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No. of Recommendations: 2
At first glance, MELI seems like an excellent recommendation, and I am intrigued by it. I have a sort of “follow-up” question, prompted by our shared experiences with CRESY.

The newsletter write-up states, “At today’s prices, it would take . . . a crippling and concerted blow by the Latin American governments to cause us to sell this stock in the near term.”

This seems to say, at least implicitly, that MELI’s exposure to the Argentina government is a limited risk. Is this a correct reading of your view?

I see that the company locates its servers in the US to avoid possible confiscation by Argentina. (Which is both sensible and kind of shocking, in a way.)

What would happen if Argentina imposed a 70% or 90% tax on the worldwide income of MELI? (Impossible? Check out highest marginal US tax rates over the last 90 years.)

This is just an example – the larger question is what are your thoughts on the Argentina-specific government risk here?

I am not suggesting that kooky governments kill an investment thesis (although maybe Venezuela does); in fact, I recently picked up a little bit of CRESY as part of my John Templeton Basket. I just would like to understand your thinking on this point as I launch my own analysis of MELI.

Thanks!

Rich

BITB
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No. of Recommendations: 7
This seems to say, at least implicitly, that MELI’s exposure to the Argentina government is a limited risk. Is this a correct reading of your view?

Yes. MercadoLibre is headquartered in BA for no better reason that Marcos likes living there. The company is listed and incorporated in the US, has its servers in the US, and derives only about 10% of its revneue in that country.

What would happen if Argentina imposed a 70% or 90% tax on the worldwide income of MELI?

Legally, Argentina has no claim on MELI's income unless that money is repatriated into the country. Usually, MELI leaves the money it makes in a country in that country. They broke this rule of thumb recently to get money out of Venezuela, and paid a significant tax bill to do it, but that was probably worth it.

In other words, the only part of MELI that is at risk in Argentina is the money that MELI actually makes from selling things in Argentina. Argentina has no claims on the business in Brazil or Mexico.

Tim
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No. of Recommendations: 0
Thank you, Tim
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