Contxto – My-oh-me, fresh out the oven is a hot loan worth US$125 million from the Goldman Sachs to fintech Mercado Credito in Mexico, a unit of MercadoLibre Inc.
This dough will be used to triple its US$100 million working-capital portfolio to small and medium-sized enterprises (SMEs) in Mexico within approximately one year, according to Bloomberg.
With this move, this would be the third time investment giant Goldman Sachs lends to a Latin American fintech. Moreover, it’s the biggest loan ever shelled out in Mexico.
Martin de los Santos, the Senior Vice-President of Mercado Credito, hopes to channel Goldman Sachs’ know-how in the future to finance other portfolios such as Mexican consumer operations.
Mercado what now?
Before we delve deeper, let’s get the Mercado name craze out of the way.
MercadoLibre Inc. is the parent company. Mercado Credito was created by mama MercadoLibre Inc. in 2016 to serve out credit lines to companies and customers that use its online payment platform, Mercado Pago. Mercado Credito is available in Brazil, Argentina, as well as in Mexico.
Goldman Sachs eyes Latin American startups
Investment giant Goldman Sachs has begun to take a liking to the fintech scene in Latin America.
It first lent Nu Pagamentos, ahem, Nubank R$200 million (around US$47.6 million) in 2016. Then, it joined forces with Fortress Investment Group and expanded Nubank‘s loan to R$455 million (approximately US$188 million) in August of 2017.
Fast forward to March 2019 and Mexican Credijusto—a tech-lender—closed a credit facility with Goldman Sachs for up to US$100 million. A few months later, in August, this same fintech wrapped up a funding round of US$42 million of which Goldman Sachs was a part.
Then, it lent Mexican fintech, Konfío US$100 million in September of this year. Now, we can add the US$125 million loan to Mercado Credito, making it—say it again with me—the largest loan to a fintech in Mexico.
Prior to this development, the loaning arm of Mercado Credito had shouldered capital for lending in Mexico on its own.
Likewise, Goldman Sachs hadn’t entered other major regional markets where Mercado Credito already operates. This was due to the fact that Mercado Credito had already managed to gather funds from investors like the Inter-American Development Bank in Brazil or through capital markets in Argentina.
This investment is strategic to fueling micro e-commerce in the region which is expected to grow between 13 and 16 percent within the next five years, according to Bloomberg analysts.
