Gaming in Brazil

6/23/2017 Update: Spectrum Gaming Capital released a report onAttracting Investment to a New Brazil Gaming Industry

Please click to access the reports in both English and Portuguese versions

Brazil is a country with 210 million people, the 6th largest population in the world. In 2003, there were over 1,200 “Bingos” (slot parlors) in the country generating ~ $800 million of GGR; gaming was then outlawed in an effort to eliminate criminal involvement.

Both houses of Brazil’s Congress, the Senate and the Chamber of Deputies (“COD”), proposed bills legalizing gaming to generate economic growth, jobs and tax revenues. Published analyst estimates for Brazil Gaming GGR range from $9B to $17B; Brazil would be the third largest gaming jurisdiction in the world after the US and Macau.

Neither bill reached the floor for a vote. The Senate bill was sent back to committee on December 15th. The COD had a public meeting to discuss their version of the bill on December 13. The first bill to be approved by one of the legislative bodies will go to the other house for consideration and modification. The modified bill will then go to the approving legislature where they will have final say. The last step to passage will be signature by the President. Proposed legislation assumes key missing regulatory items are to be decided in gaming regulations to be enacted following passage of the bill.

 

brazilgaming_table_new_dec29

 

Key Insights and Observations:

  • Both bills contain a multi-tiered tax structure that includes corporate taxes, a tax on GGR and, most significantly, a withholding taxes on player win. There is not yet any provision for players to be able to deduct losses from prior casino visits in calculating withholding tax due.
  • COD Bill states that the Federal Government will grant casino licenses rather than state-by-state as in the US.
  • COD bill provides for VLT’s for route-like operations, but does not specify where they will be located. BR1(VLT’s) profit sharing compares to VLT’s in Illinois, where the machine owner and gaming establishment operator split the profits 50%/50%
  • Focus on concession fees for license awards will favor best capitalized investors, but will not encourage building compelling facilities that will attract customers and create jobs.
  • House bill also specifies minimum room counts of 100-1,000 and gaming halls of 15k-150ksf, depending on state population
  • Law provides for the legalization of Jogo de Bicho (similar to the illegal “numbers game” in the US), but does not describe how it will be regulated
  • Government has just selected an advisor to manage the RFP process for the privatization of Lotex, the instant lottery.

 

 

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