Chit Chat Stocks - Ian Bezek Returns to Discuss Why Brazilian Bank Inter Is Undervalued And The State of Investing In Latin America

Episode Date: September 16, 2026

On this episode of Chit Chat Stocks, we chat with recurring guest Ian Bezek of Ian's Insider Corner about Inter, a bank in Brazil. We cover: (00:00) Introduction (03:51) The Brazilian Lending Market (07:06) Inter's Growth & NuBank Comparison (10:08) The Brazilian Credit Market (14:42) Impact of the Brazilian Election (17:56) Inter's Credit Portfolio (20:40) Inter's Valuation & Earnings Multiple (28:10) Local Currency Government Bonds in Brazil and Mexico (31:40) Pair Trade: Long Airports vs. Short Airlines (36:00) Mercado Libre (MELI) & the Lending Environment (40:50) Argentina's Upcoming Election & Economic Outlook (44:29) Colombia's Election Shift & Investment Opportunities (49:59) Colombian Airport Operator Exposure Ian's newsletter: https://ianbezek.substack.com/ ***************************************************** Subscribe to our newsletter and join our FREE chat community: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

For the past three years, interactive brokers individual clients average 24.3% annually beating the SMP 500. Lower costs and access to 170 plus global markets matter. Visit IBKR.com slash performance. Welcome to Chit Chat Stocks. On this show, host Ryan Henderson and Brett Schaefer analyzed businesses and riff on the world of investing. As a quick reminder, Chichet Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks? by Ryan, Brett, or any other podcast guest is not formal advice or recommendation.

Now, please enjoy this episode. Chat Stocks, a podcast to help you find your next great investment. Today we are bringing back on Ian Bzek, recurring guest and what we call our Latin American correspondent. He is the writer of Ian's Insider Corner, a substack covering an eclectic mix of investing ideas. We recommend checking out his work, which we will link to in the show notes. he has his weekly digest, I believe that's what it's called, and I love reading it every week along with other write-ups, such as even stocks that we've talked about on this show, such as New Bank.

But today we're going to hit a Brazilian bank that we haven't talked about much, if at all, on the show. It's one that isn't talked about much in the investing community, but Ian's covered it quite thoroughly. The name is Inter, and then we're going to have a bunch of other listener questions regarding Latam stocks. the economy's down there and a little bit of those elections. But first, we're going to cover Inter.

We have a few questions on this company. What is Inter? It's not a soccer team for those that know that name. But explain what they do and the difference between an emerging market banking environment like Brazil versus what many of our listeners, you know, in U.S. or Europe, might be used to. Sure. So, yeah, thanks for having me back on the show. Always a pleasure. And yeah, for Inter, it is the first digital bank founded in Brazil.

It's actually predating New. And quite distinct from New in the sense that Inter started out being a full-service bank. Like you could have deposits, kind of the whole banking experience, whereas New at first was just credit and debit cards. And so Inter is built up a large deposit base over the years. and its focus more on wealthier customers, whereas new was more middle and lower-class customers, at least in the beginning. So Inter kind of focused on wealthier customers

for kind of the assumption was they already had a bank account at one of the big traditional Brazilian banks, but they didn't always want to go into the branch. And so just for handling part of your banking business, you could just do everything digitally through Inter, and they built out seven pillars of the business, obviously banking being one, but you've got a loyalty program.

You have an e-commerce platform. You have kind of online, or not, they're going overseas. You have easy foreign exchange transactions for Brazilians that spend a lot of time in the U.S. and need seamless handling of real to dollar transactions. So you've built this ecosystem primarily targeting wealthier customers that can have a higher revenue per month per user and a very strong deposit base because like I said they've been at this for more than a decade and so it's internally self-funded very low-cost structure to operate yeah so I think that I could see kind of the general overview of what interest now on the

Brazilian lending market you've covered this quite thoroughly I learned a lot from your writing on how it differs people see things as like higher loss rates you know way wider net interest margins. Can you take us through? Because I look at, and this is just top of mind because I've been reading about them recently, you know, Ricardo Libre's net, they call it Nimol net interest margin after losses, I believe. Something north of 20% where an equivalent bank that I look at in the United States, ally, I think is like 3 to 4%. So what causes that? What's different in the consumer, I guess maybe in commercial lending environment for a bank like enter. Yeah, that to unpack there. I'd say the biggest, well, one different specific to Brazil,

one difference specific to Brazil is that they've historically had very high inflation and less a very high interest rate. I believe the overnight rate is 14% now. So you naturally have higher interest rates simply because banks want to be repaid. If the banks are having to pay 12% on deposits, let's call it. Then naturally you're going to start lending it. I don't know, 18 or 20% even for a mortgage. So just kind of some of the higher interest rates are a factor in the macro environment. But also historically, credit is much harder to obtain an emerging market. And the big, the ITO's, kind of those sorts of big banks didn't really want to lend to a lot of customers unless they had like very stable employment.

