If you keep close tabs on foreign economies, then you likely know South America's not exactly firing on all cylinders right now. Although the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC) recently raised this year's GDP growth expectations for the region from 1.5% to 1.7%, that's still pretty low.

The commission also fears Latin America's economic growth will slide back to a meager 1.5% next year. Things just aren't clicking there, making it tough for any U.S. investor to get excited about owning a South America-focused stock.

There's at least one such ticker, however, worth a look. MercadoLibre (MELI -1.80%) is defying the odds by growing in a market that shouldn't be driving much (if any growth. Here's the deal.

Mercadowhat?

MercadoLibre. It's Spanish for "free market." While it's incorporated in the U.S., the Argentinean company's headquarters is actually in Uruguay, right in the midst of its most important markets of Brazil, Colombia, Chile, Peru, and the aforementioned Argentina. It's also got operations in Mexico.

Great, but what does it do? It's often referred to as the Amazon of Latin America because e-commerce is at the heart of what it does. But the comparison doesn't quite do the company justice. While MercadoLibre does manage an e-commerce platform, it's just as much like PayPal and eBay. See, online and mobile payments are a huge part of its business. So are online auctions. It also offers logistics solutions, manages an online classifieds platform, and facilitates credit.

Still, South America's economy is a mess. Inflation in Argentina now stands at triple-digit levels. Peru is in a recession. Brazil seems to be growing with just a superficial look. But dig deeper and you'll see that the recent apparent strength largely reflects a surge in demand for agricultural goods that's starting to fade. MercadoLibre's second-quarter revenue was up 31.5% year over year anyway, driving a 123.2% improvement in operating income.

MELI Revenue (Quarterly) Chart

MELI Revenue (Quarterly) data by YCharts

What gives?

The key to this growth isn't the condition of Latin America's economy. It's the technological evolution that's still well underway there.

3 technology tailwinds

Many people living in the U.S. (or other highly developed areas) might struggle to remember it, but there was a time not too long ago when smartphones didn't also serve as a digital wallet. Indeed, there was a time not too long ago when cell phones weren't mobile computers constantly connected to the web. It wasn't too long before that when the internet wasn't the hub of our daily lives.

Much of the Latin American market is now experiencing this technological evolution that almost anyone reading this has already seen firsthand.

Take something as simple as access to the internet. The FCC reports that as of late 2021, more than 97% of people living in the U.S. had access to high-speed internet service. Atlantico's 2023 Latin America Digital Transformation Report indicates that as of the end of last year, only 78% of Latin American residents enjoyed regular connectivity to the web. Only a little more than half of them are plugged into fixed broadband or 5G connections, according to S&P Global's market research firm Kagan. And for one-fifth of these people, data costs were and still are prohibitively high.

That's changing, though. As was the case here and elsewhere, time and scale will continue to lower internet access costs and widen availability. Atlantico's data indicates that as recently as 2012, only 42% of people living in Latin American countries enjoyed access to the internet.

And they're increasingly shopping as they go online. Market research firm Payments and Commerce Market Intelligence estimates Latin America's e-commerce market will be 27% bigger in 2023 than it was in 2022, reaching $509 billion en route to $923 billion in 2026.

Perhaps the biggest, most sustainable driver of MercadoLibre's current growth rate lies in the fact that it's also bringing more banking-like services to the underbanked, or outright unbanked. Its payment platform Mercado Pago handled $42 billion worth of payments during the three-month stretch ending in June, up 39% from its year-ago comparison as more and more consumers embraced the idea of tech-based payment solutions.

And its target market is more than ready to ramp up its use of digitally based solutions. The International Money Fund reports the region is disproportionally home to more young adults and middle-aged consumers who are generally more tech-savvy. Although more than 300 million of Latin America's consumers are already willing and able to shop with a digital wallet, the number still only scratches the surface of the opportunity at hand.

Industry research company Ebanx reckons this count will grow by more than 20% per year through 2027. Mordor Intelligence believes Latin America's mobile payment market itself will grow at an annualized pace of more than 24% between now and 2028, as the option becomes a viable choice for more and more people.

Simply put, the tide is rising. There's not much chance of economic turbulence stopping it.

There's a lot to like about MercadoLibre

MercadoLibre is admittedly off the beaten path. Aside from almost the entirety of its business being done outside of North America, its market cap of only $70 billion isn't exactly head-turning.

Don't get so bogged down by the stock's unfamiliarity, however, that you pass up an opportunity to tap into an entire continent's technological evolution. Let's also not overlook the fact that as one of the dominant companies in the region, MercadoLibre is well-positioned to maintain that dominance.

Or if nothing else, owning MercadoLibre is a great way to bring international diversification to your portfolio that's often tough to come by.