Gambling Magnet for the Rich or Money Pit?

A once-glorious casino attempts a major makeover.

MONTEVIDEO, Uruguay, Oct. 30, 2008— -- At 4 a.m., the Tupamaro guerrillas stormed into the Carrasco Casino Hotel, packed away bundles of pesos and then dashed to their urban hideouts, weighed down by $330,000, money to finance their revolution.

That was in 1968. The casino has not seen as much action anytime since.

But this fall, after decades of neglect, Uruguay's capital city, Montevideo, will take a big step in recapturing the municipal casino's lost grandeur, selecting a company to restore the historic building and open the country's most luxurious gambling spot and resort.

That vision, to install a glitzy patch of Las Vegas in this sleepy South American capital, is designed to lure high-flying tourists whose private jets now land in Brazil and Buenos Aires but have yet to touch ground in tiny Uruguay.

City officials will announce the winning bidder by November, and the redesigned hotel and casino is expected to open before the summer of 2010. Two U.S. companies, Hyatt and the InterContinental Hotels Group, have submitted bids, along with the Portugal-based Pestana Hotel Group and the French company Accor, which hopes to open a hotel under its luxury brand, Sofitel. The restoration is expected to cost as much as $60 million.

"We want a hotel of the highest level. We're talking about tourists with a lot of purchasing power," said Jorge Rodríguez, a top adviser to Montevideo's mayor, Ricardo Ehrlich. "We are convinced that Montevideo is an appealing tourist destination. We're not going to compete with Rio de Janeiro, but it has attractions."

The Carrasco Casino Hotel used to be the top attraction. In the 1940s and 1950s, when high prices for Uruguayan beef and wool exports boosted per capita GDP to the levels of Italy and France, the hotel's gambling parlors, terraces and restaurants became high-society hangouts. The beaux arts structure, completed in 1921 on the Montevideo waterfront, helped give birth to what has since become the city's ritziest neighborhood.

Casino Troubles

The casino, however, hit a string of bad luck. In the late 1950s, Uruguay's golden age ended abruptly, converting the "Land of the Fat Cow" into a maelstrom of runaway inflation, labor strife and guerrilla warfare. In 1973, a military coup turned Uruguay, the "Switzerland of South America," into a brutal police state.

Uruguay recovered its democracy in 1984 and more recently achieved economic stability. The prison in Punta Carretas that once held Tupamaro guerrillas is now a shopping mall.

Despite the U.S. economic meltdown, Uruguay's economy grew 13.1 percent in the first half of the year, according to central bank data. Unemployment is down to 7.6 percent from a high of 17 percent during the 2002 regional economic crisis. Tourism reached 2.3 million in 1999, up from 491,000 in 1976, according to government figures. Earlier this month, the National Institute of Statistics said poverty had decreased by 4.7 percent in the first half of the year.

But the Carrasco Casino Hotel never reclaimed its mid-century glory. Today, the regal building is ringed by a 12-foot-high, corrugated metal fence.

Like Uruguay's historic railroad terminal, built by the British in downtown Montevideo, the casino complex's hotel is abandoned, the sea views from the upper floors obstructed by dusty, shattered glass.

The ground-level casino is still open, but its rusty entryway and stained carpeting give little hint of its rich past. On a recent Thursday afternoon, the game rooms were empty, except for a few locals leaning over a roulette table lit by a bronze chandelier or slumping at a bank of 10-cent slot machines with names like "Neon Nights" and "Cleopatra."

Last year, the casino brought in only $60,000, making the $540,000 generated by the decidedly low key, city-owned Parque Hotel casino -- attached to the headquarters of the Mercosur regional trading block -- seem like a windfall.

"It's an embarrassment," Rodriguez said. "In one of the most attractive neighborhoods in the capital, an entrance to the entire city, you find a building in terrible shape."

Socialist Government Seeks Private Help

That Montevideo is ready to put the casino in private hands is itself a sign of its desperation. Uruguay, led by Socialist President Tabare Vazquez, is known for its state enterprises. The federal government operates the national electricity monopoly; water utility; oil refinery and most gas stations. It also controls the country's fixed telephone lines and competes in the mobile phone market.

