Askume Brasilia, Sep 20 – Radical Brazilians are curiousOnline sports betting has generated keen interest among foreign bettors , which could add to state coffers but also drain money from consumer spending in other sectors.
Consumer spending in Latin America’s largest economy has grown less than expected in recent months, with some banks and think tanks blaming gambling for the weakness. The link echoes data from some US states hit by a boom in online gambling.
Gabriel Garipolo, the incoming president of Brazil’s central bank, also expressed his views.
“Even the major banks are discussing why recent income growth is not reflected in an increase in savings or consumption, and it may be leading to this type of activity, gambling,” Garipolo said at a seminar last month.
The boom of online gambling in Brazil highlights a profound economic shift that may be driven by the widespread popularity of gambling and by global policymakers.There is a need to walk a tightrope while avoiding difficulties in terms of tax revenue gains.
The gambling industry disputes the impact of gambling on consumption and insists the drop in spending is due to the COVID-19 pandemic that has kept people confined to their homes for two years.
“The retail industry is using gambling as a scapegoat,” said Luiz Felipe Maia, a lawyer who represents more than a dozen gambling companies in Brazil. He said one of the safeguards included in last year’s law setting rules for fixed-odds sports betting was a ban on the use of credit cards for betting.
Brazilians spent 68.2 billion reais ($12.2 billion) on foreign gambling platforms through June, according to an analysis by bank Itaú Unibanco based on central bank data. That would put it among the top six sports betting markets in the world.
“Stop living”
The Brazilian government hopes to receive a down payment of 3.4 billion reais for license applications before it can tax the gambling industry. Despite these achievements, there are also signs that the gambling boom has siphoned money from the real economy.
Diego, a 38-year-old factory worker in Sao Paulo who became addicted to sports betting and later online slot machines, said his losses reduced his wages and put him permanently in debt.
“In the beginning I made a lot of money gambling, but then I stopped winning. I couldn’t pay my credit cards, basic household bills and rent,” he said, asking to hide his last name.
“I almost stopped living.”
Alarmed by Brazil’s addiction to sports betting, the government took steps to limit advertising time and children’s exposure. Consumer surveys show that Brazilians are betting money they would normally spend on other goods and services.
According to a recent Santander report, household gambling spending as a share of income rose to 1.9% this year, double the level of 2018. At the same time, household income spending on food, clothing, electronics, beauty products and medicines fell from a high of 63% to 57% in 2021.
Another study by PwC consultants Strategy&, based on the National Household Income Survey, showed that gaming will account for 38% of entertainment budgets by 2023, up from 10% in 2018.
According to the Locomotiva Institute, a consumer research center, 79% of gamblers are from the low-income group who are already having difficulty paying off their credit card debt.
“This money would normally go to neighborhood shopkeepers and boost the economy from the bottom up,” said Renato Meirelles, the institute’s director. “Now it’s being swallowed up by speculation, and not entering the real economy.”
Investors’ craze
Online sports betting in Brazil began in 2018, but the government only started regulating the activity last year. It forces multinationals to set up base in the country, register and pay corporate tax. The deadline for registration is August 20 and there is excitement about registration.
Among them are Betfair Flutter Entertainment (MGM.N ), owned by Sweden’s Betsson AB (FLTRF.L ) , which also includes MGM Resorts International, and Caesars Sportsbook ( BETSb.ST ) , the United States’ largest casino entertainment company.
Andre Gelfi, general manager of Betsson Brazil, said: “Brazil is a truly emerging market, with a population of 200 million people who love sports and betting. That’s why investors are so interested.”
Brazil is not the only major world economy experiencing the tug-of-war between the positive and negative impacts of online gambling.
The US legalisation of online betting after the Supreme Court overturned the ban in 2018 had a negative impact on average credit scores, according to a study led by UCLA professor Brett Hollenbeck.
Three to four years after legalization, households were 25 to 30 percent more likely to file for bankruptcy, the report said.
Another study, “Gambling Destabilizes Life,” conducted by economists from the University of Kansas, Northwestern University and Brigham Young University, states that for every dollar spent on gambling, the equivalent of $2 is cut from savings by financially strapped families, with credit card debt increasing by 8%.
