GMB - What is your vision of the Brazilian gaming market? What areas are Codere most interested in to return to the business?
Bernardo Chena - As is public knowledge, Codere's business development is exclusively associated with regulated markets. We are always aware of the evolution of the different rules of gaming in order to continue growing in a legal framework that is attractive and sustainable.
For Codere, the Brazilian market has aroused high interest for many years. We have been operating here for almost 15 years in a relatively small market segment, looking forward to the approval of a regulatory framework that allows the development of business of the size and power that should correspond to a country of the magnitude of Brazil.
The Brazilian market undoubtedly has a high development potential. An adequate regulation and a correct implementation will allow to advance creating value in a significant way, generating economic development in all regions of the country, allowing the different levels of the State to "protect" its population and generate resources to be used in its public policies.
Codere is an integral gaming operator, with more than 35 years of experience and presence in 8 countries in Europe and Latin America, which manages:
We seek to operate in omnichannel formats. We believe that in this way the best customer experience is provided. It is the format that we consider most attractive and that we would like to develop in the Brazilian market in case the regulation that is authorized permits so.
The company has met with the Ministry of Economy in Brasilia. What impression did you have? Did you hear what you expected so to trust and invest in the country?
In the week of December 9th we have been in Brasilia with the officials of the Ministry of Economy / SECAP. We find a professional team very prepared and knowledgeable about the gaming problem, who informed us about their decision to move forward in the coming months in the detailed regulation of Law No. 13,756 with the aim of granting the first operating permits prior to end of the year 2020.
The officials told us to be aware of the weaknesses and problems that this implies in terms of business sustainability and interest on the part of the operators who wish to enter the regulated market. However, given the difficulties that it might mean to obtain the necessary modifications in the legislative branch, they preferred to advance in this way.
Brazil's law has received a lot of criticism for its high taxes and even the Ministry itself wishes to modify it later. What is Codere's opinion on this? Is the business still viable?
Indeed, the Law has certain aspects that are not favorable for the development of a sustainable legal market. We believe that, in effect, the taxes that are raised are high (probably higher than 45% on the GGR in some scenarios). Additionally, existing taxes and regional charges (ISS, PIS, CONFIS, etc.) must be added.
Likewise, the fact that the tax, as it is regulated, has as a taxable base the volume of bets and not the gross result of the bets, is not a minor issue. This definition, in addition to meaning a decoupling between the tax burden, the results and cashflows of the operators, could lead to a very difficult level of taxation.
Even for the players, the context that would be created discourages the game through the formats that are authorized. The prize tax also turns out to be high. Customers may feel motivated to find cheaper sources of entertainment.
The penetration of the sports betting business in Brazil by unauthorized operators for several years cannot be ignored. This activity is very naturalized and present in the daily life of the Brazilian people, it is clear that the vast majority of the public does not consider the activity to be illegal. Achieving a change of perception will require many efforts.
There was a time when Codere worked hard in Brazil with the racetracks. What happened so that the company withdraw from that business and practically leave the local market? Today, how do you see that modality?
Codere's operation in Brazil was linked to the main Jockey Clubs for its International Simulcasting operation, allowing bets on races made outside the country. The company, thanks to its experience in the sector (directly operates the Racecourse of the Americas (Mexico), the Presidente Remón Racecourse (Panama), the Maroñas National Racecourse and the Las Piedras Racecourse, the last two in Uruguay) and its excellent management procedures have provided successful formulas for the revitalization of this industry, which in the late 1990s was in deep crisis.
Codere entered the Brazilian market in 2005 in one of the few business lines enabled by the regulatory framework in force at that time. In this context, we signed agreements with the Jockey Club Brasileiro in Rio de Janeiro and the Jockey Club of Rio Grande do Sul. This business model did not generate the expected results, so the company decided to transfer it, maintaining certain agreements with some of the Jockey Clubs.
Brazil is a very particular market due to its language, dimensions, customs ... do you think that some of Codere's businesses in Latin America are replicable in Brazil?
Undoubtedly, our previous experience in this country since 2005, our know-how and our positioning in the different Latin American geographies give us a broad view of the market as one of the main companies of private gaming.
Likewise, our experience in the retail channel, where Codere is a leader in various markets with gaming halls and sports betting, adds to the effort made during the last time, in which the company has increased its competitiveness in the online activity, reinforcing an international team that will definitely push Codere in this direction.
In all our operations this vast experience is strongly reinforced through the incorporation of local talent, understanding the realities of each of the regions.
Before going to Brasilia, the company attended the OGS of Sao Paulo ... what impression did you get of the event and how did you feel the rest of the companies in relation to their expectation for the opening of Brazil?
Participation in the forum was very interesting, it allowed us to make contact with numerous stakeholders and exchange ideas and perspectives. Also, let me highlight and thank the excellent organization.
Which do you think could be Codere’s differential to conquer the local gambler?
Having known from within the operation in the territory for about 15 years, to have extensive experience in the gaming sector in its various face-to-face / online activities (machines, sports betting, gaming halls, racetracks) in different countries and the possibility of having a professional team prepared, gives us all the guarantees to start our activity in this geography.
Our management based strongly on the client as a center, supported by a robust and friendly platform, with a wide range of products that allows us to trust that we can be successful in highly competitive markets. Our commitment to the operation in regulated markets also allows us to offer the player security and trust attributes.
How was 2019 for Codere in general? Was it a busy year, with changes for the company?
The year 2019 was a certainly intense year. The industry, in most of our markets, is going through a complex stage of increasing fiscal and regulatory pressure. The economic situation in Argentina or Mexico has also been a challenge for the Group. Despite this complex environment, the company has successfully continued its business plan, profiting the Spanish operation and also achieving growth in the online business, Italy or Uruguay. We have simplified and globalized our structure and we are in the process of unifying our brand, which makes it easier for us to adapt to an increasingly global, efficient, challenging and digitized environment.
2020 promises to be a year of great challenges. In addition to continuing our transformation plan and finalizing our reorganization of structures and processes, the company will focus efforts on refinancing debt and adapting to regulatory changes in several of our markets, while we are awaiting the opportunities that a possible regulation of online gaming could present in Brazil, Argentina and other markets. The company also has an important roadmap for the development of its social responsibility activities, with the purpose of promoting, in the different countries where it operates, public policies that favor user guarantees, ensure the protection of vulnerable groups and ensure industry sustainability.
Do you think that 2020 is the year of Codere's return to Brazil?
It would be very interesting for the company to value our activity there. We really depend on the necessary regulatory development finally taking place and that it really has the necessary market appeal. Brazil is - without any doubt - a market of great potential and interest, and we trust that it will enhance the activity in a legal environment, that it offers all the guarantees and legal certainty so that companies like Codere trust its investments and capacity in the country.
Source: Games Magazine Brasil
