Lula's win knocked the real down 10.5% and hit MercadoLibre's Brazil-heavy revenue and new dollar debt
Lula's surprise runoff win halted São Paulo trading and knocked the real down 10.5%. MercadoLibre, which draws more than half its revenue from Brazil, had priced $1 billion of dollar notes three weeks earlier.
Vincent Jiang · 3 min read
A wrong-way trade unwound in one session
Brazil's stock exchange halted trading on Monday after an automatic circuit breaker tripped. President Luiz Inácio Lula da Silva had won Sunday's runoff with 51.8% of valid votes to 48.2% for Senator Flavio Bolsonaro, son of former president Jair Bolsonaro, who refused to concede and said he would seek the result's annulment 12.
Markets had bet the other way: since Bolsonaro led the first round three weeks ago, the Bovespa index closed Friday about 7% higher and the real about 5% stronger 3. On Monday the real fell 10.5%, its weakest since December 2025, and the iShares MSCI+0.30% — MSCI, up 0.30 percent today Brazil ETF was down 25% by 10:30 a.m 1. ET 1.
MercadoLibre's 10.9% drop was mild next to Brazil's oil, brewer and country fund
Data
| Value | |
|---|---|
| EWZ Brazil ETF | -27% |
| Petrobras | -22% |
| Ambev | -18% |
| MercadoLibre | -10.9% |
| Santander | -4.5% |
| Embraer | -3.8% |
| Vale | -3.6% |
More than half the company is Brazil, and the new debt is in dollars
MercadoLibre−8.73% — MercadoLibre, down 8.73 percent today, the Nasdaq-listed e-commerce and fintech company (MELI), fell 10.9% in premarket trading, while Brazilian bank shares lost 23% to 29% 3. Brazil produced 54.2% of MercadoLibre's consolidated net revenues and financial income in the first half of 2026, up from 51.5% a year earlier, its quarterly filing shows 4.
On September 9 the company priced $1.0 billion of 5.850% senior notes due 2036 at 97.864% of face to yield 6.139%, guaranteed by six subsidiaries including Mercado Livre Brasil, the Brazilian arm 56. BRZ News, the sole outlet reporting it, counts a 2026 Brazil budget of 57 billion reais, about $11 billion, up about 50%, for 72 logistics centers by year-end 7. The notes were priced in September's Brazil; the currency moved the night after the vote.
The squeeze started before the election
Operating margin fell to 6.7% of revenue in the second quarter of 2026 from 12.2% a year earlier, even as revenue grew 49.8% year over year 8. Provisions for doubtful accounts, the reserve against souring loans, nearly doubled to $1.276 billion from $690 million, against $11.4 billion of loans receivable and $8.3 billion of credit-card receivables at June 30 4. No source yet publishes a number for what a 10.5% weaker real does to a book that lends in reais against a 5.850% dollar coupon 4.
MercadoLibre's operating margin halved even as revenue grew close to 50%
Data
| Operating margin | |
|---|---|
| Q3 '23 | 20% |
| Q4 '23 | 7.6% |
| Q1 '24 | 12.2% |
| Q2 '24 | 14.3% |
| Q3 '24 | 10.5% |
| Q4 '24 | 13.5% |
| Q1 '25 | 12.9% |
| Q2 '25 | 12.2% |
| Q3 '25 | 9.8% |
| Q4 '25 | 10.1% |
| Q1 '26 | 6.9% |
| Q2 '26 | 6.7% |
The ratings held; the fiscal math did not move
Consensus on MELI is still Strong Buy, with an average target of $2,291.82, about 27% above Friday's close 9. Citi+0.89% — Citi, up 0.89 percent today says Brazilian lenders now face interest rates staying higher for longer, and ING counts a 7% to 8% budget deficit with net debt near 70% of GDP 1.
Lula targets a primary surplus of about 1.3% of GDP by 2030 against public debt above 82% of GDP 39, and Brazil's Treasury has canceled two bond auctions set for October 27 and 29 1. Third-quarter results, due in early November, carry consensus of $10.69 billion of revenue and $9.34 of earnings per share 9, the first earnings report since the vote.
The Inference traced the bond's guarantee structure on October 15 and the credit boom behind it on October 2; the repricing is the new part.
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