GMB: Please tell us about your law office's participation in BgC 2019. What topics will you analyze during the event?
Pedro Cortés: Our office is based in Macau SAR and currently we have two branches in Mainland China and Portugal. We will participate in two panels:
On the first day, I will be a speaker in the panel “Examining the Opportunities and Barriers to Entry for Casinos in Brazil”. On the second day Oscar Alberto Madureira will moderate the panel “Creating Transparency: How to Build a Regulatory Agency.”
In both panels we will have excellent speakers and we are very confident that our experience could be used for the construction and development of the gaming legal framework in Brazil. It is the third year that the office participates and we have already experienced a great evolution in recent years in terms of legislation. We are in a decisive moment that has to be taken advantage of in the best way by the official entities of this great economic and cultural power that is Brazil.
Could you give us a brief preview of the content of your presentation?
Pedro Cortés: That would be the same of giving you the results of Mega Sena lottery!
From my side, I think it is important to emphasize that Brazil will have to pass laws taking advantage of the best international practices, with transparency and respecting the principles of open market.
On the other hand, the major principles of jurisdictions where gambling is legalized:
• Gambling shall be fair and safe
• That individuals under age and other vulnerable people shall be protected from the harms of gambling
• That the industry is free from criminal practices and not to be used for money laundering and terrorist financing.
Global trend is going towards convergence, and therefore the methods adopted by Brazil must ensure that the indicated principles and ends are properly achieved.
For example, online gaming is a cross-border practice and therefore global gaming market shall only develop with convergence and cooperation of the relevant stakeholders. Brazil has to be in the first league of regulation. In soccer language, Brazil has to be in the Champions League of the gaming industry and it has now a great opportunity for that to happen.
From the information you get and the movement you see, is Brazil closer than ever to legalize casinos?
Oscar Alberto Madureira: In our opinion Brazil has reached a point of no return. I think that given the steps that have been taken in recent months, the legalization of gambling in casino is an inevitability. There is at this moment a certain unanimity on the subject. I think that all stakeholders involved, from operators to consumers, are of the opinion that casino gambling should be legalized. Honestly, I suspect that even the legislator shares the same view. There are, however, some important details to discuss and it is perhaps the lack of agreement on these details that has drawn the final step which is passing the law.
If you could give the Brazilian Government three advices for the success of a good regulation, what would they be?
Oscar Alberto Madureira: In the first place, the Government should clearly define which administrative-legal model will be at the basis of local gaming operation. Brazilian legal and administrative matrix indicates two major possibilities as the more likely scenario. The Concession and the licensing (a.k.a. authorization) models. Although the ordinary citizen thinks that this kind of specifications are irrelevant, this will be in my opinion a key choice to be taken by the legislator because it will define the exploratory framework of all the industry. In a nutshell, the concession model is quite demanding in terms of obligations because it is based on the idea that the operation of this industry would be ab initio reserved to the state itself. It happens that for several reasons, the state decides to grant the right to grant the possibility to operate this activity to the private sector, during a certain period of time that normally is long, for example 20 years. In return, the operator/concessionaire will pay a premium up front and will also commit to a certain investment plan that is usually substantial. In addition, the operator will be also liable for the payment of certain taxes over the revenue of the operation, in the case of gaming industry, for example on gross gaming revenue. The concessionaire will also be obliged, under the terms of the contract signed with the state, to comply punctually with various types of obligations to the state, the regulator, the market and even its clients.
The authorization model, by its nature, creates a less demanding and less costly bond with respect to the obligations of the parties. It usually requires less investment, is allocated for less time and may even generate less revenue for the state.
In the Brazilian case, I believe that a mixed system could be assumed. Concessions for the land based operations and authorizations for the online game for example. By the nature of the two realities, I think these are the models that suit each one of them.
