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The First of Many One-Pagers: MercadoLibre - The Goliath of Latin America

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Written by   6
1 month ago
Topics: Economy, BTC, Market, Finance, Business, ...

I first stumbled upon MercadoLibre back in early-2019, when the shares were trading around $500/share. Around May of that year, it was announced that major global investors including Visa, MasterCard, and PayPal had provided $750M in funding for the Latin American e-commerce-focused platform. Whenever the big boys get involved, I pay attention, because they have insider information and generally have a better understanding of the financial side of the business than most. At the time, I didn’t realize how incredible the business was. In the early days, MercadoLibre provided a platform that connected merchants with customers, in other words, sellers with buyers. Hailing from the United States, I’d watched as Amazon grew into the behemoth that it is today, controlling upwards of 50% of all online commerce in the country. While I am not a fan of Amazon’s policies, I did respect the process of how the business was built from the ground up. Bezos saw the benefits of putting growth at all costs above traditional metrics that investors treasured, like earnings, for example.

Amazon went years without turning a single profit, and Wall Street seemed to punish them for it, with Amazon’s share price not appreciating with their exponentially-growing business. Fast-forward to the present, and MercadoLibre is following the model Amazon set forth. They have put earnings on the backburner while they push full-speed ahead into becoming the go-to platform for e-commerce, mobile payments (both on- and off-platform), merchant services (including credit and small business financing), and logistics for the Latin American region. Now, I cannot stress this enough when I say that MercadoLibre is an integral part of commerce in the region today. Not only have they developed their own distribution network, connecting once-isolated areas of the region with each other, but they’ve also managed to do what was once thought to be impossible: they have enabled customers to purchase goods online using paper cash through their proprietary payments service, MercadoPago.

I suspect that MercadoPago is what attracted Visa, MasterCard, and PayPal to become investors in the first place. Those 3 payments goliaths dominate the globe. With hundreds of millions of users, it was only natural to swoop in to an under-penetrated region and insert themselves as the financiers of the biggest growth company in Latin America. With MercadoPago, customers are able to order online, and then travel to any of MercadoLibre’s service locations and pay in cash, in person. This is a revolutionary concept for a region that depends on cash for much of the economy. Unlike the United States and Canada, credit cards have not taken Latin America by storm, especially in its largest target market of all: Brazil. While that is now changing, there are still hundreds of millions of people who will benefit from the growth and development of MercadoLibre. Enabling people anywhere in the region to buy and sell goods and services on a digital platform allows for cross-border trade like never before.

The most important thing that I believe you should take away from this article, is simple: MercadoLibre is growing their revenues across each market at triple digits, quarter after quarter. The growth is exponential, and the opportunities only continue to stack up, with their recent partnership with BigCommerce, MercadoLibre’s merchants and customers can now engage with the United States’ gigantic retail market. This will only continue to open the doors for future partnerships and even more growth.

Wall Street analysts have largely ignored Latin America, because of fiat currency value fluctuations, political instability, and a lack of understanding of how business operates in the region, but I don’t think that ignorance will last forever. What people care about most, is to see vital infrastructure being built across the region, opening doors that didn’t exist a mere two years ago.

This is why I call MercadoLibre the Goliath of Latin America.

As always, none of this is investment advice. Always do your own research, and always verify information that you read online.

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