We worked for the government, those sorts of things. So there's opportunity to attract clientele that you might not have had elsewhere. Although that's more kind of for kind of leader for new kind of interviews going after higher status festivals in general. But yeah, so much higher interest rates, kind of less, you don't have credit card rate caps like you might have.

They've been discussed in the US. I believe new, for example, is averaging like 60, 60 something percent on credit cards. I don't have that number of money. Something ridiculous in Brazil. But people are willing to pay it because it would be even higher

if they tried to obtain credit elsewhere. You still have the people that lend money in the street. I don't know if they're called in Brazil, but in Colombia, the daily lenders, and they will beat you up if you don't pay them. That was the only access people had to credit prior. It's 60% or 70% that's a lot more attractive than that.

But yeah, obviously, when you're lending at much, much, much higher interest rates, you're going to have significantly higher losses. I think it's just kind of baked into the model that we're going to lend at high rates and a lot of people aren't going to pay. And on balance, it works out because, yeah, if you're getting 15, 20% net interest margin and then you have a spike in defaults, not really that big of a deal. like Inter specifically their NPLs are like 6% now

and so if you're at interest merchants 15 and you lose 6% of your lows cost of doing business what has growth look like for Inter NewBank gets talked about a lot I think for

American investors but how has Inter compared and why do you think new seems to get more recognition abroad? Sure. Yeah, to the more recognition, I think that's mostly a factor of size as new market cap is like 20 times out of interior, I believe.

New is already the second largest digital bank in Mexico. It's rapidly growing in Colombia. You have the new launch in the U.S., I believe, this year. just so that, yeah, New has already proven that it can operate at massive scale as kind of world-class roster of management team. Grabbed a lot of people from the U.S., kind of prestigious people to introduce the company overseas. So, yeah, I think New has done a tremendous job, both in building the business and the marketing itself. Obviously, I own new staff as well, so not taking anything away from them, but inter is, what, rebuilding other market caps, much smaller. Up until now, it's been Brazil only, although they're launching in Florida this year.

Like you mentioned, there is the Interstadium, which is affiliated with them, because they've been building the brand there ahead of the launch. I think that's going to be successful for them because they're specifically targeting the large Portuguese-speaking population that lives in Florida and saying you have friends and family in Brazil, you want an easy way to, when you're in Brazil, you can shop. And in the U.S., you can shop with the same cards and money back in Europe. forth and fees, that sort of thing. And also, they're building a product that allows you to use year credit score and credit

history in Brazil to be able to buy houses or other stuff in the U.S. So I think that portability of credit is kind of a very cool feature. It's not a mass market thing. Like, it's not something that's going to matter to just Americans. But for Brazilian Americans, I think that's the sort of thing, kind of their higher touch market, kind of the upper class positioning of their brands can track. can tap into a really attractive base. In terms of overall growth,

that's growing around 30% a year now, which they've been doing, I believe, since the IPO, more or less. And I think there's obviously a question as to how large the overall market can get, but I see what they're doing right now is competing more of the traditional banks. I don't think they're directly running into new

or Mercado Libre yet, because those are targeting kind of more mass market rather than an upper class. And like I said, it's much more a traditional bank in that most customers have deposits there. Whereas new hasn't really attracted nearly the same sort of deposit base. So it's more kind of your traditional bank, but online rather than like pure fintech. So yeah, I think there's still room particularly since they're smaller for them to keep growing at the high speed for at least a few more years. Yeah, for context for listeners, this is definitely not JP Morgan.

The market cap is $2.4 billion. So as Ian mentioned, you know, there might be a couple hundred thousand Brazilians in Florida, maybe even more. I'm not exactly sure. And yeah, if you can get those wealthier customers, that could be quite meaningful. I want to ask maybe this listener question at the moment. It's a bit long. So bear with me, other listeners. But I think it was quite, I couldn't have said it better myself.

So the context from the listener, they said inter-CEO is saying he is confident they can grow their credit book at 30% for the next few years, if every other digital bank, such as New Bank, Mercado Libre, even C-Limited going in the mix now in Brazil, is growing at this rate, then are the incumbents losing market share that fast?

I looked at the other banks, and their revenue is growing, earnings per share growing at 10 to 15% as well. Does this mean the credit market is growing that quickly and is that sustainable in Brazil, if 30% of, salary is already going to interest payments. I know that's a lot there, but essentially, is it sustainable to keep growing the Brazilian

credit market? That's kind of maybe the first bare case some of the listeners were talking about. Yeah, yeah. Let me answer in two parts. In terms of the market growing, I don't think the incumbents are growing that quickly. Keep in mind if they should have been like between 6% and recent years. And so if the incumbents grow, they will have spoken. 10% and inflation's 8%.

I think the income is more just kind of running in place. But yeah, certainly a question, when is the market going to be penetrated? I think new in particular, starting to see signs of maturity for their products in Brazil just while you're seeing them

move so aggressively in Colombia and Mexico. But like I said, I think there's a difference in who they're serving. Like Mercado Libre's been growing like a weed in in Brazil, but that's primarily financing people that are making, purchasing stuff online through the e-commerce platform.

