Casino mogul Adelson pressures Spain to bend rules for EuroVegas
American casino mogul Sheldon Adelson's EuroVegas project could bring Spain much-needed investment, but the deal comes with demands for unappealing legal and financial exemptions.
Madrid — American casino mogul Sheldon Adelson has a “vision” of bringing a massive Vegas-style casino complex to Spain and is tempting officials with billions in investment and tens of thousands of jobs that are sorely needed.
But Mr. Adelson's proposal comes with big demands, which reportedly include fiscal breaks and substantive reforms to Spanish laws, and have already prompted a backlash that could upend the project altogether. His proposal is triggering a broader debate in Spain about just how far the country should be willing to go to exit its worst recession in decades. Spain's final decision on the proposal isn't expected until this summer.
The proposed project would involve building 12 hotels, six casinos, a concert hall, several theaters, and golf courses on about three square miles over the next decade. Ron Reese, vice president of public relations for Adelson’s Las Vegas Sands Corp., told officials and Spanish media during a tour last month that some 17 billion euros would be invested and around 260,000 jobs would be created.
Adelson’s company hasn’t made its case publicly and the aura of secrecy is raising even more suspicions. The company did not answer multiple requests for comment.
Analysts, politicians, and economists in Spain have suggested that the economic benefits are not realistic. With several casinos in three different cities, Adelson's company only hired 36,000 people, they say. And besides, the rate of employees per hotel room – a common unit of measurement for Spain's tourism industry – for Adelson's proposal is much smaller than that of Spain's overall average.
At the time, Mr. Reese also acknowledged that any decision will depend on the “flexibility” of authorities as they consider Adelson’s terms. Both the company and Spanish authorities have yet to confirm what incentives are being negotiated, but both have said talks are in advanced stages.
Some of Adelson’s terms have been widely published in the press. They reportedly include tax breaks; social security exceptions; and reforms to anti-smoking, labor, and immigration laws; on top of land concessions and significant public spending in surrounding areas. Some of them violate existing Spanish laws – such as bans on smoking in casinos, gambling by minors and gambling addicts, and money laundering – and exceptions or changes to the laws would require parliamentary approval.
Both Barcelona and Madrid are being considered for the project and both cities made their case in Las Vegas last week. Madrid appears more than willing to make exceptions for Adelson. Its leading regional politicians, aligned with the Spanish government, have insisted they will do anything in their power to win Adelson’s business. All officials admit there is room to negotiate, as long as it’s within the law, but they have been intentionally vague about the specifics of the deal.
Adelson’s demands, or at least the public perception of them, are indeed threatening the EuroVegas project.
“Just because someone offers money doesn’t mean we should do them any favors,” says Xavier Sala i Martín, a well-known Spanish economist and professor of development economics at Columbia University. “The bar should be equality under law. Whatever authorities offer Adelson has to be offered to all companies. Some laws should be changed, indeed, because it’s in better for Spain – but not to attract an investment.”
Worried about 'the worst of Vegas'
Adelson first announced he was in talks for a EuroVegas in Spain more than a year ago, but with Spain focused on its economic crisis, growing unrest, and political upheaval, negotiations didn’t get very far.
Unemployment now stands at more than 23 percent and is expected to peak at 25 percent. The economy is projected to contract 1.5 percent in 2012 and not return to growth until 2014. Austerity measures have been severe and are expected to only get worse.
Mega casino proposals are not new to Spain, which receives nearly 60 million foreign tourists every year. At least another couple of mega casino projects have been announced in Spain over the past years, including one that attracted millions in investment, but the plans fell through as the crisis scared investors away.
Interest in Adelson’s EuroVegas picked up once the conservative Popular Party swept elections in November 2011. Adelson met with top regional officials to discuss his project as recently as February 2012.
But concerns about gambling, prostitution, money laundering, and other stigmas of the casino industry are not new either and Spain, like the rest of Europe, has strict anti-gambling laws although casinos are legal and numerous.
“Spain should impose conditions. They have to attract higher value-added tourists,” says Gayle Allard, a managerial economic professor at IE Business School in Madrid. “Make sure EuroVegas doens’t look like the worst of Vegas.”
Opposition against the project has also been building as officials admitted in the past two weeks to be involved in advanced negotiations, despite getting close to no public input. Spain is in dire need of investment and job creation – but at what price, many ask.
“They are keeping negotiations secret. They never asked anyone’s opinion. Even after we asked, they haven’t told us anything,” says María Fernández, a spokeswoman of the EuroVegas No! initiative. She was one of a dozen protesters delivered a letter Wednesday to Madrid officials demanding the project be scrapped.
“I believe Adelson really wants to build EuroVegas, but this can unwind at any moment,” Dr. Sala i Martín says. “He’s asking for exceptionality that shouldn’t be granted. But if the government’s desperation is such that it will bend laws for him, than yes, this could actually happen.”
Perpetuating a broken economic model
The bulk of Aldelson’s job-creation proposal would be in the construction and tourism sector, mostly as low-income jobs – precisely the kind of economic model that led Spain to the economic pain it’s now enduring.
When a real estate bubble burst in 2008, leaving millions of workers without a job, the economy simply couldn’t absorb the suddenly unemployed workforce without a substitute industry.
Critics say Adelson’s proposal reinforces an unsustainable economic model and adds insult to injury because it includes a request for tax and social security exemptions.
“Jobs and investment are not worth what they want in return,” Ms. Fernández says as she passes out flyers in Madrid's main plaza, Puerta del Sol. Could she be persuaded with more information though? “No. This is not the economic model we need. We don’t want a Sin City here. We don’t want Adelson’s money here. The entire project is intolerable.”
But some economists disagree. “You have to be realistic. In the short term, what do you do?” asks Dr. Allard. “Spain should grab anything to create jobs. If you can get someone to come in, while economy gets back on its feet, it’s a fiscal stimulus in itself.
“Besides,” Allard adds, “nobody is going to come and say they’ll hire 300,000 to build high technology industries.”