MELI Theory

Hi Everyone,
One of my favorite stocks is Mercadolibre (10.7%). Over the last year, MELI gained about 105%. MELI has 3 main business arms Mercadopago (Latin America’s version of Paypal - and Paypal is an investor in MELI), Mercadoenvios (shipping), and Mercadolibre (Latin America’s version of ebay). The stock had been held back previously due to a strong dollar, get used to currency swings if you like a stock like this, and fears of competition from Amazon. MELI is holding it’s own against Amazon, but the really interesting thing to me is Mercadopago.

Mercadopago grew 94% in currency neutral terms, and there are tons of unbanked people in latin America. I don’t want to sound insensitive, but my view of Latin America (to be fair the state of Wisconsin too) is that there is a lot of corruption. My guess is that if one was to deposit a decent amount of money in a local bank in some countries, then the banker, the mayor, and the chief of police would learn about it. It could be possible to set up some infraction of the law that would separate the account holder from their money in short order. If this is true, then one might get around this by placing money in Mercadopago. It would certainly be safer than under a mattress. Can anyone shed some light on this? Are my thoughts off base?




How do you “place” the money in there? It has to be transferred from somewhere.

To answer your question:

How do you “place” the money in there? It has to be transferred from somewhere.

Mercadolibre has stores that accept cash to be deposited in the Mercadopago accounts.



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I think you’re pretty off base. Money laundering is a thing, and crooks try to avoid putting money in the bank. But it’s not the case that people are afraid of putting money in the bank because they think it will be stolen.

There are a number of reasons why there are so many unbanked in latin america.

  1. Poverty. This, I’m sure, is the biggest reason. When your income is $50 per month, you don’t really need a bank. A lot of people are living hand to mouth.

  2. Taxes. If you put your money in the bank, the government knows about it. The grey market is huge and people use cash when they can so they don’t have to declare income. This isn’t just small items. Most people in my country of residence pay their rent in cash, and landlords ask you to pay extra if you want a receipt.

  3. Inefficiency in the banking system. Dealing with banks is annoying. The bureaucracy is wacky. Not only that, but they may not offer a lot of the products that we may take for granted, such as free checking.

  4. High interest rates. Interest rates are high so people avoid taking on loans or opening credit cards. A mortgage in my country starts at 11%. A car loan starts at 14%. Credit cards can go for 25% if you have AMAZING credit, but for most people you’re looking at 50-60% interest rates.

  5. Its standard for stores to offer payment plans for products they sell. So when you need to pay for a new refrigerator, you get credit through the store and never involve a bank.


Hi Bulwnkl

Yeh I think this is way off base. There’s plenty to be worried about in LatAm from random acts of violence to massive levels of corruption but I think you are thinking about corruption in an amateurish retail kind of way which is the wrong kind of scale.

You have to think big, professionally and systemically if you want to succeed in the corruption business in South America and there’s lots of competition.

When President Christina Fernandez needed money for her regime she didn’t try to nick the odd bank account here and there. She confiscated the entire $30Bn of private pensions savings in one go. Now that’s how to think like a pro! She was personally charged with $160m in missing funds…

Mind you that’s nothing on Najib of Malaysia who redefined the pro stakes in kleptocracy with $billions missing via the 1MDB sovereign wealth fund scandal.

Yes I think there are risks worldwide as far as corruption goes but not the kind you’re thinking of.



Hi BobbyBe,

A mortgage in my country”… where are you from? I really appreciate this 1st hand info. MELI is one of my highest allocations, based primarily on the 3 reasons laid out in this article:…

  1. Growth in the Central/South American middle class - many new people just getting online

  2. MercadoPago growing like weeds, now branching into brick-and-mortar stores.

I’m very interested in your boots on the ground, so to speak. Thanks!

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Thanks. Your points are much appreciated. It’s great to get perspective from one of MELI’s areas of business. What do you think is driving Mercadopago’s growth? If you don’t want cash in the bank to avoid taxes, do you think Mercadopago is considered a safe alternative for the unbanked to store money? With random acts of violence, I wouldn’t think storing cash under your mattress is a good idea. How do people keep their money safe?




For perspective, what you describe is exactly what goes on in certain eastern european countries I’m familiar with. I imagine it’s at least possible some areas of S.A. are the same, even if salaried people in big cities don’t personally encounter it.

Like, a guy with a small spice company I met in e. europe was v scared that any official or policeman might infer that he was profitable, as the official could easily find some excuse to take his entire business from him. (I heard about some guy whose fortune was a roll of leopard skin cloth (always in fashion in certain parts of the world) - they (the police) took that.

How? I dunno, but I do know, from the horse’s mouth, that, the way they get money from restaurants is not threatening to blow them up - although I’ve seen blown-up restaurants in Italy (the police and mafia claim to be at least partially separate, there.) In eastern european restaurants, they threaten to find electrical problems (or dirty spatulas, or whatever.) (The guy I spoke with budgeted about 30% of gross for the police, in case you’re wondering…)

Obviously, ML wouldn’t protect a restaurant (the police could infer profits), but it might protect guys making skin tight leopard jogging pants (or even spice importers).

This might have no bearing in South America, but there is at least the chance it does in areas of society other readers are not familiar with.

It’s a rough world, of which most Americans are blissfully unaware…(having said that, if the way to get cash into the Meli account is in a local store…well, gotta take your chances somewhere, I suppose…)


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Honestly, it’s hard for me to say what MercadoPago’s growth drivers are. The linked fool article sounds right. I think a lot of it may be that MercadoPago offers payment plans for large purchases, so instead of getting a store payment plan, one goes through MercadoPago. Also, even though many people are unbanked, there is also a large segment of the population that is banked but is just now starting to use the internet. These people are happy to spend money with their debit cards. That said, I have one friend with a taco stand who takes cards now through his little device, but still prefers cash because he doesn’t want to worry about taxes.

Also, I think MercadoLibre and MercadoPago are more South America centric. I don’t see MercadoPago really. I might have seen it once or twice. I’ve seen a lot of other card readers out there though. I know a few people who have used MercadoLibre, but let’s just say its still very early days for e-commerce in Mexico.