And so I think that's a pretty different business than Inter, which is primarily making personal loans or they're making a paycheck. I forget what it's called, but basically you get a loan that's backed up by your paycheck, like they draw out of it in the future. And so that's quite different from someone saying, I want to buy a guitar,

and Mercado Libre helped me pay for it and for it or whatever. So yeah, I think in terms of kind of what sorts of loan products like vehicle loans or vacation loans, that stuff's different than

what a Mercado Libre Fc is doing. I mean, yeah, there's only so much credit that consumers can take, but in terms of a small bank with a distinct business model from the rest of the bunch. So I don't think it's mature yet. But yeah, I'm going to answer the second part.

It's the listener question, which is the 30% of people's income goes to loan payments, which sounds like an absolutely crazy stat. The first time I saw it, I looked it up. Is this actually true? But yeah, the central bank data confirms that I think what's happening, only 7% of Brazilian households have a mortgage and plus to 40% of young Brazilians still with their parents. And so a lot of income that would normally go to rent.

or to a mortgage payment is instead going to consumer loans. The rate of car ownership in Brazil is also very low compared to the U.S. And so people, like in the U.S., you see people with a $5,000 a month income spending $1,000 a month on their truck, which is just not a thing in Brazil to anyone at the same extent. So I think people have, for whatever reason, decided this is true in Colombia and Argentina, other Latin American markets as well, so that they spend a lot more discretionary stuff as opposed to housing or vehicles. And so I think that explains.

Like when you look at the total data, like 45, estimated 45% of Brazilian income goes to all debt service, including mortgages, vehicles, everything else, medical debt, et cetera. And so like a huge chunk of debt service goes to consumer lending, but I think a lot of American households would have 45% of their total income go to all debt service, including their mortgage and their vehicles as well. Hopefully I give some context.

No, that is fantastic context. I had not thought of it that way before. One question I have in what I like was your analysis of these type of countries is that you can set or change your expectations depending on where the political winds are flowing in various of these markets. You know, sometimes there can be hectic changes from free markets to socialism to free markets to socialism, them back again in some of these places. Brazil has an election, I think later this year. What is the impact or not of the Brazilian election on an inters long-term plan?

Can who is in office impact the banking sector? Or is that not part of your thesis? Yeah, a good question. First down to the election is in October. It's not very soon. I don't think it will affect inter news strategy that much. Regardless of who wins, it's presumed the two candidates will be Lula, who's the socialist incumbent, and then Flavia Bolsonaro, who's the son of the former president of Bolsonaro, who's conservative. So those are assumed to be the two candidates. I would assume Inter's business strategy stays pretty much the same, regardless of which of us, two wins. Let's not just say there will be no impact in the market, though. I think Brazilian

stops would drop if Loua is re-elected, I think there'd be a rally, if Bolsonaro wins. It's worth mentioning Inter, because it's a small market cap, it's barely in the Brazil ETF. It's like under 1% weighting. And so to the extent that people just buy or sell the EWZ ETF, that's not really going to move Inter and say my, like, new is 8% of, of the Brazil ETF. And so if people in New York and London just slam the buy or sell button on Brazil, like New is going to probably move 10% the day after the election.

Inter, I don't know what it'll do because it's not really an ETF. But yeah, you're going to see a big move in Brazilian stops because the election is too close to call. Betting market has a like 55% Lula, 45% Woltanera at the time we're recording this. my personal opinion which is probably now

the investors want to hear I think Lula wins re-election we just had the election in Colombia which was the similar socialist first right candidate and the right one candidate

only won by one point Lou is the incumbent whereas that should be stronger footing whereas Columbia did not have an incumbent running and then

Brazil traditionally just has more more people that use the social safety net retirement age which was 55, so a lot more people that rely on state pensions and so on than in Colombia. And so if the right wing, if the right wing tied in Latin America, so to speak, was only strong enough to deliver at one point victory in Colombia, like two months ago, my god says

slula, the windset by squeaker, like two or three points, which would probably cause a probably probably five or ten percent sell off in Brazilian stocks. I might have mentioned this earlier, so I might have missed it, but what is the credit portfolio primarily comprised of for Inter? Is it credit card primarily, or is it kind of all over the place? No, it's a good question. It's actually a point of distinction versus almost all of fintechs and digital banks, and that more than half of the loan book is directly secured, so secured against people's paychecks or against other assets, personal property vehicles, whatnot. They have been expanding the credit card business recently.

Yeah, it's very distinct from new 92% of news loanbook is unsecured. So you're totally up to the way of whether the consumer wants to pay or not. Whereas into, yeah, the majority is secure lending. And obviously, they get a significantly lower net interest margin in return for having let secured loan book. Yeah, I think it's a point of distinction. If you look at some of the other Brazilian in techs like Stone

and Paxigerow and so, they all have they've been growing their loan books very quickly, but in unsecured products, and it doesn't seem like they really know what they're doing. Like Stone's NPLs have gone up like 400 basis points over the past year.

