This Monday, Goldman Sachs Group Inc. agreed to lend $125 million to Mercado Credito, a unit of MercadoLibre Inc. This deal is the bank’s third loan to a Latin American fintech this year and the biggest ever in Mexico.
According to a phone interview with Mercado Credito SVP Martin de los Santos
, Mercado Credito plans to use this capital to boost its $100 million working-capital portfolio provided to small and midsize companies in Mexico threefold in approximately one year.
The goal is to “democratize financial services,” by lending to firms that don’t have access to other financing, he said (Yahoo Finance
MercadoLibre dominates the Latin American e-commerce market with an almost 25% market share and 40 million unique monthly visitors, as reported by Julie Chariell
, a senior analyst at Bloomberg Intelligence.
According to the company’s financial statements, MercadoLibre’s market value more than doubled this year to $29 billion. Although the e-commerce giant is based in Argentina, roughly two-thirds of its $603 million in third-quarter net revenue reportedly came from Brazil.
As reported by Yahoo Finance
, Mercado Credito was launched in 2016 to provide credit to clients of its parent company and to customers using its online payment platform, MercadoPago, in Brazil, Argentina and Mexico.
“Mercado Credito, which develops proprietary credit-risk models, has granted more than $610 million in working-capital credit lines to more than 270,000 companies in Latin America. It also offered around $200 million in consumer loans.”
The loan from Goldman Sachs won’t be used to finance lending in Brazil, where Mercado Credito raised 245 million reais ($58 million USD) from investors including the Inter-American Development Bank
. The capital will not be used in Argentina, where the firm finances itself in the capital markets, Santos said.
Prior to the Goldman deal, Mercado Credito was using its own capital to finance loans to firms in Mexico.
“We wanted not only Goldman’s capital but also the experience the bank has on this type of transactions throughout Latin American… I hope to work with the bank in the future to finance other portfolios, including consumer operations in Mexico and other markets,” Santos said.
According to Santiago Rubin, a managing director at Goldman Sachs who’s head of technology, media and telecommunications for Latin America, Mercado Credito has a unique way of getting capital flowing to businesses that have traditionally lacked access to financing.
Although higher delinquency rates are a concern for analysts, Santos said he is not worried. The lending portfolio to consumers in Brazil is less than 8% of the total, and brand new, having started only 9 months ago, he said.
reports that Goldman’s loan will be executed through the company’s structured finance, investment and lending business, headed by Ram Sundaram
: the same special-situations group that provided a secured credit facility of as much as $100 million to Mexican fintech Konfío
Ltd. in August. Earlier this year, the group also agreed to provide Mexico’s Credijusto Inc.
with a $100 million facility.
This special-situations group also provided a loan to Brazilian credit-card lender Nu Pagamentos SA
, widely known as Nubank. The loan was of 200 million reais in 2016, and was expanded to 455 million reais in August 2017, in a deal with Fortress Investment Group. The entire loan has been repaid.
“We look forward to keep supporting MercadoLibre across the region as their lending footprint grows,” said Sundaram
, who also oversees the emerging markets and commodities business at Goldman Sachs.