Mercado Libre ($MELI) - South America's Alibaba

[_TeemuHinkula]

@Ituhippinen

Amazon’s Brazil department and Nubank have formed a partnership where NuPay will become a payment option in Amazon’s Brazilian online store. This offers Nubank customers, among other things, access to an additional credit limit and various installment payment systems. And as is customary with Nubank, this is a completely digital operation, requiring no external gadgets like a bank card.

Amazon competes in Brazil with, for example, MercadoLibre, which has its own payment service MercadoPago. Through Nu, an attempt is being made to somewhat complicate Meli’s dominance in the market.

I also got caught up in wondering about this Latin American trend, which is admittedly very interesting.

The competitive situation is interesting in that MELI has, as I understand it, been able to operate relatively unchallenged in a somewhat virgin market, into which these two partners have now entered as challengers. At first glance, one might think this would mean difficult times for MELI, at least in terms of margins, but on the other hand, such an oligopoly situation could act as an accelerating driver for market transformation.

A couple of factors immediately come to my mind:

1. Smartphone penetration in Latin America is apparently around 75% [1], but a similar proportion of the market still relies on the power of cash [2].
2. Two (insanely) large players raise the barrier to entry for the market.

Would the forum’s resident economic historian @Verneri_Pulkkinen like to come and give a lecture on oligopolies? I recall you’ve talked about them in some other context?

[1] Mobile Penetration in Latin America - GeoPoll.
[2] Why Does Cash Remain King in Latin America and the Caribbean? – Inter-American Dialogue.