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Mercado Libre Launches U.S. Dollar-Tied Stablecoin in Brazil Amid Economic Growth

2024-08-23 19:42:48.299000

MercadoLibre, the e-commerce and fintech giant, has reported a significant increase in profits for the first quarter of the year. Despite the impact of Argentina's currency devaluation and economic crisis, MercadoLibre saw its net income rise by 71% compared to the previous year, reaching a total of $344 million. The company's revenue also grew by 36% to $4.3 billion. While the devaluation of the Argentine peso affected MercadoLibre's local business and consumption, the company was able to offset this with strong growth in Brazil and Mexico. Gross merchandise volume reached $11.4 billion, and the loan book increased to $4.4 billion. MercadoLibre plans to add 18,000 jobs this year, with a focus on Mexico, and investments in Brazil are expected to grow by 21% to $23 billion. The company remains confident in its underwriting capabilities and continues to expand its customer base.

In a significant development, Mercado Libre launched the 'Meli Dollar', a U.S. dollar-tied stablecoin, in Brazil on August 23, 2024. This stablecoin, introduced via its subsidiary Mercado Pago, allows users to buy and sell using Brazilian reais without fees. The launch aims to enhance financial management amid ongoing economic volatility. Mercado Libre's previous introduction of Mercado Coin and its integration of blockchain for cryptocurrencies have paved the way for this new initiative. The partnership with Ripio, a Latin American crypto company, is crucial for the stablecoin's success, facilitating cross-border transactions and offering a reliable alternative to traditional currencies. This launch signifies a new era for Mercado Libre and Latin America's financial landscape, potentially inspiring further fintech innovations.

Falabella, a Chilean retailer operating across Latin America, has also reported a net profit of 58.50 billion pesos ($59.55 million) for the first quarter. The profit was driven by an operating profit from its Peru unit. Revenues for Falabella increased by 4% to 2.86 trillion pesos, largely due to the foreign-exchange effect of the weaker Chilean peso. The company saw increased visits to shopping centers and reduced its inventories by 11% in the quarter. Its loan portfolio gained 1% year-over-year, though delinquent payments rose slightly to 4.4%. Core earnings for Falabella more than doubled to 296.95 billion pesos. Despite the economic challenges in the region, both MercadoLibre and Falabella have demonstrated resilience and profitability in their respective sectors.

Macroeconomic conditions are improving in Latin America, and as a result, the analysts at Fitch Ratings are bullish on the sector there. Stable inflation and gradually declining interest rates will benefit the sector this year. Increased competition from pure online retailers has led traditional retailers to defend market share by focusing on enhancing their product offerings, elevating service levels, and improving the overall shopping experience. Retailers in Latin America are striving for a more balanced strategy between growth and profitability when executing digital strategies. Merchants are demonstrating increased prudence with their capex, directing their investments toward optimizing logistics and bolstering the long-term value of customer relationships. Merchants in Latin America kicked off 2024 with better inventory levels after paring back their purchases during 2023. Inventory management continues to be key to preserve profitability despite these more efficient inventory levels. International debt markets continue to be volatile as the global macroeconomic environment and geopolitical risks disrupt stability. Some of the top retailers in Latin America include FEMSA Comercio, Grupo Comercial, Organization Soriano, and Grupo Coppel in Mexico, Cencosud and Falabella in Chile, and Natura & Co. in Brazil. In Mexico, Walmart de México y Centroamérica, also known as Walmex, dominates the market with more than 2,800 stores, 300 Walmart Supercenter units, and 167 Sam's Club stores.

According to a report by eMarketer, digital advertising in Latin America is projected to reach $22.25 billion in 2024, driven by double-digit growth in video and retail media ad spending. Brazil and Mexico's improving economic conditions will contribute to the region's ad market growth, while Argentina and smaller markets like Peru may experience contractions. Digital's share of total media ad spending in Latin America is expected to exceed 50% in 2024, with Argentina and Chile reaching this milestone for the first time. The report provides charts and data on total media ad spending, digital ad spending, digital vs. traditional media ad spending, and more.

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