Paraguay: From Corruption Scandal To The End Of A Monopoly

May 8, 2024
In 2022, multiple employees of Paraguay’s gambling regulatory body were under investigation for corruption. Fast forward 18 months, and with radical changes underway, has Paraguay’s gaming industry recovered its reputation? 

In 2022, multiple employees of Paraguay’s gambling regulatory body were under investigation for corruption. Fast forward 18 months, and the country has a new head regulator and is drafting amendments to its gambling law that would move away from a de facto monopoly. Having clawed its way back from a corruption scandal, has Paraguay’s gambling industry recovered its reputation?

For a country of just 7m people, nestled between larger neighbours Argentina and Brazil, Paraguay seldom makes the international news, but in 2022 corruption in the National Gaming Commission (Conajzar) exploded across local headlines. 

In mid-July of that year, the country’s National Competition Commission (CONACOM) opened an investigation into Conajzar over its allegedly corrupt practices.

At the time, Paraguay’s public prosecutor had brought an official case against former Conajzar president José Antonio Ortiz Báez. A public trial was requested and prosecutor Alcides Corbalán said he had evidence of bribery and “irregular adjudication”.

Ortiz Báez was replaced by an interim head, María Galván del Puerto, who used her time in office to oversee a highly controversial licensing period. 

The tender process ultimately re-awarded the solely available sports-betting licence to local company Daruma Sam, over two other candidates that presented stronger offers in terms of the revenue they were willing to share with the state. One spurned bidder demanded an explanation from Conajzar, which refused to acquiesce. 

Galván del Puerto was replaced by Carlos Augusto Liseras Osorio in August 2023.  

A few months later, the Paraguayan Association of Entertainment and Gaming (APEJ), the first national trade organisation of its kind, was formed by the respected former Conajzar head Javier Balbuena.

APEJ announced that its three founding members were Vimerica S.A., Tecnología Para el Desarrollo de Paraguay (TDP) and the winner of the disputed tender process, Daruma Sam.

According to APEJ, those operators are responsible for 90 percent of the revenue collected by Conajzar. 

In September, the presiding judge provisionally dismissed the corruption cases against all involved members of Conajzar.

The following month, Carlos Augusto Liseras, in the wake of the corruption scandal, paid a visit to Paraguayan congressional deputy Adrián Vaesken to hammer out modifications to the country’s national law governing games of chance, Law No. 1,016/97.

A few weeks later, 14 deputies officially presented a bill to modify the current law and to de-monopolise the market. 

“Through the current system, Conajzar has been awarding the exploitation of national games, such as sports betting, quinielas, lotteries, among others, exclusively; that is, a monopoly to a single company,” they said.

“The aim is to correct the exploitation of games of chance which, according to the deputies, are ‘monopolistic concessions’ and, in certain cases, in violation of the National Constitution,” the group of lawmakers reasoned. They also wrote that a monopoly only encourages illegal gambling.  

The biggest change in their proposal would be to Article 8 of Law No. 1,016/97, which would expand the number of sports-betting licences available from one to three bidders. 

Away from sports betting and lotteries, Paraguay already applies a more competitive regulatory model, with multiple licences awarded for both land-based and online casino gaming. 

But the proposed changes were far from perfect. CONACOM expressed concern that raising the number of licences would change the economic model, which is currently based on fees paid by the licensee. The competition authority requested further analysis to promote healthy competition.  

Javier Balbuena, for his part, said on local radio that the modifications to the law would give more powers to Conajzar, but claimed that, currently, the organisation does not have the necessary budget or the infrastructure to take them on. 

In recent months, the legislative project has stalled. At the beginning of April, discussion on the bill in the Chamber of Deputies was postponed for 90 days, despite requests that the delay be for no more than 15 days. 

One of the champions of amending the law, Adrián Vaesken, warned that “90 days is already a lot because the concession of the quiniela is going to be granted soon and the concession is given for five years and the spirit of this law will not be fulfilled for this period if it is not addressed as soon as possible”.

Opponents argued that polishing was needed and that too much power was being taken away from Paraguayan municipalities, which are eligible to regulate slot machine operations within their jurisdictions, and given to Conajzar at the national level. 

Local media outlet ABC Color, which led the reporting on alleged corruption within Conajzar, called the delay “suspicious”.

However, Balbuena of Paraguay’s new gambling trade association insists that the reform process remains on track. 

“[The postponement] does not generate for me in particular nor for the Paraguayan Association of Entertainment and Gaming any disappointment because both Conajzar and the association have requested in the public hearing held in the National Congress that the same law be postponed due to the fact there are still many points to discuss both in substance and in form.”

Those points include “an increase in the collection of the fiscal fees, however, there is no technical study and much less a commercial study to support this situation, consequently, the result promised by the planners cannot be guaranteed”, Balbuena told Vixio GamblingCompliance.  

“Even worse,” he continued, “with the modification, there will be more offer of games of chance for the citizens, more demonstration of the commercial power of the companies through their advertising efforts, which in sum could cause the generation of a greater number of gamblers with the possibility of having problems with gambling addiction and its social consequences”.

He echoed calls from deputies for an update of the current law that is “ integral, broad and complete”. 

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