Yeah, I think that's another point that like some of these companies know what they're doing and some of them don't and I think investors should pay more attention. Kind of all of these stocks are cheap like stone pegs into people seem to just throw them in a bucket of, it's too hard interest rates are too high. Consumers have too much debt. We don't really know what they're doing. But you look at internew, their NPLs are stable and then you look at somebody like stone and it's going, just skyrocket. So people should should give more credit to the banks that are,

performing well despite the more challenging macroeconomic situation. You research your investments, you analyze markets, you manage risk, but have you researched your broker? For the past three years, interactive brokers, individual clients averaged an annual return of 24.3% compared to 23.1% on the S&P 500. IBKR's lower trading costs, competitive rates, efficient execution, and access to 170-plus global markets help investors keep more of what they earn and put more capital to work. Over time, the broker you choose matters. Interactive brokers, member SIPC.

If you care about performance, find out why the best informed investors choose interactive brokers at IBKR.com slash performance. Again, visit ibkr.com slash performance. Why? So I believe it trades at a earnings multiple of basically eight. I can confirm that, Ryan. I'm looking at fiscal AI right now. I'll mention fiscal.aii slash chit chat use our link, get 15% of any paid plan.

That is correct. Only P.E. of 8 and Ryan, I see, and maybe you can correct, as earnings per share growth, as you mentioned, like 30% over the last five years. Yeah. Yeah. So why, I guess. Is it just the kind of an investor aversion to Brazil from, what's happening here? Yeah, I think that's kind of any time you're looking at a stock that seems unreasonably cheap, I think that's the, the right question. Is the market missing something? Is there some risk that explains that? Yeah, eight times current earnings and then, I believe, based on like a 2028 estimates, just if they hit what is currently estimated, it would be like five times

28 earnings. So it's like, yeah, why is this business growing at 30% here and trading at this price? I think there's not much support for the stock in Brazil. Also, I mean, Pags was trading like five times their rings. I think stone is like six times earnings. Like there's a lot of these stocks that are in this bucket. I think a big part of that is because the interest rate in Brazil is 14%. So if you're a Brazilian investor, you can just either open your new or inter app on your phone and lock in money like 12% with no risk.

So why are you going to put money in the stock market in Brazil when interest rates are so high? I think that's been one big drag on Brazilian equities. But then, yeah, we've got this credit situation in Brazil and BL's non-performing loans have been ticking up for everyone, including the incumbent banks, and they've been exploding at some of the smaller firms. So I think people are saying, how well is the Brazilian consumer going to hold out particularly if, say, Lula gets re-elected and the Brazilian economy goes through another downturn? Yeah, there's a lot of risks there.

And I think people are a little uncertain kind of what the path is for, kind of how they get their capital back. Like Inter doesn't have a buyback. And so they do pay, they pay like 25% of annual profits out of dividends. So the profits keep going up at 30% a year. That turns into a meaningful dividend stream overside. But I think for American investors,

people would prefer to see a buyback. That's just kind of a cultural difference. people really like dividends in Latin America. They don't really like buybacks to the same extent. People want the cash rating their account. But yeah, certainly people would be happier. Americans would be happier if there's a buyback, but I don't see one coming.

So I think the best catalyst in terms of getting the people that respect the stock for is just management to keep putting their guidance. I said they're going to get return on equity up to 30%. traditional it's at 16% now from 1% three years ago so I've been doing it on that so far traditionally banks that get a good way to think about is take your return on equity divide by 10 like if you're a good multiple for about your price to book value should be it's kind of a bank investors often think about things and so in that case interior would be worth would be worth like 1.6 times book value now heading the 3x over time stocks trading in a

reasonable discount to that. I think when you grew up kind of that return on equity pathway, like the management is doing what they said that you're going to do. But new doesn't get a much higher multiple. For what it's worth, new is it five times now. So gives you a sense of kind of the upside. If Interior can actually deliver, I think there's just a lot of skepticism. But like you said, it's there really this much growth left, but cool, a cool number since the IPO, but I keep demonstrating it in the harder and that I feel like these type of companies, even NewBank to an extent, although you mentioned, they do have that premium. Something like Inter for foreign investors, it's almost every quarter

climbing the wall of worry. Like, oh, your numbers look good, but what about next quarter when the Brazilian economy goes to zero? And then they have to just keep doing that and bang out a dividend. For less of the bear case, you know, we obviously know the bear case, the Brazilian economy does badly and consumer loans too poorly, you know, that's going to hurt their net income, at least temporarily. But where do you think in any other areas does interlose as an investment, say, over whatever time horizon? Is it the new bank targeting with the more premium credit cards? Is it competitive threats? How do you see kind of the downside scenarios? Yeah, good question. I think they're trying to

