---
title: "Lula's win knocked the real down 10.5% and hit MercadoLibre's Brazil-heavy revenue and new dollar debt"
description: "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."
publisher: "The Inference"
section: "Economy"
published: 2026-10-26T15:21:59.660Z
modified: 2026-10-26T15:21:59.660Z
canonical: https://theinference.org/article/lula-s-win-knocked-the-real-down-10-5-and-hit-mercadolibre-s-brazil-heavy-revenue-and-new-dollar-debt
language: en
keywords: "Brazil, MercadoLibre, Currencies, Elections, Latin America"
---

# 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.

## 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](https://www.cbsnews.com/news/brazil-presidential-runoff-lula-flavio-bolsonaro/) 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 [1][2].

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%](https://www.msn.com/en-us/money/markets/brazilian-stocks-rocked-as-lula-wins-presidential-election-bolsonaro-reportedly-refuses-to-concede/ar-AA2g3t8w), its weakest since December 2025, and the iShares [MSCI](https://theinference.org/markets/companies/msci) Brazil ETF was down 25% by 10:30 a.m [1]. ET [1].

*Chart: **MercadoLibre's 10.9% drop was mild next to Brazil's oil, brewer and country fund** Bar chart of Monday premarket percentage declines for US-listed Brazilian shares, from about 27% for the Brazil ETF to under 4% for Vale, with MercadoLibre at 10.9%.*

*Premarket percent moves, US-listed Brazilian shares, Monday October 26, 2026, about 05:10 ET. Source: Investing.com, via Yahoo Finance. [3]*

## More than half the company is Brazil, and the new debt is in dollars

MercadoLibre, the Nasdaq-listed e-commerce and fintech company [(MELI)](https://theinference.org/markets/companies/mercadolibre), 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](https://www.sec.gov/Archives/edgar/data/1099590/000109959026000023/meli-20260630.htm) [4].

On September 9 the company [priced $1.0 billion of 5.850% senior notes due 2036](https://www.sec.gov/Archives/edgar/data/1099590/000114036126036073/ef20081816_fwp.htm) at 97.864% of face to yield 6.139%, guaranteed by six subsidiaries including Mercado Livre Brasil, the Brazilian arm [5][6]. [BRZ News](https://brznews.com/article/nasdaq-mercadolibre-issues-1-billion-in-new-debt-to-fuel-e-commerce-expansion), 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].

*Chart: **MercadoLibre's operating margin halved even as revenue grew close to 50%** Line chart of MercadoLibre's quarterly operating margin from Q3 2023 to Q2 2026, falling from 20% to 6.7%, with a low of 6.9% in Q1 2026.*

*MercadoLibre's operating margin, % of consolidated revenue, quarterly, Q3 2023 to Q2 2026. Source: MercadoLibre SEC filings, via The Inference compilation. [8]*

## 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](https://theinference.org/markets/companies/citigroup) 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 [3][9], 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](https://coincentral.com/nu-holdings-and-mercadolibre-stocks-sink-as-lula-wins-what-analysts-say-now/) [9], the first earnings report since the vote.

The Inference traced the bond's guarantee structure on [October 15](https://theinference.org/article/mercadolibre-s-1-billion-bond-is-guaranteed-by-the-units-that-issue-its-credit-cards) and the credit boom behind it on [October 2](https://theinference.org/article/mercadolibre-s-new-bond-prices-the-cost-of-its-75-credit-boom); the repricing is the new part.

## Takeaway

Lula's runoff win broke the markets' wrong-way bet: the real fell 10.5% and Brazilian assets tumbled, and MercadoLibre, with 54.2% of revenue from Brazil and $1 billion of dollar notes priced three weeks before the vote, now faces a weaker real against a 6.139% dollar coupon on an operating margin already cut in half.

## Sources

1. [CNBC via MSN, "Brazilian stocks rocked as Lula wins presidential election, Bolsonaro reportedly refuses to concede", 26 October 2026](https://www.msn.com/en-us/money/markets/brazilian-stocks-rocked-as-lula-wins-presidential-election-bolsonaro-reportedly-refuses-to-concede/ar-AA2g3t8w)
2. [CBS News (AP), "Lula wins fourth term as Brazil's president, beating Flávio Bolsonaro in runoff, but Bolsonaro rejects results", 25 October 2026](https://www.cbsnews.com/news/brazil-presidential-runoff-lula-flavio-bolsonaro/)
3. [Investing.com via Yahoo Finance, "U.S.-listed Brazilian shares slump after shock Lula election win", 26 October 2026](https://finance.yahoo.com/markets/stocks/articles/u-listed-brazilian-shares-slump-093816698.html)
4. [MercadoLibre, Inc. Form 10-Q for the quarter ended 30 June 2026, SEC, filed 6 August 2026](https://www.sec.gov/Archives/edgar/data/1099590/000109959026000023/meli-20260630.htm)
5. [MercadoLibre, Inc. Form 8-K, underwriting agreement for 5.850% Notes due 2036, SEC, 10 September 2026](https://www.sec.gov/Archives/edgar/data/1099590/000114036126036136/ef20081842_8k.htm)
6. [MercadoLibre, Inc. pricing term sheet (FWP), $1,000,000,000 5.850% Notes due 2036, SEC, 9 September 2026](https://www.sec.gov/Archives/edgar/data/1099590/000114036126036073/ef20081816_fwp.htm)
7. [BRZ News, "MercadoLibre Issues $1 Billion in New Debt to Fuel E-Commerce Expansion", accessed 26 October 2026](https://brznews.com/article/nasdaq-mercadolibre-issues-1-billion-in-new-debt-to-fuel-e-commerce-expansion)
8. [MercadoLibre quarterly figures (revenue, operating margin), from its SEC filings, retrieved 26 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001099590)
9. [CoinCentral, "Nu Holdings and MercadoLibre Stocks Sink as Lula Wins: What Analysts Say Now", 26 October 2026](https://coincentral.com/nu-holdings-and-mercadolibre-stocks-sink-as-lula-wins-what-analysts-say-now/)


---

Lula's win knocked the real down 10.5% and hit MercadoLibre's Brazil-heavy revenue and new dollar debt — The Inference. Canonical: https://theinference.org/article/lula-s-win-knocked-the-real-down-10-5-and-hit-mercadolibre-s-brazil-heavy-revenue-and-new-dollar-debt