MercadoLibre: Mercado Pago Seeks Banking License in Mexico

No anticipated short-term credit impact, but rather a continuation of the positive credit story in Mexico.

MELI’s strategic move to engage in discussions with Mexican authorities to establish and operate as a Multiple Banking Institution is a promising development. This initiative not only aims to broaden the range of products MELI offers in the country but also holds the potential to tap into a large unbanked population, presenting a ripe market for fintech companies like Mercado Pago to provide comprehensive online banking services.

While Mercado Pago operates in Mexico under an IEPE fintech license, a banking license would enhance its current offerings. It would enable the company to accept payroll deposits and eliminate restrictions on the amount it can hold, opening up new avenues for growth.

Impact on the credit story

Given the growing opportunity potential, the decision to engage with Mexican authorities aligns perfectly with our expectations that MELI would concentrate to some degree in Mexico.

This strategic move is not an isolated event but a part of a larger plan. In May 2024, MELI opened its first fulfillment center in Texas, US, allowing US sellers to offer their products to Mexican buyers in the company’s marketplace. In April 2024, it announced its plans to add 8,200 new jobs in the country, further solidifying its commitment to the Mexican market.  

Given that the news aligns with our expectations, we do not see a short-term credit impact. However, as MELI operations grow in Mexico in the medium to longer term, it significantly reduces the company’s country risk exposure. This is particularly reassuring given that Mexico benefits from an investment-grade country credit rating considerably higher than MELI’s other key countries, such as Brazil and Argentina, with high-yield ratings.

Furthermore, Mexico’s economy benefits from its trade agreement between Mexico, the United States, and Canada, fueled by global supply-chain reorganization coupled with geopolitical changes, further strengthening the case for investment in MELI.

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