do a lot of stuff with the seven different pillars of the business. Some of the things, like they have an e-commerce, like shop with them, get rewards, that sort of thing. I think that stuff are cool and certainly helps in terms of customer lock-in and so on. But I could see a case where management is trying to do too many things at the same time. There's unclear branding. People don't really know. Yeah, it's just, it requires a lot of focus when you're trying to do asset management, insurance and kind of selling all those different stuff to people. Obviously you can do it well, but you can also have like a Wells Fargo scenario when you try to sell too many products and get into scandals. So I think there needs to be they need to do a good job managing kind of all

the other pillars of the business. Like the core banking business is doing great, but I don't know. I think the e-commerce platform has been shrinking a little bit. So just kind of making good decisions. is still a good use of our time and resources and should we trim off some of this stuff that's not working as well? I think the US expansion is a great idea, but obviously it's a risk. It's a very different market from Brazil. You have much lower interest rates that people will tolerate in Florida versus Brazil.

So you could see it hit overall profitability, just in terms of, I don't know how they'll design the loan book and all, but I think it's a high-risk category award sort of thing to make that expansion. and what else I think could get wrong. I think management has laid out very ambitious profit targets, like the 30% ROE, but they also want to keep growing at 30% a year. What's the other tenant?

So there's one more tenant that they have in the growth plan. But very ambitious targets, they've reached them so far, but I think you create kind of the risk of setting expectations too high, which, I mean, it's fine. I want management to be ambitious and try to hit these targets. but so far they've not been rewarded in terms of the stock price for having social admissions targets

and then it feels like you can set up a scenario where people just get annoyed if they don't hit the targets. Yeah, management has set a high mark for themselves and market's not rewarding us for it now and it feels like you could get a disappointment. Yeah. Yeah, you're at 8.30s.

Why are you promising us the moon? It's the, we're not getting anything back That's fair Yeah Rather just crush No expectations If you're never going to trade above A single digit multiple

Let's move beyond Inter To some other questions This was a listener one That I thought was fascinating You mentioned the high interest rates On Just from Central Banks

In Brazil Mexico and others This was really the one here And I can maybe toss in Currency You've talked about this as well Maybe being overvalued or undervalued

You can hit on that if you want. But here's the listener question. What does Ian's take on local currency government bonds in Brazil or Mexico? I assume they mean from like an investable perspective. Yeah. I have a stronger opinion on Mexico. I'm bullish on Mexican fixed income. I believe they, what, the overnight rates 10% now, I think.

It's around 10%. I haven't checked this one. It's around 10%. Inflation is like 5%. So you're getting 5% real yield. Mexico is very credible central bank, fully independent from the government, no tampering from then.

The president, Shinebaum has been quite austere in terms of spending. She's a liberal. People assume the worst, but she's been responsible in terms of managing my affairs. Mexico has plenty of access to foreign capital with all the exports to the U.S. and now kind of the investment boom that you've had in Mexico

with companies relocating from China. So they have plenty of dollars. So there's no real way to have the liquidity squeeze against them. And just, yeah, it's a huge real interest rate, 10%, very attractive compared to what else's offer in the world. Yeah, so I like Mexican-Passo fixed income. When I lived in Mexico, my wife had CDs in Mexican Pesos for a while. So we kept money there. The yields are so much better than what was at opera in the U.S.

And the peso was stable versus the dollar. So there is no loss in terms of currency. On the Brazil side, I'd be a little more cautious, at least ahead of the election. I think Lula is not as good of the leader as Shinebaum is in Mexico. I'm not like an investor that just hates all left-wing governments in discriminating. I think Shinebom is a good president. I'm quite admire what he's doing. I don't think Louis nearly as good of a press.

It's certainly not the worst. Like Petro and Columbia was a lot worse. But yeah, I don't think Louis is a great leader. I don't think Brazil really has a long-term coherent economic vision. They're trying to be neutral and kind of the U.S. versus China trade war. But that feels like they're getting squeezed on both sides there. Yeah, and they just have more state apparatus. There's more welfare, more pensions, more obligations on the state.

It's just hard to get the tax base about American. to support such a big state program. The states like Brazil and Argentina that try to spend as if they were in Scandinavia, it just doesn't work out for them. But the yields are super high. It's 14% in Brazil and the inflation rate now. It's like 6 or 7.

So it's a massive real yield. They seem to reward there. I understand people putting that position on Bolsonaro wins the election. And you're good. But of the, so I'd say both seem reasonable, but up the two,

I'd prefer it on next to 15 months today. All right. Makes sense. Let's shift gears a little bit. We've got, you've written about a lot of different topics over on Ian's insider corner, which I will plug now. Brett and I subscribe to plenty of investing newsletters, and Ian's is one that I read every time as soon as it comes in.

