Sam Badawi
LATAM Macro Impact to NuBank and MercadoLibre | HE Deep Dive 5
1/7/2025, 11:42:42 AM
Economic Summary
- Brazil saw inflation reaccelerate into late 2024 (November reported ~4.87%), prompting the central bank to raise rates from 11.25% to 12.25%, with analysts pricing hikes toward ~14.75% by end-2025; higher rates are depressing sentiment and local currency value.
- Trading Economics forecasts inflation deceleration in 2025 and GDP per capita (PPP) for Brazil, Colombia, and Mexico is projected to trend upward, implying longer-term consumer and credit growth that benefits digital banks and e-commerce (e.g., NU, MELI).
- The Brazilian real's depreciation versus the US dollar and the strong USD rally have driven sizable pullbacks in the Bovespa; a USD retracement could reverse some losses and improve returns for Brazil-focused stocks like NU and MELI.
Bullish
- GDP per capita (PPP) in Brazil, Colombia, and Mexico is forecast to grow, supporting long-term consumer demand.
- Trading Economics expects inflation to decelerate in 2025, which could ease monetary tightening later.
- A potential US dollar retracement would likely support BRL appreciation and a recovery in Brazilian equities.
Bearish
- Accelerating inflation in Brazil and expectations of further rate hikes are weighing on sentiment and credit activity.
- Depreciation of the Brazilian real versus the US dollar has amplified losses for local equities and foreign investors.
- Heavy revenue concentration (≈80%) in Brazil makes Nubank (NU) and MercadoLibre (MELI) vulnerable to Brazilian macro shocks.
Bullish tickers
NUMELI
Bearish tickers
NUMELI
NU
1 price targets
13
Bullish
Large untapped market share (60% of population coverage), growth in deposits/credit, and long-term GDP/consumption expansion support upside.
Bearish
High Brazil exposure (~80% revenue) means NU is sensitive to inflation, BRL weakness, and aggressive rate hikes that hurt sentiment and lending activity.
MELI
2 price targets
20001900
Bullish
Strong regional e-commerce positioning and long runway for payments/marketplace adoption across LatAm support long-term growth.
Bearish
Significant exposure to Brazil and regional macro weakness contributed to recent drawdowns and could pressure results if BRL remains weak.
ITUB
Bullish
Established incumbents may benefit from higher rates and stable deposit franchises over time.
Bearish
Domestic banks can face margin pressure from higher rates and weaker economic activity.
BBD
Bullish
Large retail footprint and recovery in consumer lending could support medium-term improvement.
Bearish
Macroeconomic stress and currency moves can hurt earnings and investor sentiment for Bradesco.
GRAB
Bullish
Referenced to illustrate founder networks and tech ecosystem comparisons.
Bearish
Mentioned only as an example of a Stanford founder; no direct LatAm exposure noted.
People mentioned
David VelezMarcos GalperinWarren BuffettJerome PowellLuiz Inacio Lula da SilvaDonald TrumpChris