation of a strict regulatory structure.

Mexico had Las Vegas style gambling halls back in the 1930's. A new wave of casinos would provide a needed boost to a sagging economy. A recently completed report on tourism by the Mexican Chamber of Commerce outlines the plans for as many as 11 major casinos, which would attract 11 million tourists, create upwards of 150,000 new jobs, and $800 million in tax revenue.

Still, the return of gaming in Mexico figures to be a methodical process and one that will take a few years.

Richard Eng is turf editor for the Las Vegas Review-Journal and host of the Race Day Las Vegas Wrap Up Show.