Gaming in Brazil

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.

The bills propose a massive legalization of gaming to include Integrated Resorts, Slot Parlors, Routes, Lotteries, Sports Betting, Internet Gaming and legalization of the currently popular Jogo de Bicho.

Based on our discussions with government officials, lawyers, lobbyists and industry participants, it appears that legalization will occur in a step fashion to enable regulation to keep up with legalization. Our assessment is that the sequence will be lottery privatization, sports betting, large-scale casinos, internet gaming and then slot parlors (bingos) and others.

10/30/2017 Update:

Privatization of Lotex, Brazil’s instant lottery

  • The government undertook a roadshow with proposed bidding parameters, including an upfront payment >$300M US for a 25 year exclusive license for instant tickets and “virtual” online lottery
  • Negative investor reaction caused government to rethink the offering
  • Government is signaling they will issue the RFP late this year with bids due late January/early February

Sports Betting

  • Government is considering selling sports betting concession in a similar fashion to the Lotex process, provisioning $937M in the 2018 budget

Gaming

  • A coalition called “Parliamentary Front for the Approval of the Regulatory Framework for Gambling in Brazil” was launched to organize efforts for approval of House Bill 442
  • A report that described Senate Bill 186/2014 favorably was presented in the Constitutional and Justice Commission, seeking to create urgency for the Senae to vote on the bill
  • According to government officials, President Michel Temer will sanction whichever bill is approved by the Congress

Spectrum Gaming Capital released a report on Attracting Investment to a New Brazil Gaming Industry

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

 

 

SUMMARY OF BILLS PROPOSED

brazilgaming_table_new_dec29

 

Key Insights and Observations on proposed legislation:

  • 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

 

 

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