On a recent write-up, you talked about the, can we call it? call it a pair trade on your airports versus airlines bet. Can you describe what that is and why you've chosen it? Sure. So, for people not familiar, I'm a big advocate of private airport ownership and they're wonderful companies. And the three Mexican airport operators are three of my biggest position. So I'm the one in Argentina. And Brazil referenced, the ASR airport operator, just bought 13, 14 airports in Brazil.

So if you're interested in that, there's now a Brazilian way to own airport exposure as well. But anyway, so I've owned these stocks forever, only through COVID, through all sorts of disruptions to the industry. But yeah, one of the bigger problems we can have is high jet fuel prices. because of airlines you got a business like spirit shut down early this year which caused like a 5% traffic drop at cancun for example which is not ideal you could lose more airlines if jet fuel stays high if top jet blue could go under in the next six months if oil doesn't come down obviously local carriers fail all the time in Latin America as well and so yeah the longer this around situation goes on with no resolution in sight the more nervous I get and so I put on a short position earlier the summer in JETS, JETS, which was an ETF that owns North American Airlines, so Delta American United, but also a smaller like frontier, some international air Canada,

that sort of stuff. The view of being that I'm not picking an individual winner-e loser in the airline space, but I think as a whole of the airlines are going to see a big drop in profitability if Jetfield stays up here. I don't think they can offset it. with price increases. I don't think there's enough consumer discretionary purchasing power available. After years of revenge travel and whatnot, I think consumers are pretty tapped up, particularly when gas is, what, $4,000, heading towards $5? How much are people really going to be making big holiday trips this year?

I think maybe not as much. And in the U.S. we've now seen, according to the TSA data, like check-ins with the U.S. are down 5% year every year now. This is the biggest drop. It's the biggest sustained drop aside from my government shutdowns and stuff. Biggest sustained drops since COVID. So, yeah, I really like everyone in the short here. I think they're in significant trouble.

And you have such high fixed costs because you've got to pay all your pilots and flight attendants, union labor, all that sort of stuff. The plane leases, you can't get out of those. Even if you don't want to fly the planes anymore, he's still stuck with the leases. There's this huge fixed costs that you can't avoid. When you're in airport, you have very low costs, the building. You build the building, but then it doesn't cost very much to maintain it. During the pandemic, the airports went to skeleton crews,

and so they cut operating costs almost nothing. And we're just like, okay, we just wait for six months until COVID ends. And so the airports stayed by, whereas the airlines needed a huge bailout. And I mean, in a worst case scenario where we were stuck in Iran for years and oils at 150. I think the airlines would need another bailout, or so the airports would be fine. So, yeah, I really like short airlines, long airports. And interestingly, the airports are down more this year than the airlines,

which makes no sense because airlines have so much more economic sensitivity to oil places than airports. So even in, let's say there's a real ceasefire tomorrow, the street reopens. I just cover the airline short position and my airports go up 30% from here. So it's fine. I do. Yeah, that is a fair point.

That is fascinating that the airport operators are down more than the airlines. Let's hit a company. We do a whole show on them, but maybe we can talk specifically regarding to the lending industry. Ricardo Libre, a lot of listeners know this business from the United States. It's probably the number one business listeners know, specifically because it's been a long-term, you know, Motley Fool stock. and it's been a massive winner for them so a lot of people know about them it's kind of the one business

I think if you asked anyone who's an individual investor what's a Latin American company they would say Mercado Libre they're growing fast in their credit portfolio I think the number was at least for credit card

100% something like that how do they fit in to the lending environment I know you've written about them recently it's kind of that or wherever you want to take it overall thoughts on the company Yeah, so it's been a, and I'm now a shareholder I bought during the dip, what was it, like, 1600 a few months ago.

So I've been on the sidelines on that company for years since the valuation seed bridge that I'm now involved. Yeah, I think it's been kind of a bearish talking point, a reasonable one for several years now that they're growing the loan book too quickly. That management is dead set on keeping the string of like 30% revenue growth. I think they're the longest running publicly traded company in the world with quarters of 30% revenue growth now. So kind of the bears have been saying it's empty calories. Like they're just buying revenues through lending. That doesn't make sense. And I think there was potentially meat to that case, like back 2021, 2002, but we're now more than five years into this experiment.

And it keeps working reasonably well for them. You know, I've seen upticking in bad laws. first is in Argentina with kind of the switchover from socialism to capitalism. It kind of had a big downturn in their economy in 2024. I have bad loans. They're becoming more of a problem in Brazil. I mean, they operate across Latin America. So anytime, like if Mexico is an economic crisis, I'm sure you'd see that hit the results in Mexico.

But I think what people miss is that the duration on their lending is extremely short term. It's four months on average. and so that gives them a lot of flexibility. They can just turn people's credit limits down or just close accounts that they see risky in the event that they say, oh, our one product is really not working very well. This economic crisis is a lot worse than we thought.

