DLocal CEO sees e-commerce firms rushing into Milei’s Argentina

Merchants selling everything from electronics, consumer goods and streaming services are coming back to Argentina as President Javier Milei unwinds years of controls, according to the the top executive at payment services provider DLocal Ltd.

The company, which focuses on firms offering goods largely from China, the United States and Europe into emerging markets, is seeing renewed activity in crisis-prone Argentina adding to its overall business with an expectation for that to continue, Chief Executive Officer Pedro Arnt said in an interview.

Milei, a self described anarcho-capitalist who is obsessed with cutting government spending and red tape, has eased import rules and recently began to unwind a web of capital controls that made doing business in Argentina extremely complex. The economy is expected to grow five percent this year, according to the World Bank, and inflation has slowed dramatically since the libertarian president took office in 2023.

The change in government prompted more merchants to look at Argentina again, with operations picking up after certain tariff barriers on e-commerce goods were removed and now on the loosening of currency controls. Imports jumped 39 percent year-on-year in March, government data show.

“It’ll stop punching beneath its weight,” Arnt said from Miami, where he was to take part in the LatAm Tech Forum. “The expectation typically should be that Argentina is the third largest market in the region and it hasn’t necessarily been the case for many companies because they’ve either de-emphasised that market significantly or stayed away from it altogether.”

DLocal, based in Uruguay, operates in more than 40 countries with more than 700 merchants. Those include DiDi Global Inc, Temu, Amazon.com Inc, Shopify Inc, Spotify Technology SA, Tencent Holdings Ltd and Shein. 

Latin America accounts for 75 percent of DLocal’s business, while Africa and Asia make up the remainder. In the fourth quarter, gross profit in Argentina jumped 37 percent while other markets like Nigeria and Egypt showed similar growth. Despite the gains in those countries, more mature markets like Brazil and Mexico were laggards.

DLocal shares tumbled after its last earnings report on results and guidance that missed expectations. Arnt, in response, said the firm is in a “deliberate short-term investment cycle” and sees “massive long-term potential in our business.”

The company, which counts General Atlantic as its largest shareholder, will report first quarter results on May 14. 

Arnt, 52, joined DLocal in August 2023 as co-CEO and took sole ownership of the role in March 2024. He previously spent more than two decades at MercadoLibre Inc, where he was chief financial officer before departing.

DLocal provides both help for global merchants to charge clients on the ground and repatriate funds to those firms. It’s preparing to roll out credit tools and point-of-sale solutions for offline purchases soon, which should help expand its portfolio, Arnt said.

Among its services, facilitating remittances was the fastest growing in 2024, doubling in total payment volume terms. The two-way flows of cash allow the company to often forgo traditional brokerage fees to settle with customers directly in their countries of origin. “The liquidity offers you the two key success factors in remittance price and almost more importantly speed of settlements,” Arnt said.

About 40 percent of total payment volume is done by Chinese merchants, which has prompted the firm to build a team of about 100 people on the ground now, Arnt said. Total headcount is close to 1,100 people.

DLocal also remains on the lookout for attractive acquisition opportunities given a “valuation adjustment” and the fact that some companies are having difficulty in raising new funds or are running out of cash. 

“I don’t think we want to say ‘we’re gonna do something come hell or high water,’ but we are deliberately exploring more opportunities than we did throughout 2024 because we think we may be entering a phase where there are good companies that can be scooped up at very attractive prices,” Arnt said.

DLocal’s own shares took a hit in 2024 and its market cap has fallen to US$2.5 billion from about US$7.2 billion three years ago. That’s created something of a “Goldilocks effect” where the firm isn’t small enough to offer shareholders a potential exit through M&A and isn’t big enough to become a consolidator of more transformative businesses, he said.

The easing of currency controls in Argentina has also opened an opportunity for companies operating there — including DLocal — to consider repatriating profits again. 

DLocal still has sovereign Argentine bonds on its balance sheet that it purchased years ago as part of an agreement with the government. Those notes can now be unwound if needed to send cash back to the holding company. “It’s likely that we can now reassess ‘do I really need all that liquidity or do I only need a part of it for my investment plan?’” Arnt said.