Castlefield Stock Story - MercadoLibre

Our recently launched TM Castlefield Thoughtful World Equity Fund aims to invest in the best companies in the world wherever they are located and, alongside holdings in large American companies such as Apple, Microsoft and Visa is MercadoLibre, which can be described as a combination of Amazon, eBay and PayPal for South America. A major enterprise, MercadoLibre vies with the Brazilian energy company Petrobras[1] for the title of largest company by market capitalisation on this vast continent.[2]

Founded in 1999 by the Argentine Marcos Galperin as a peer-to-peer retail platform, MercadoLibre, which translates as “free market,” is the pre-eminent online commerce ecosystem in Latin America, based on the number of website visitors and orders processed and it is also one of the region's leading financial technology (FinTech) platforms.

the pre-eminent online commerce ecosystem in Latin America

The company is based in Montevideo, Uruguay and operates in eighteen countries including Argentina, Brazil, Mexico, Colombia, Chile, Colombia and Peru. Latin America and the Caribbean countries have a combined population of more than 660 million[3] as well as an established but still growing internet infrastructure, so there is plenty for MercadoLibre to go at. For example, the population of Brazil is around 212 million[4], while nearly 132 million people live in Mexico.[5]

The company operates MercadoLibre Marketplace, an online commerce platform that can be accessed through a mobile app as well as the website. It also operates Mercado Pago, which offers a full suite of financial technology services to users of its e-commerce platform.

MercadoLibre Marketplace provides buyers and sellers with a safe and well-organised trading environment which has helped to build a large e-commerce community in Latin America. Mercado Pago offers users a full range of financial services. For individuals, these include a digital bank account with a debit card, online payments, insurance, savings, investments and credit lines. Customers can access their accounts through a widely available mobile app, which works with digital wallets. For retailers or merchants, Mercado Pago offers online and physical point-of-sale “tap-to-pay” terminals as well as a digital account.

The company operates Mercado Fondo, which allows users to invest funds deposited in their Mercado Pago accounts; Mercado Credito, which grants loans and obtains different funding alternatives and Mercado Envios, which facilitates the shipping and delivery of goods from the company and from sellers to buyers.

In addition, the company provides MercadoLibre Classifieds, where users can buy and sell vehicles, properties and services; Mercado Ads, an advertising platform which enables retailers and brands to promote their products and services on the platform and Mercado Shops which allows users to set-up, manage, and promote their own online stores.

From a sustainability standpoint, MercadoLibre is a strong performer. The company’s Ships in Original Container (SIOC) programme is proving successful, with 18% of products now leaving MercadoLibre’s logistics centres in just their original packaging, helping to cut down on waste by eliminating double packaging.[6]

From a sustainability standpoint, MercadoLibre is a strong performer

On the social side, the company works hard to widen consumer access to credit and digital finance, with total loans issued now worth more than $24 billion. In Argentina, Mercado Pago introduced an option for users to collect their social security benefits digitally, reducing dependency on cash and increasing access to financial services. At present, 85% of new app users generate a financial return on their cash balances and 60% of small traders report that Mercado Pago provided them with access to loans for the first time in their lives.[7]

Over the last 25 years or so, MercadoLibre has successfully built the leading e-commerce platform and Fintech business in Latin America. The continent remains a significantly under-penetrated market for digital finance, credit and debit cards and other basic financial products, presenting MercadoLibre with an outstanding opportunity. MercadoLibre has increased sales enormously over the last two decades and this exceptional business performance has delivered fantastic returns for shareholders. Given the size of the opportunity in South America, there should still be plenty of upside in the share price for long-term investors like us.

Written by David Gorman