Brazil's bingo halls are basically betting parlours and there are those in high places not happy with that. James Marrison Investigates
Casinos in Brazil were first outlawed by President Eurico Dutra in 1946. Before the ban, the then capital Rio de Janeiro had been home to some of the most spectacular and famous casinos in the world.
The Glória opened in 1922 and this was followed two years later by South America’s first luxury hotel, the Copacabana Palace, which quickly began to attract the world’s rich and famous, including Marlene Dietrich, Walt Disney and Orson Welles who, so legend has it, is said to have thrown a grand piano off the Palace’s roof.
Indeed so successful was the casino industry in Brazil that by the early 1940s money generated from casinos was providing the country with a fifth of its yearly tax income.
But when the ultra conservative ex-general Eurico Dutra came to power and enacted Decree Law No. 9215 the night life across the country, especially in Rio, changed almost overnight. The vibrant night life in Rio continued, of course, but as more than one observer at the time noticed, the lights were much dimmer.
But in common with many countries in South America where casinos are officially speaking banned, in Brazil there are still plenty of places where you can make a bet in casino type surroundings, albeit in slightly less glamour than the Glória or Copacabana Palace.
In fact, today there are over 600 legal betting parlours dotted all over Brazil thanks to an amendment in the casino legislation which was passed in 1993 under the so-called Zico Law.
The Zico Law first allowed for the establishment of bingo halls, but it was amended in 1998 to allow them to house slot machines too (where numbers are present instead of images) in order to generate income for sports. These bingo parlours can sometimes be large scale with up to 400 electronic bingos on site.
But bingo halls still face a huge problem in Brazil. Political corruption still remains rampant almost on every level in Brazilian society and there are proven links between bingo halls and the mafia. The result is that the issue of gaming is one of the most highly charged issues on the Brazilian political map.
Indisputable proof of corruption in gaming came in 2004 in the form of an undercover video filmed in 2002. The video showed the then head of the State Lottery of Rio de Janeiro, Waldomiro Diniz, soliciting a bribe from well-known illegal gambling boss and numbers runner Carlos Ramos (aka Charlie Waterfall).
Every single bingo hall was closed under Presidential Decree pending a full-scale investigation into the links between bingo halls and the mob. Thirty thousand outraged bingo workers almost immediately took to the streets in protest all over the country and two and a half months later the act was declared unconstitutional by the Brazilian Senate.
Since then the majority of bingo halls have been able to remain open by individual judicial order while an investigative committee looks into bingo halls and their possible link to organised crime.
Unfortunately, while the committee has carried out its investigation, controversy continues to plague the bingo industry. They made headlines in a big way again and for all the wrong reasons in 2007 when a police sting operation discovered more evidence which linked bingo parlours with political corruption. Investigators found that bingo hall owners were regularly bribing local judges for stays of closure.
The problem for bingo parlours is that many of them have proven ties with the infamous mob-controlled Jogo de Bicho or Animal Game - a street lottery where numbers are represented by animals.
In fact the numbers runner Carlos Ramos, the man first caught up in the bingo controversy, is widely believed to be Animal Game kingpin.
The Animal Game started innocently enough when it was first introduced by a Brazilian nobleman called Baron Drummond in 1890. Drummond had the concession to run the Rio zoo and in order to raise money he applied for and obtained a licence to run a type of daily lottery where people could bet on what animal was hidden behind a curtain by choosing a number.
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Since then the Animal Game has become a peculiarly Brazilian institution - so popular in fact that in 1945 a citizen tried to get elected to Congress on the ticket that he would make it legal.
Unfortunately, he failed in his endeavour and the game is now entirely under the control of the mob with the result that politicians, high court judges and gaming officials are known to turn a blind eye in return for cash while the mafia uses the game to launder money and raise cash.
Yet more bad news came for the bingo hall industry in April of last year when well-known mafia figures involved in the Animal Game were arrested.
It was later proved that they were also involved in the running of bingo parlours around the country as well as the distribution of slot machines.
It is in this atmosphere that the Brazilian Congress has been trying to reach agreement about their future and so far there have been seven attempts in the House of Deputies to ban bingo parlours outright. Legislation that supports bingo halls, meanwhile, proposes to put them directly under the control of the federal government.
Lately, this solution has met with a more positive response from law makers. Struggling under the burden of growing budget restraints, the fiscal advantages of bingo halls are hard to ignore. It is estimated that a regulated bingo industry could bring in around US$3bn per year in additional tax revenue.
The latest news is that bingo halls could well come under a much wider gaming law. In September of 2008 the Committee of Economic Development in the Chamber of Deputies presented draft legislation regarding both bingo halls and casinos.
