Latin America’s investment landscape has undergone a dramatic metamorphosis over the past decade. Within the region’s top economies, financial markets are increasingly diverse, domestic consumption is rising and innovation plays a leading role in growth. The region boasts a vibrant and entrepreneurial economy, creating opportunities for investors with a long- term view.
“Today, the most important investment theme is what we would describe as The Great Catch Up, where the region’s newly created behemoths are replicating the same successful strategies of some of the world’s best companies. The cases are numerous, but front and center is Latin America’s largest listed company today, Mercado Libre (MELI US) at a market capitalization of $60 billion and up over 4,000% since going public in 2007, surpassing that of the historic megacaps of the past: Vale ($58.5 billion) Petrobras ($53.3 billion) and Itau Unibanco ($41.2 billion),” said Santiago Arias, Head of Equities and Lead Portfolio Manager at Credicorp Capital.
In the region, the e-commerce industry enjoys clear skies for a faster-than-expected growth ahead. There is an overwhelming acceptance of ecommerce and super-apps, which begins due to an innate desire of Latin Americans to be connected, which can be seen by the 43% higher than average time spent using the internet in a day 9:17 hours compared to the global average 6:43 hours accorded to HootSuite and Morgan Stanley Research. Add to the impressive growth in smartphone penetration, going from just 26% in 2014 to an expected 80% in 2025, leading to a huge market of close to 600 million of connected consumers to their mobile phones.
Another factor that should lead to further adoption and growth of ecommerce in Latam is the investment that is currently being deployed. Over the past 3 years, the leading e-commerce players: Mercado Libre, Magazine Luiza, and Falabella, have raised capital in the market, surpassing the $10 billion USD mark. These proceeds have gone in part to client incubation, but also in proprietary delivery mechanisms, logistics, and fintech apps such as Mercado Pago. “In 2020, Covid-19 was a huge test for the sector and companies proved to have been ready, leading to faster-than-expected adoption into the platforms. This success has also been shared by last-mile companies entering the space, like Rappi. We do expect to continue adding value to e-commerce ecosystems and to enhance super-app adoption,” added Arias.
This is what Credicorp Capital refers to as a catch-up story, one that does not have to go through the whole development cycle and instead leapfrog to the top of tech food chain in a shorter period of time. There are many similar stories in the tech space of Latin America and despite their recent success this trend remains unknown to most investors. “We are certain that we could see a sustained rally in Latin American equities. But one thing that is for sure is that the rise of e-commerce platforms and super-apps is good enough reason to invest in Latin America,” concluded Santiago Arias.
Credicorp Capital is part of Credicorp Ltd., the leading and largest financial holding company in Peru which is listed on the New York Stock Exchange (NYSE: BAP) and has a market capitalization of USD 20.12 billion*. Credicorp Capital is one of the subsidiaries of the holding Credicorp Ltd., which groups together BCP, Prima, Pacífico, Mibanco, Krealo and Credicorp Capital. It is also a holding company dedicated to providing financial services that arose from the consolidation of three leading Latin American corporations in Colombia, Chile and Peru. Today, it has a presence in 5 countries and USD 30.7 billion ** of Assets Under Advisory/Management.
* Source: Credicorp / Information at the end of 2019, considering an exchange rate of USD 3.34
** Source: Credicorp Capital / Information at the end of 2019 (includes assets under custody managed by the Wealth Management team)