New Gamble on Casinos? : Mexico’s Proposal to Bring Them Back Stirs a Hot Debate

Prohibition-era casinos in Baja California attracted a glittering galaxy of Hollywood stars, big-name athletes and gangsters until Mexico President Lazaro Cardenas outlawed the parlors in 1935 as dens of iniquity.

And although the Tijuana casino that once stood near Aguas Calientes racetrack was demolished long ago, other former gambling halls--the Rosarito Beach Hotel and the Riviera Convention Center in Ensenada--stand today, rich in ambience and home to the ghosts of Charlie Chaplin, Jack Dempsey, Al Capone and countless others who partook of Mexico’s legal hooch and games of chance.

Now the Mexican economic crisis, overheated Caribbean competition for tourist dollars and the advent of free trade across North America have prompted a surge of interest in legalizing casino gambling once again.

A new government-commissioned study concludes that such a move could generate billions of dollars in public and private revenue. The Mexican congress could act on the matter later this year.

The proposal has stirred an intense national debate, rallying opposition among Mexicans who fear casinos would promote the kind of crime and “moral deficiency” that prompted Lazaro Cardenas to banish them 60 years ago.

Tijuana is one of 10 Mexican cities--mainly seaside resorts and border towns--mentioned as probable casino sites. Tijuana alone, promoters say, could generate up to a quarter of all Mexico’s gambling revenues and the attendant economic benefits because of its proximity to Southern California.

The proposal began gathering momentum after the government held a gaming conference in the resort city of Huatulco in late August.

There, the government released details of a study it commissioned from Harrah’s Entertainment of Memphis, Tenn., that concluded casinos in the 10 cities could generate $2.3 billion a year in new tourist dollars and 24,000 new jobs. The study also projected some $740 million in tax revenue for Mexico by the fifth year of operation.

Those figures spelled jackpot to cash-strapped Mexican officials. Many Americans already flock to Mexico’s legal sports bookmakers and horse and dog tracks, and Las Vegas-style casinos would attract far more, the study found.

Nervous about opposition from churches and other sources, few government officials appear willing to be publicly linked to the casino initiative.

The Mexican House of Deputies and the federal tourism ministry are both analyzing casinos to see if “there are more points in favor of or against legislation” legalizing them, said Javier Solis, spokesman for the federal Ministry of Tourism. His department has enlisted the universities of Texas and Florida to help with the analysis.

“So far, the results tend to suggest that casinos would benefit Mexico,” Solis said. “If we conclude that casinos are beneficial, the interior secretary would draw up a legal initiative and send it to congress,” and the issue could possibly be decided by year-end, he said.

The talk of legalizing casinos has caused a rush by major U.S. gaming concerns, including Harrah’s Entertainment and ITT Corp., parent of Caesars World, to offer their services in casino development and operation. Many are lobbying full-time in Mexico City.

The mere mention of bringing back the casinos was political suicide in Mexico just 20 years ago. But much has changed, here and elsewhere.

“There is a better probability [of a casino bill passing] than in past years because of the economic recession in Mexico and because of NAFTA [the North American Free Trade Agreement],” said a government official working on the proposal who asked not to be named.

Tijuana Mayor Hector Osuna, who guardedly favors the casino plan as long as a fair portion of the revenue goes to cash-hungry municipalities, said the stigma that attached to casinos 60 years ago has faded over the last decade as legalized gambling has spread through the United States and other parts of the world.

Twenty-five U.S. states now have casinos, up from just Nevada and New Jersey as recently as 1986, said William N. Thompson, professor of public administration at the University of Nevada-Las Vegas.

Casinos could bolster tourism at resorts of Mexico, which because of Mexico’s political assassinations, the guerrilla war in Chiapas and the troubled economy has leveled off in recent years.

In the meantime, other Caribbean places have gained visitors, said Juan Tintos Funcke, tourism secretary for the state of Baja California. Now, Mexican officials worry that Cuba may beat them to the punch in legalizing casinos, diverting even more foreign visitors from Cancun or Puerto Vallarta.

“Tourism, which for many years was viewed as a sure bet in Mexico with the American market close by, is now fiercely competitive,” Tintos Funcke said.

Casinos also may keep some of the many Mexican wagerers who spend big bucks in Las Vegas and other gambling meccas from leaving home. Las Vegas tourism officials say 119,000 Mexicans arrived in Las Vegas by air alone in 1994. Total wagers by Mexicans in Las Vegas have been estimated at $100 million or more annually.

But some social workers, church groups and academics see casinos as harbingers of misery. They say the crime, drugs, money laundering and prostitution that casinos attracted in the 1930s will revisit the host cities. Most of the perpetrators, they warn, would be luckless Mexicans who would resort to crime to support compulsive gambling habits. Others warn that the investments casinos would require will come mainly from foreign countries--and that that’s where most of the profits would go.

But any new gala casino opening in Mexico would be hard-pressed to match that of Ensenada’s Playa casino in 1930 on an October night that, according to one local chronicler, was “like something out of fantasy.”

Xavier Cugat and his orchestra played amid four grand pianos for the glittering guests arrayed against mosaic tiles imported from Spain, cedar and ironwork from Cuba, marble and tinted glass from Italy, and tapestries from France.

Just five years later, gambling was outlawed, and by 1938 the adjoining hotel was closed.

Mark Fineman in The Times’ Mexico City bureau contributed to this article.