The legislation, which deals with both casinos and bingo halls together, proposes federally regulated bingo halls with at least 500 individual bingo seats. Slot machines would also be allowed on the premises.
The law also proposes green lighting fully fledged land-based casinos with both slots and table gaming. The casinos would be restricted to certain underdeveloped areas in Brazil: the north, the north east and central western parts of the country.
As legislation stands now, only eight casinos would be permitted - two casinos for each sector. The legislation though is only in committee stage and needs to be approved by four more committees before even being put to the vote before the House.
As a result the law will in all likelihood change substantially from how it now stands in its draft form. As it is now though, casinos would pay 15 per cent of gross income in tax. If the legislation is approved, it has to be sent up to the Senate for approval where it will probably, if recent developments are anything to go by, face its toughest obstacle yet.
In fact the pro-gaming legislation drafted in the House of Deputies now looks increasingly redundant given the fact that in November of 2008, the Senate Investigative Commission charged with investigating the ties between bingo halls and political corruption proposed outlawing gaming altogether.
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The new bill introduced by Senator Jarbas Vasconcelos would make all gaming illegal (except state lotteries) and that would include bingos and electronic slot machines. Those found guilty of taking part in gaming would be handed down a sentence ranging from one to three years (double if you are a government official) in jail.
Meanwhile, while the future for both bingo halls and casinos in Brazil looks increasingly bleak, the lottery sector in Brazil still continues to flourish. This is due to one of the most advanced and innovative lottery systems in the world.
Go to a cash machine in the UK and you can take out money, check your statement and deposit a cheque. Go to a cash machine in Brazil and chances are you can also have a little bet on the side while you are at it. This is because in Brazil the largest state-owned bank also has the mandate to run the national lottery known as the Mega Sena.
By entering their pin number in one of the 25,000 gaming/bank machines dotted countrywide Brazilians can not only withdraw cash and pay their bills (today more than 60 per cent of bills paid in Brazil are now paid at lottery offices) but they can also pick their numbers for the national roll-over lottery which runs twice weekly.
And while they are at it they can also try their luck on the other nine official state-run lotteries which are also under the control of the state-run bank, including the increasingly popular Lotofácil (Easy Lotto).
This innovative system has proved a great success with Brazilians and today participation in the lottery is so easy and so accessible that ticket sales have rocketed.
By the end of 2007 total revenues for the state-run lotteries combined had reached a record $2.8bn, a 23 per cent increase from the previous year. While this might have slackened slightly during the first quarter of 2007, lottery officials plan on introducing new games and new cash/gaming machines in order to bring back numbers to the record sales seen back in 2007.
These healthy returns are, of course, good news for the government, which is able to plough back earnings directly into educational and cultural programmes, as well as urban infrastructure and sports. According to the most recent figures, out of every $0.56 bet on the Brazilian state lotteries, $0.27 is returned to state-run development programmes.
The $108m contract to physically install these machines and link them to the bank’s data processing centres took 15 months and was carried out by Comsat International, which runs network services and solutions around the world. The 25,000 lottery terminals have been up and running for over three years and are now present in 9,000 lottery outlets.
Combined they receive over 41,000 transactions per minute. That’s 3.3 billon transactions each year. And of these transactions 2.18 billion are gaming related.
All transactions are managed by the CAIXA bank, which has its headquarters in capital Brasilia and was first established back in 1861 with the express purpose or representing the interests of the underprivileged. Its mandate to run and monitor state-run lotteries came in 1961.
With over 10 million customers, it is now the largest public bank in the entire region and is also responsible for handing out welfare cheques, which can also be withdrawn from the lottery machines.
Naturally, the logistics behind managing a banking and lottery online system at the same time are breathtakingly complex. Up until August 2006 both processing systems for CAIXA had had been outsourced to the largest lottery systems operator in the world, GTECH, which had been operating in Brazil for 10 years.
But now the lottery and all banking services are run in house by using IBM hardware equipment and software solutions. According to figures recently released by IBM, this has allowed CAIXA to cut infrastructure acquisition costs by over 50 per cent, or US$330m. At the same time, since the lottery has been run in house, participation in the lottery has gone up seven per cent nationwide.
The lottery sector may be doing well, but the future of casinos and bingo halls in Brazil has never looked bleaker. While casinos are being debated in the committee stage in the House of Deputies it looks increasingly unlikely that we will see any glamorous casinos along the beaches of Rio de Janeiro any time in the near future.
Before even considering fully fledged land-based casinos, Brazilian law makers need first to address the issue of corruption in bingo halls.
Unfortunately, both Houses seem more divided than ever on the issue, even though it has been debated and recognised as a matter of urgency since 2004.
If yet more scandal continues to emerge around bingo halls (and this looks more than likely given recent events) the industry faces a every uncertain future indeed.
