The sands run out

US casino operator Sheldon Adelson's decision to abandon plans to build Europe's largest gambling and leisure complex in Madrid will have political repercussions, possibly even threatening the Popular Party's two-decade control of the capital's regional government, currently headed by Ignacio González. Last Thursday, Sheldon's Las Vegas Sands Corp (LVS) said in a statement that after months of continuing talks with the regional and central governments, and on the basis of an in-depth analysis, it would not be presenting a formal investment offer of $30 billion to build and develop a series of resorts in the Madrid dormitory town of Alcorcón.

"While the government and many others have worked diligently on this effort, we do not see a path in which the criteria needed to move forward with this large-scale development can be reached. As a result we will no longer be pursuing this opportunity," Adelson said in the statement. The project included 12 hotels with 36,000 rooms, six casinos, golf courses, shopping malls, a convention center, bars and restaurants. The initial investment was estimated at around six billion euros (going up to 17 billion by the completion date) and it was going to create 25,000 construction jobs and 75,000 more in the services sector.

Adelson, aged 80, is the world's 15th-wealthiest person, and has established a multi-billion-dollar gambling empire, with casinos in the United States and the Far East, where his activities have been linked by the authorities to organized crime.

The magnate said in February 2011 that he required the government's help to develop his plans for a casino in Alcorcón. In the fall of 2011, LVS began talks with the Socialist Party administration, with then-Industry Minister Miguel Sebastián coordinating the negotiations. After the PP won the elections in November of that year, the new trade minister, Jaime García-Legaz, oversaw the negotiations.

Adelson wanted changes to Spain's labor and immigration laws, as well as exemptions to Social Security contributions, along with a multi-million loan from the EU. New Metro stations and commuter train routes would have to be built, and a nearby garbage processing plant moved further away. He also wanted state-owned land to be given free of charge, while minors would be allowed into the casino, and smoking permitted. At the same time, Spain's money-laundering laws would need to be changed.

Madrid City Hall, then under the mayorship of Alberto Ruiz-Gallardón, did not oppose the project publicly, but made sure that it would not happen in the city proper. For a while, Barcelona and Madrid competed against each other for the privilege of being home to Eurovegas. The conservative PP had initially hailed the development as a much-needed boost to the Spanish economy that would bring jobs and wealth to the region.

González inherited the project from his predecessor, PP veteran Esperanza Aguirre, who stepped down in September 2012 after nine years in office. The collapse of the deal is yet another blow to González, whose popularity rating within the party, and among the electorate, is at a low ebb. Among the first things he did after taking over was to cut the region's budget by 2.7 billion euros. The central government has imposed a deficit target of 1.5 percent of GDP on all regional governments.

The head of the regional government also ran into problems with the central government after LVS insisted that the law would have to be changed to allow for smoking in the casino. LVS also wanted lower gambling taxes and guarantees of financial compensation in the event of future legislative changes. Finance Minister Cristóbal Montoro also opposed the financial conditions demanded by Adelson's company.

With just 18 months to go before regional elections, and with little to show for his time in office, González doesn't even know whether he will be his party's candidate to continue running the Madrid region. As if he didn't have enough on his plate, his plans to privatize six of the capital's hospitals have been blocked by the courts.

González was always skeptical about the viability of the casino plan, which was first unveiled in 2007, while the previous, Socialist Party, administration was in office. Sources in the PP say that Aguirre pushed the project ahead, the former premier claiming at one point that Adelson had "fallen in love" with Madrid. She invited Adelson — who is a regular donor to the Republican Party — to weekend visits to one of her several homes.

Adelson met with González soon after Aguirre stood down as regional premier — although she remains the head of the regional party — to determine whether he too supported the project. Adelson may not have enjoyed the same rapport with González as he did with Aguirre, but he appreciated the former's efforts to provide financial incentives, along with other measures that González approved at the end of last year.

In Thursday's statement, LVS thanked the regional government of Madrid for "working continuously on this opportunity with the interests of the Spanish people in mind. They should be praised." Indeed, González pressed on throughout this year, trying to square the circle with the European Union and the central government. Mariano Rajoy met with Adelson on three occasions, with the prime minister saying at Easter that he would meet the gambling magnate's demands. But it was clear that the talks with LVS were not moving forward, and by September González and Rajoy were at loggerheads. The regional government issued a statement calling on Rajoy to resolve the legal problems holding up the project.

At the last meeting between the Spanish government and LVS, officials said that Spain was not willing to accept the company's conditions. Sources close to the talks say that some of the conditions imposed by Adelson were laid out at the last minute, and were unprecedented in any other of the countries where LVS owns similar mega-resorts. Providing compensation for future legislative changes, thereby guaranteeing the company's profits, would have violated European competition laws. But company officials said the conditions were not negotiable.

Speaking on Friday after the weekly Cabinet meeting, Deputy Prime Minister Soraya Sáenz de Santamaría said: "New conditions were put forward concerning taxes and legal protection that could not be accepted," adding: "The government needs to preserve the general interests of all Spaniards."

After initially supporting Adelson's plans, the opposition Socialists decided to come out against the project, warning that if they took control of the capital region, they would overturn any deal.

González was dealt a bad hand, while Adelson may well have overplayed his. The winner in this high-stakes game would appear to be the Socialist Party, which in the run-up to the municipal elections of next year, and then the regional poll in 2015, will surely harp on the regional government's handling of the affair, which comes on top of the failure of the PP-controlled City Hall's third consecutive bid to attract the Olympic Games to Madrid.