In the November 2011 issue ofCasino Journal, an article by Jose Luis Benavides and Carl Emerson Faris was published on the state of the Mexican gaming industry (“Heading South”). As the head of AIEJA, one of the two Mexican gaming associations, I would like to clarify some misconceptions and provide some additional perspectives on our industry.

Since 2005, the market has been the most rapidly growing slot market in the world, with an estimated 115,000 slot machines in place today, which already makes Mexico the third largest slot market in the world (behind the U.S. and Australia). We estimate that this industry has generated more than 40,000 direct and 120,000 indirect jobs. Certainly, given such rapid growth, the regulatory framework, and its enforcement, has been far from perfect and uniform. However, the authors’ statement that Mexico “has not been so much a regulated gaming jurisdiction as it is an economic free for all” is highly misleading.

According to the Mexican Interior Ministry (SEGOB-Secretaría de Gobernación), which regulates and supervises gaming, there are 378 casinos currently operating in Mexico, with 318 operating under federal permits, 53 under regulatory exemptions or final judicial resolutions and only seven operating under judicial injunctions (amparos), pending final review. While some casinos (around 30, according to published figures) may indeed operate illegally, a significant majority are fully legal-possessing effective federal permits or authorizations issued by SEGOB that the federal government or the judiciary consider valid.

Moreover, the federal government has been active in strengthening its regulation of gaming since at least 2008. Notable examples include:

• Smoking ban-A law was published in 2008 and was made a regulation in 2009. Both the law and the regulation were observed by casinos.

• Enhanced monitoring of industry by the Federal Revenue Service (SAT)-Fourth Miscellaneous Resolution published in March 2010, which set the rules for the gaming tax (IEPS), the central monitoring system for all casinos, as well as compliance with certain technical standards for gaming devices (software and hardware) similar to international GLI standards (NMX standards).

• In 2008, the government raised gaming taxes from 2 percent to 20 percent through instituting a new gaming tax. In 2010, IEPS was raised to 30 percent.

• Currently, the federal government (SEGOB, Secretaría de Economía, and SAT) is working with the official Mexican technical certification body, NYCE, on developing a new NOM (Official Mexican Standard) for gaming devices in Mexico, based on the established NMX technical specifications, which will govern all gaming equipment vendors in Mexico.

As can be expected, after the fire-bombing of Casino Royale in Monterrey in August 2011, the federal and municipal authorities have gotten more active in their inspection and enforcement efforts, including closure of multiple illegal casinos, 25 as of today (concentrated in the northern states of Tamaulipas, Chihuahua, Nuevo Leon and Coahuila). In addition, there is now broad consensus in the industry and the government that a new gaming law and enhanced regulatory infrastructure is a requirement for the industry moving forward.

We hope that the industry-Mexican gaming operators and foreign gaming equipment manufacturers-will work together with government leaders in the coming months and years to strengthen the industry and to continue to provide substantial tax revenues and new jobs for Mexico and its citizens. New laws and regulations would not only strengthen the existing locals gaming market but also provide a solid platform for the development of the potentially significant tourist/destination business in developed areas such as Cancun/Riviera Maya and Los Cabos, further increasing employment, foreign investment, and tax revenues.

President, AIEJA