The second advice would be the setting up of a strong regulatory body, able to effectively supervise an activity whose regulatory standards are at the highest level known. Gaming industry is probably one of the most scrutinized and regulated activities in the world and the Brazilian industry cannot fall short of this trend as far as regulation is concerned. If this is not the case, the Brazilian market will have difficulties imposing its international credibility that will be liable for attracting investment from the major international players that are obliged to comply with these requirements by the regulators supervising other markets where they are currently operating.
Finally, we believe that the Brazilian legislature has to be very cautious defining the type of taxation to be applied to industry. Taxing players' winnings should be out of the question, at least at an early stage. Then, more importantly, a competitive tax model of the operators will have to be defined, which is already practical. The Brazilian tax system is complex and it might not be bad to consider creating a special tax of the game, which would stipulate a percentage of the gross revenue that would be for the state, automatically. In this solution could possibly set a percentage that would be retained by the state and another by the Union. I think everyone had to win with a simple, straightforward and easy application model and not of doubt.
Are Macau investors eager to open in the Brazilian market? Do you think there could be a big deal for the country?
Pedro Cortés: All global operators are eager for the opening of the Brazilian market. The feedback I have received is that if there is really an opening, the big names will want to be present. But attention: it is not at all cost! There is a need to prepare legislation so that the market is attractive and that the big names come to the Brazilian competition.
Regarding Macau, which is the largest gaming market globally, with the exception of Galaxy, all other operators have resort deals in various parts of the world and have not scorned the possibility of coming to what is expected to be a top market 5 worldwide. On the other hand, the question of language - in Portuguese or Portuguese is still an official language - facilitates and in what way this appetite for the Brazilian market. Establish conditions and operators of gaming in Macau and Asia, as well as other entities linked to the game, will be in the forefront to invest in this wonderful country with unique characteristics.
In terms of importance, the game market can be a decisive driver for the economy of a country like Brazil that wants to be modern and that can attract more tourists. I was amazed by the annual number of foreign tourists that Brazil receives every year. Last year there were 6.6 million. In Macau, which has an area equivalent to the Pinheiros neighborhood - in São Paulo - 30 and a few square kilometers - "only" we had 35.8 million in 2018. The difference is abysmal!
Do your office clients show interest on investing in Brazil? In what position of the international gaming market would they consider the opening of Brazil to the sector?
Pedro Cortés: So much interest! And we believe that we can play a decisive role in this disclosure. Both Oscar Alberto Madureira and me, in all the conferences related to the gaming industry, make the disclosure to the maximum of the potential of the Brazilian market. Our clients in the various jurisdictions where we operate (Macau, China and Portugal) only need the legal structure to be strong and built in order to be able to invest (hopefully strong) in Brazil. This country may be, as I said before, in the Top 5 of the game markets globally.
What conclusions did you draw from the May 22 hearing in Congress?
Oscar Alberto Madureira: I honestly think the audience was very positive. A word to Congressman Evandro Roman who had the ability to gather people from all over the world to speak openly and clearly about gaming industry. That is the way. I was honored by the invitation and am fully available to continue to helping in whatever it is required.
Do you believe that these events organized by Clarion are useful for the sector?
Oscar Alberto Madureira: We think so. We are serious participants. We have already been at events organized in three continents and the quality of these organizations has been transversal. We are also of the opinion that for example in Japan, Clarion played (and plays) an important role that serves not only to clarify who attends the events but also serves to acquaint people from industry to local. We attach a similar importance to BgC and that is why we have supported the event in recent years. Clarion knows he can count on Lektou.
BgC is Brazil's most respected gaming industry congress, providing unrivaled access to ministers, federal deputies, senators and local governors working to regulate this rapidly growing jurisdiction. With fixed odds sports betting, integrated casino resorts and privatization of lotteries under discussion in the Brazilian government, 2019 marks a true turning point in this vibrant emerging market. The event will be held at Tivoli Mofarrej in São Paulo and to register or become a Sponsor / Exhibitor, see all information on the official BgC website: www.brasiliangamingcongress.com.
Source: Exclusive GMB
