Amazon Invests $25M in Rappi, Challenges MercadoLibre in Latin America

Amazon has made a strategic investment in Rappi, a prominent last-mile delivery company in Latin America. The initial investment is in the form of a 25 million US dollars convertible bond, which gives Amazon the option to purchase up to 12% of Rappi's shares upon meeting certain conditions. This move is seen as a direct challenge to MercadoLibre, the dominant e-commerce player in the region.

The partnership between Amazon and Rappi combines Amazon's retail and technological infrastructure with Rappi's extensive delivery network. This collaboration allows Amazon to leverage Rappi's logistics capabilities to compete more effectively with MercadoLibre. For Rappi, the alliance provides validation from one of the world's largest online retailers and opens up opportunities to utilize Amazon's logistics and cloud computing networks.

Amazon's strategy of investing in partners through convertible bonds is not new. The company has previously invested in various sectors, including airlines, grocery distributors, and electronics manufacturers. The goal is to gain additional returns as Amazon's business growth drives the performance of its partners.

Rappi, founded in 2015, operates across multiple countries in Latin America, from Mexico to Chile. Its "Turbo" service promises delivery of a wide range of products, from wine to toothpaste, in under 10 minutes. The company also offers restaurant delivery services and has expanded into the financial sector, launching a digital wallet and obtaining regulatory approval for credit card and savings account services in countries like Colombia.

Rappi has attracted significant investment from prominent firms, including SoftBank Group, Sequoia Capital, and T. Rowe Price. Last year, the company's co-founder and CEO expressed the ambition to go public by 2025, potentially listing on the New York Stock Exchange. Recently, Rappi secured a 100 million US dollars loan from Santander Bank and Kirkoswald Capital Partners.

Amazon's investment in Rappi is built on an existing commercial relationship. Rappi is a customer of Amazon Web Services, and in Mexico, Amazon offers a year of free delivery to its Prime members through Rappi. This strategic move by Amazon not only enhances its competitive position in the Latin American market but also strengthens its logistics and delivery capabilities in the region.