Several of the federally owned casinos are managed by private companies, such as Maronas Entertainment. But only one, the 296-room Conrad Resort & Casino in upscale Punta del Este, has been fully privatized, according to Rodríguez.

City officials, however, said they have neither the bankroll nor the expertise to turn Montevideo into Monte Carlo. Though the plans submitted by the bidders are private, the proposals are expected to be extravagant. Employment at the complex, for example, will likely jump from 50 city workers to a staff of as many as 500.

Hyatt, backed by Argentine investors, has offered to open 102 rooms and suites, a 27,000 square-foot casino, a spa, a restaurant and at least 5,000 square feet of event space for conferences, Myles McGourty, Hyatt's senior vice president for Latin America, said in an interview.

"It's going to back to the old glamorous casinos," he said. "It's going be a high-end gaming facility with a focus on table games."

The city government, which has about a $300 million budget, has asked for a $1 million annual fee from the casino operator and a share of revenue. That second component will vary in each proposal and play a part in the final evaluation, along with architectural design and business plan. (In preliminary results just released, the panel reviewing the proposals appeared to be favoring Accor, according a leading Uruguayan newspaper, El País.)

Attracting the Jet-Set Crowd

The leftist party that governs Montevideo, home to about half of this country's 3.5 million residents, said that all earnings from the casino will be funneled to poor neighborhoods. But city and federal officials have a higher hope for the project: putting Montevideo on the jet-setter's radar.

That might be a big gamble. Uruguay has always been overshadowed by its giant neighbors, and Montevideo's reputation as a safer and calmer Buenos Aires has not persuaded many European and American tourists to add a stop across the Río de la Plata to their holiday itinerary.

About a hundred cruise ships stop in Montevideo annually, a third from the United States, according to the Ministry of Tourism. But most passengers who come ashore do little more than feast on barbecue at the Mercado del Puerto or hop on a tourist train to a nearby vineyard. Meanwhile, Brazil and Argentina still account for more than two-thirds of visitors to Uruguay, leaving the country dependent on its beaches and hot springs for tourism earnings.

Two previous attempts to recruit private investors for the Carrasco Casino Hotel failed. The first, in 1997, was quashed by the city council; a later effort was undone by the 2002 economic crisis. Meanwhile, the biggest spenders in Uruguay continue to congregate in Punta del Este, known as the South American Riviera.

But city officials said there is reason to believe the new project could change all that. Montevideo has several luxury hotels, including the Punta Carretas Sheraton and the Radisson in the Plaza Independencia downtown. But none offer the opulence, entertainment and dinning options that keep the Conrad, in Punta del Este, hopping all summer long.

Big-Money Gamblers

"We want a more Mediterranean-style casino," Rafael Mendive, secretary of Montevideo's Commission for Projects and Investment, said. "We want high-income gamblers."

The Carrasco Casino Hotel is only five minutes from the country's international airport, where nonstop flights from Miami now land several times a week and a new terminal is expected to open by year's end, in part to accommodate increased business and diplomatic traffic.

In addition to the Mercosur -- located by the U.S. Embassy along the Rambla, the riverside promenade -- Montevideo also hosts the headquarters of the Latin-American Integration Association.

McGourty, the Hyatt vice president, said Uruguay is a safe bet. The company is invested heavily in the region, having restored several historic buildings in South America. Hyatt owns hotels in Santiago, Chile, Mendoza and Buenos Aires, Argentina and in Sao Paulo, Brazil. The Montevideo Hyatt would be branded the Carrasco-Park Hyatt Montevideo, Hotel, Casino & Spa.

"We see Montevideo as a growth area from both a business and tourism point of view," McGourty said. "There is nobody operating on our level right now. It'll really be a huge attraction, putting Montevideo further on the map."

Benjamin Gedan is a Fulbright research scholar studying the Uruguayan media. He has reported for The Boston Globe and The Providence Journal newspapers, writing about state politics, economic development and technology. He has also reported internationally, writing from Ghana, Mexico, Uruguay, Paraguay, Panama and Belize for publications that include The New York Times, the San Francisco Chronicle and The Miami Herald. He studied International Relations and Latin American politics at Tufts University. Check out his blog here.