With a Ph.D. in Economics from the University of Brasilia and a career at the Central Bank of Brazil, Gustavo Guimarães faces the challenge of the new regulatory wave of gambling and betting throughout the country, in addition to controlling the launch of new state lotteries and LOTEX. It is expected that one of his priorities will be to finally start the regulated sports betting market in Brazil. As agreed in December 2020, SECAP-ME will focus on the administration, regulation and control of the new state lotteries, which emerged after the decision of the Supreme Court on September 30th, with official publication at the end of the last year. In this sense, SECAP is preparing a technical document to unify regulatory criteria, ensure transparency, establish limits on premium, taxes and services, and develop fair competition, good governance and the protection of vulnerable groups. In addition, rules against money laundering, disclosure of balance sheets and other security mechanisms will be established.
You are a true expert in economics. What knowledge did you have about the gaming industry and the lottery segment in Brazil? What aspects of this sector interest you?
The regulation of lotteries, as an institutional competence of the Ministry of Economy (ME), is a subject that has a transversal impact on other activities of the Ministry. In my recent career at the Special Secretariat of Finance, the issue often arose among the different demands that were addressed in interactions with the Ministry of Economy or with other areas of the ME. We are interested in enabling a safe and healthy expansion of the market to generate income and employment, with the consequent increase in the transfer of resources to Government programs and public policies, taking into account the growth potential of the lottery and gambling sectors in Brazil.
In the last two years, there has been an important advance in the regulation of gambling in the country. Through this technical document that is preparing, how can SECAP unify regulatory criteria, guarantee transparency, generate opportunities for all market players and protect vulnerable groups?
The search for a modern regulatory framework that responds to the best international practices for the lottery sector is a constant effort in SECAP’s activities. In addition, the guideline established in our Secretariat is that, considering the operational sensitivity and the regulatory complexity involved, such matters are based mainly on the sustainable expansion of the sector, on corporate social responsibility, in particular, Responsible Gaming, and on the maximization of value derived from the exploitation of these public services. In this sense, both our regulatory standards and the technical requirements of ongoing privatization actions, planning and studies that support the expansion of the market will be addressed to the protection of the public, as well as of the interests of Brazilian society and freedom of action, and innovation for current and future lottery operators in our territory.
How do you think the sports betting market managed by Brazilian state lotteries will grow and strengthen? In the case of São Paulo, do you agree with the decision of the local Governor to create a State Lottery to finance the social policies of that state?
About this issue, we cannot comment on the acts adopted by any of the states. Specifically in the Brazilian sports betting market, we can only limit ourselves to ongoing actions, which follow the determinations of the Executive, which included this public service in the National Privatization Program. I can declare here that such actions are being carried out effectively, in a strategic plan of the Brazilian government, which involves the Ministry of Economy and BNDES. With this, our expectation is to complete the planning, market analysis and modeling stages at the beginning of next year and, with consistency and in line with what is being developed in the large international markets, in order to finalize the regulation of this activity in the country.
Why did two large international companies like Scientific Games and IGT abandon the LOTEX tender? What will happen to the prize of this instant lottery?
The Estrela Instantânea S.A. consortium, formed by the companies IGT and Scientific Games, won the 2019 auction for the LOTEX concession. However, the consortium did not comply with all the conditions established in the call, so the concession contract was not signed. The reasons and justifications for not signing the contract are the responsibility of those companies. As for the Government, we can say that we have resumed activities related to LOTEX, which should result in a review and update of the privatization model of this public service, with the aim of having soon the commercialization of instant lotteries throughout the national territory, in a safer and more complete way within the parameters of responsible gaming.
How is the joint work of SECAP and Caixa Econômica Federal being developed? How can the Secretariat contribute to strengthening the 13,000 face-to-face lottery sales points of the Caixa network?
The relationship between SECAP and Caixa Econômica Federal (CEF) is strictly developed within what is expected of an effective relationship between the regulator and the regulated entity in the operation of the public service. Focusing on the growth of the sector in Brazil, as a regulator, we try to advance in solving claims and modernization initiatives of CEF. In turn, we recognize that CEF has managed the Federal Lotteries, on behalf of the Union, with a high quality level for almost 60 years. In addition, the figures for the beginning of the year show the importance of the amounts involved in the operation of the lottery. Our first Brazilian Lottery Market Report, published last month, showed that federal lotteries generated R$ 2.74 billion (USD 506 million) in revenue in the first four months of 2021, representing a growth of 13% over the R$ 2.42 billion (USD 447 million) transferred during the same period of 2020. Such figures reflect the continuous improvement in the management of federal lotteries, both by Caixa Econômica Federal and by the performance of the lottery network and the entrepreneurs that manage it, which even in the midst of the pandemic has shown impressive sales results.
What is your future perspective on the regulatory evolution of all gambling verticals in Brazil?
I am convinced that lotteries are the great reference and the point of comparison for any movement to open the Brazilian gaming market. Based on what is practiced in federal lotteries, in relation to regulatory requirements, which are security, integrity, inspection and control, fraud prevention, responsible gaming and money laundering prevention, we will have the possibility to evaluate and discuss expansion of gaming in Brazil. SECAP will surely play a pivotal role in this context.
As an economist, what benefits do you think this industry will bring in fiscal terms for the Brazilian state? In which way international companies will be able to enter and invest in this huge market?
Based on the experience of Federal Lotteries, it is important to highlight the fiscal relevance that comes from lotteries and other games of chance. In the evolution of the sector that we are boosting, with Fixed Odds Betting and LOTEX, this will become more evident, with resources obtained by the Union as subsidies or licenses, depending on the modeling of the concessions. Finally, in addition to the direct resources generated by the Brazilian state, the expansion of the national lottery market is highly attractive for strong investors, who today operate in the large international markets and who, on several occasions, have expressed interest in the Brazilian market. With this in mind, we understand that the development of considerable benefits for society, through social transfers, in addition to the growth of the actors involved in the lottery operation, will bring with it an increase in the job offer and in income for the country’s population.