They can very quickly tap the brakes on how quickly they're moving their loan book, which is a huge difference. Like, there's people who keep saying, like Brazil or whoever a lot of Americans can have a financial crisis like the US in 2008, but the issue there was the duration of the loans. The banks made these stinker 30-year home mortgages

that were at bad interest rates that didn't cover the risk correctly. You can't get out of a 30-year loan. I mean, it's like forever. Whereas with Mercala Libre, there's either somebody buys something on their e-commerce website. Either they pay you or they don't. If they don't pay you, then you don't want any more money. It's very easy to cut off that lending relationship very quickly.

And so that's the thing. the bears get so obsessed with this like we're going to have this huge financial crisis about America. It's like, yeah, you don't think these companies are aware of that possibility. All the executives have lived here and been through all sorts of devaluations and confiscation.

Yeah, it's part of the local culture that people are aware of those risks. And so, yeah, I think people I think the bears have talked that up way too much. It's a real risk, but I think it's totally blown on a per course. I think a good example for Mercado Libre is that during up until

the last few years they've had kind of the free market reforms in Argentina which has had some downsides I guess from consumer spending power temporarily but it's rebounded the last couple of years but even before that there was hyperinflation just crazy policies and Mercado Libre I believe was contribution margin

profitable in Argentina that entire time so they seem to have quite a good experience with this. Yeah. And then maybe we can segue. Oh, and just, that's a point I should have made on Inter that I didn't.

When people say that you can't own Inter, you can't own new ahead of the Brazilian election, it's like, okay, so who's been president for the last four years when they were growing EPS at 40% a year? Lula. And so your risk factor that makes the stock on Unable is that the current president who they prospered under is going to be reelected, but maybe it make that make sense doing it.

Right. Yeah, that is a great point. All right. We mentioned Argentina. You've talked about the airport operator there. We don't need to talk about them specifically today. But the Argentina election is coming up next year. You can get more context with that if you want. What?

I guess maybe I'll lean in with a little, my personal opinion a little bit on this, is I look at the inflation rate, and I look at kind of maybe a little bit slower progress in the three market performance than some of the ultra bowls were saying. I guess I've tempered my expectations, especially with what the polls look like down there. What are your thoughts on the Argentina election there, and how could it impact the economy? Because for myself, I get a little bit scared that they get back to that hyperinflationist era. Yeah, yeah, I think the financial market, at least a lot of the commentary I've seen online seems a little bit complacent.

Betting markets have been around 60, 40 that Malay will be re-elected next year. Actually, disclosure, I've built a short position at about 35%. So kind of two to one, that if Malay is not re-elected, I get like $3 for every dollar. I put it, because I think those odds are wrong. I think it should be closer to

if you're 50-50. Yeah, because like you said, it's taking longer for reforms to work. I think the reforms have worked very well. Kind of out in the countryside, like the mining sector, it's booming. Agriculture's really been reactivated. So you've got a lot of stuff going on there. But the largest voting block in

Argentina is in Buenos Aires. And the economy is not really working there. You've had the largest shutdowns of hotels and restaurants, kind of consumer stuff in the past 20 years. Yeah, prices are very high. there's just not enough money. He slashed the state apparatus,

but that was how a lot of people in the capital get their money just working at the state-run universities, hospitals, whatnot. And so the extent that those jobs haven't been replaced, those people are unemployed and very upset. Yeah, so I think it's going to be much more competitive than people are thinking that. Or maybe people just haven't thought about it yet because we've been doing other Latin American elections this year.

But, yeah, I think there's, significant downside in Argentina. It's the socialist and back to power. So if you say a 50-50 coin flip away from that happening, that's a pretty significant risk that I don't, I think people might be a little bit complacent towards. So I've tempered my expectations for Argentina, which isn't like to say to get out of everything. I haven't sold my airport stock there. But yeah, I'm significantly more cautious than I was since 12 months ago. Yeah, I think there's some pictures people have on, for example, I think this is publicly traded, like the Argentinian stock market or stock exchange. I feel like people need to temper expectations there of it's so far away from that becoming a booming market there.

It just needs to be baby steps. And yeah, like, you know how the. You know how the MSCI rates countries is like developed emerging a frontier, right? Yeah. making their ETS. Argentina is not even frontier because there's still too many capital controls for money to freely get into or out of the Argentine equity index. So they're in a stand-a-l of tier where they're not eligible for any of the emerging market ETS.

