Brazil's Supreme Court temporarily has extended welfare payments for low-income Brazilians, delivering a major boost for Mercado Libre, the largest e-commerce and online payments provider in Latin America. That helped MELI stock rise Monday, along with a World Cup victory for Mercado Libre's home nation of Argentina.
Late Sunday, the Brazilian court granted an injunction that removes a 600-real monthly allowance from the nation's constitutional spending cap. It extends payments for low-income families into next year.
Removing the spending cap was a win for President-elect Luiz Inacio Lula da Silva. It also was a key part of his planned constitutional amendment, and allows him to fulfill a major campaign promise.
The decision weakened the real currency against the dollar Monday, trading around 5.3 real per U.S. dollar.
Mercado Libre's Markets
But Buenos Aires-based Mercado Libre generates roughly 55% of its revenue from Brazil. It reported $3.9 billion in sales in the country for fiscal 2021. Mercado's home nation of Argentina represented 22% of its sales and $1.5 billion in revenue last year, FactSet data shows. The welfare extension could help Brazilians continue spending through the holiday season.
Meanwhile, Argentina will likely see a slight economic boost from their World Cup victory on Sunday. World Cup winners tend to see a 0.25% increase in economic growth in the two quarters following the tournament, according to the University of Surrey. More immediately, there should be a slight uptick in spending as Argentines take to the streets to celebrate their third title.
Mercado Libre averaged 55% revenue growth over the last four quarters, leaping 45% to $2.69 billion in the third quarter. Meanwhile, earnings rebounded from a loss of 92 cents per share to a gain of $2.56 per share last quarter, rising 33% for the most recent period.
MELI stock jumped nearly 4.8% to close at 884.27 Monday. Mercado Libre stock is down roughly 34% so far in 2022 as inflation hit nearly 100% in Argentina this year.
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