Crushing Losses for Codere in 2019

In a new statement, Spain’s major gambling operator Codere revealed losses of close to €62 million in 2019. Analysts cite the weakened market in Latin America, where Codere holds many locations, as well as prolonged and severe internal struggles for Codere necessitating an extensive audit last year. The operator had been working throughout 2019 to offset some of their losses, enhanced by massive currency devaluation in Argentina, but struggled after finding corrupt activity in their Mexico, Panama, and Colombia locations.

A busy street market in San Nicolas, Argentina.

Codere officials cite the devaluation of the peso in Argentina as a source for their financial woes in 2019. ©Rafael Guimarães/Pexels

A Tough Year: Corruption From Within

In October of 2019, officials at Codere, a major gaming company based in Spain, were likely horrified to learn that significant financial inconsistencies were being reported from their locations in Latin America. At the time, Codere officials didn’t know where the fraudulence was coming from or for how much.

Following the discovery that Latin American offshoots of Codere could have been overstating accounts by up to €18 million (about $20 million USD), a massive audit of the company was prompted, with particular focus on their locations in Mexico, Panama, and Colombia.

The period of time immediately following this reveal seemed to be a humbling one for Codere. The director of Codere during the discovery, Alberto Manzanares Secades, resigned from his post suddenly and — according to company spokespeople — for reasons wholly unrelated to the scandal.

Further investigation found that the manager of Codere Mexico had been responsible for the fraud, and it was hit with €14.8 million (about $16.4 million USD) in losses. Codere Colombia came in a distant second at losses of €1.3 million ($1.4 million USD), while Panama was responsible for €400,000 (about $444,480 USD).

Making Matters Worse: Financial Strain in Latin America

What came as no help at all in the face of significant financial fraud on the part of Codere insiders was the ongoing financial struggles in Latin America, particularly Argentina. The end-of-year report shows a decrease of €90.5 million euros in Codere’s Argentina income for 2019, the equivalent of about $100.5 million USD.

These losses ultimately contributed to Codere’s annual revenue, which came in at a loss of 5.9% from the year before. In total, the company made €1.39 billion (about $1.5 billion USD) for 2019. The company cited the Argentina losses as a central factor in the diminished statistic, and adjusted earnings for Codere fell 12% for the year.

Why The Argentina Strain?

The economy in Argentina has been severely challenged since August of 2019, a time just prior to an election where the value of the national currency, the peso, plummeted in relation to the US dollar. In response to the currency devaluation, the national stock market took a significant hit, falling 30%.

Following the primary election in Argentina, held in August alone, Codere stocks fell from €3.64 to €3.25. As elections continued through the fall of 2019, the economy continued to stutter as the country shifted in a radical and unexpected win of the country’s left-wing party.

Moreover, and what would be uniquely challenging to a company like Codere, is that the election of left-wing politicians threatens the future of gambling across Argentina, as the country’s left faction (much like the left faction in Spain) disapproves of gambling and worries for the possibility of addictive behavior.

And Codere would not be wrong to worry: in November of 2019, officials from Buenos Aires, Argentina’s capital province — which tends to set the trends nationwide — made several significant laws regarding gambling. The first prevented players in Argentina from using foreign credit cards in casinos.

According to officials, that decision was made to crack down on the black market sale of pesos for “cheaper dollars,” but it effectively also cracked down on gambling establishments, in both brick-and-mortar and online forms. The law also prohibited players in Argentina from using their cards to gamble on international iGaming sites.

Next came a major announcement from Buenos Aires officials at SAGSE, a massive international gaming conference held in Argentina’s capital annually. Officials took the stage to announce a new decision regarding the province’s lottery.

At SAGSE, the officials announced that all lottery activities for Buenos Aires would be regulated by state-run organizations. This effectively put close to 1300 local privately-owned gambling institutions out of business. What’s more, officials reiterated the illegality of online gaming in Buenos Aires.

Codere: Making Proactive Moves for 2020

It’s likely that the existing financial strain for Codere, incurred by the struggles in countries like Argentina, was exacerbated by last year’s fraud — not merely for the outstanding debts to be paid, but also for the significant PR blemish it left on the company’s reputation, which had struggled with similar behavior before.

Still, it seems that Codere is making moves to get back on its feet for 2020. Following the scandal, the company was granted two new credit lines, which representatives from Codere announced would be used to bolster operations in Uruguay and Mexico. The credit lines equal about $40 million USD.

Codere has also announced a new partnership with MGA Games for their Colombia locations. The company is also reportedly in talks to sell off their locations in Uruguay, which some have speculated they will sell to Sun Dreams.

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