That's how far they still have to go. They're not even on the same level as like a Kazakhstan, which is a frontier market. Yeah, I think after traveling to Argentina, you realize, yeah, those capital control things where you come in from someone with a financial background or investor perspective, you go, wait, what is this? Why is there this fee? You have to buy an airline ticket internationally and there's a 30% surcharged. Like, what is going on here? Let's move to another topic that is something that is an event that's happened, positive, potentially for the markets. We've seen the Colombian presidential election. It swung to a conservative one, as you mentioned earlier, and the Colombian peso has been

booming. The stock market's been booming. There's talk about opening up mining rights. There's oil developments. The neighbor in Venezuela is much more stable potentially. What are your thoughts? And you do live in Columbia, so you have much more boots on the ground insight here. Kind of thoughts on some of the Colombian stocks that pique your interest and how you're seeing it over the next few years from investment opportunities. Yeah. So I've been bullish on Columbia for several years. I thought kind of the socialist that just left power would not be able to kind of the bare case was Columbia turned into Venezuela. I didn't think that would happen. So it's just kind of painful holding Columbia stocks in the interior, but I figured it would swing back to

to kind of a more standard, standard issue right wing government at some point. That's been virtually rewarded. I think our ETF's up like 150% now over the past couple of years. I've still bullish. I've not really taken any money at the table. I think the setup is still great, particularly I have no idea where oil prices will go, but oils half our exports. So everyday oil is at 100. That's a lot of money for us. But yeah, I think the new piece of information is kind of the pitch was conservatives were likely doing the election, which has not happened. But I think the new piece of information was we didn't know if you're going to get just kind of a center right kind of milk toast. government if we're in to get

something aggressive. I think we're getting a very aggressive government like someone who's campaigned a lot on Buckele, kind of El Salvador-styled. Very strict law and order. Like every day on TV we see new raids

in the jungles, new raids on the border. They're deporting tons of people that think are illegals. Yeah, they just every day you see they broke up a drug party confiscated hundreds of kilos of marijuana and cocaine, you know, and very publicly executing like terror, or people they say are terrorists. And so it's just very, very in your face, like,

things are changing Colombia. This government is not going to take anything lying down. And so I think to the extent, like a lot of investors really appreciate what's happened in Salvador, got with the dramatic reforms there. And so I think if you were saying, hey Columbia is going to vote for a conservative but is it going to be kind of like center right or is it going to be hard rate it's going hard right which could be good or bad I have some concerns in terms of how things go but we'll see I think I think you can potentially see a major change in the government people haven't really people haven't really priced in like what if Colombia goes

full Oslova or full Malay Argentina in terms of reforms the other interesting thing. The new president is an American citizen. He lived in the U.S. for 10 years. He's very close rooms with Rubio. That's already paying dividends. And that Rubio has announced a huge, he was in Columbia this week. He announced a huge aid package to recover from our earthquake. They also listed the tariffs that have been in place against our country since the last government. So that's an immediate shot in the arm. I particularly like technoblasts. A U.S. listed, but Colombian business that produces windows, solar panels, that sort of stuff. The manufacturers in Colombia and then they primarily sell in the U.S.

And so removing tariffs, which just happened this week, it was a huge shot in the arm for the margins. They've been getting hit because margins have been going down. It's kind of the soft-tossing market combined with the Trump tariffs. And so half of that issues resolved. The stock still down 50% from I was trading two years ago. pretty much everything else in Columbia. It's been straight up.

It's a very interesting value differential. And then I just, I still like the Colombian banks. And then if you go in new, you also get exposure. It's new, that's a large digital banking operation here as well. Yeah, I think the economy is really going to boom. I think it's a huge building boom. People didn't want to get any money to building apartments, condos, that sort of stuff under the higher government.

A lot of Colombians are moving home from Spain, from Florida. It's like the first year we've had positive in migration in quite a while. And so, yeah, the housing demand, it's the more activity in the banking sector. Yeah, so very bullish, I think the first month of the new government is from an investor perspective. It's everything you can ask for in terms of stronger relations with the U.S. on the key international markets, getting key new trade deals, and then putting forward a much more strict law and order image. for them. One fall up there,

then we can wrap things up. What is the airport operator that has exposure to Columbia? Which one is it? Sir yesterday. They have many in private airports, including. Okay.

So that could be another potential beneficiary as well. Ryan, unless you have any other questions, we'll let Ian wrap things up. Before we get out of here, a 30-second pitch, or however long you want it to be, on Ian's insider corner, what type of reader, what type of listener would be interested in your work? Yeah, so I've been running this publication. This is the 10th year now.

Every Sunday, almost every Sunday for 10 years now, kind of giving people, getting my perspective, some of this has lived in Latin America for a long time, kind of what's going on with our local stocks. And all this insight on Brazil, Argentina, Colombia, and actually, look at whatever is going on. I will be covering it. And also my best ideas from the U.S. and other international stock records as well. And that's either a sub-stack or I'm taking off.

Yeah, it's not just a Latin American. All they do that a lot. We talked about today. Software companies you've got recently, alcohol stocks. Yeah, it's got a mix of everything for people who like that type of investing. All right. Let's get out of here, everyone.

Thank you, everyone, for listening. As a disclosure, we are not financial advisors. Anything we say on the show is not formal advice. or recommendation. Ryan, I, or any podcast guest, may old security is discussed in this podcast, may have held them in the past, and may buy, sell or hold them in the future. Thank you everyone for tuning in, and we'll see you next time. Do you wish you could just hit skip on the worst parts of your life? You know the same way you can skip an ad? I get it. I'm Siaiaia, and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned,

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