MercadoLibre Stock

MercadoLibre, Inc., together with its subsidiaries, operates as an online commerce ecosystem in Latin America.

The company is present in 18 countries: Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador. The company’s platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline.

The company offers its users an ecosystem of six integrated e-commerce and digital financial services: the Mercado Libre Marketplace, the Mercado Pago Fintech platform, the Mercado Envios logistics service, the Mercado Ads solution, the Mercado Libre Classifieds service and the Mercado Shops online storefronts solution.

Through the company’s e-commerce platform, the company provides buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. The company offers technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform in Latin America.

The Mercado Libre Marketplace is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through the company’s website and mobile app. This platform enables the company (when the company acts as sellers in its first-party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods.

The Mercado Envios logistics solution, available in Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador, enables sellers on the company’s platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services the company offers are an integral part of the company’s value proposition, as they reduce friction between buyers and sellers, and allow the company to have greater control over the full user experience. Sellers that opt into the company’s logistics solutions are not only able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices, but are also eligible to access shipping subsidies to offer free or discounted shipping for many of their sales on the company’s Marketplaces.

In 2020, the company launched Meli Air with a fleet of dedicated aircraft covering routes across Brazil and Mexico, with the aim of improving the company’s delivery times. The company has also developed a network of independent neighborhood stores and commercial points (known as ‘Meli Places’) to receive and store packages that are in transit using the company’s integrated technology. The Meli Places network allows buyers and sellers to pick-up, drop-off or return packages with a better experience, reducing the travel distance for all parties.

To complement the Mercado Libre Marketplace and enhance the user experience for the company’s buyers and sellers, the company developed Mercado Pago, an integrated digital payments solution. Mercado Pago was initially designed to facilitate transactions on Mercado Libre’s Marketplaces by providing a mechanism that allowed the company’s users to securely, easily and promptly send and receive payments. Now, Mercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. The company’s digital payments solution enables any Mercado Libre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces. Currently, Mercado Pago processes and settles all transactions on the company’s Marketplaces in Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador.

Beyond facilitating Marketplace transactions, over the years the company has expanded its array of Mercado Pago services to third parties outside Mercado Libre’s Marketplace. The company began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America. Today, Mercado Pago’s digital payments business allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits. Through Mercado Pago, the company brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with the company.

As the company deployed its digitally-based payments solutions, the company also observed that individuals and micro, small and medium- sized enterprises (‘MSMEs’) in the physical world were being underserved or overlooked by incumbent payment providers and financial institutions in Latin America, and that a very large number of retail transactions were still being settled in cash throughout the region. Consequently, the company has also deepened its fintech offerings by growing the company’s online-to-offline (‘O2O’) products and services. The company envisions Mercado Pago as a powerful disruptive provider of end-to-end financial technology solutions.

In the company’s main markets, the company offers the following solutions:

In-store physical payments by selling mobile point of sale (‘MPOS’) devices and through quick response (‘QR’) payment codes;

Digital payment solutions for utilities, mobile phone top up, peer-to-peer payments and more through the company’s digital account;

Pre-paid cards and debit cards for users to spend and withdraw their account balances from their Mercado Pago digital account;

Merchant and consumer credits, both on and off the Mercado Libre Marketplace, and credit cards;

Insurance products, such as extended warranties, theft and damage policies, among others;

Savings and investment products to invest balances stored on Mercado Pago accounts; and

A cryptocurrency buy, hold and sell feature of the company’s wallet in Brazil, Mexico and Chile, for users to buy, hold and sell selected global cryptocurrencies and stablecoins.

Mercado Credito, the company’s credit solution available in Argentina, Brazil, Mexico and Chile, leverages the company’s user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables the company to further strengthen the engagement and lock-in rate of the company’s users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution. The company’s distribution capabilities and in-depth understanding of the company’s customers’ behavior and merchants’ sales on the Mercado Libre Marketplace and machine learning and artificial intelligence algorithms have also allowed the company to develop its own proprietary credit risk models with unique data that differentiate the company’s scoring from traditional financial institutions.

The company offers credit lines to both its online merchants, as well as MPOS device users. Because the company’s online merchants’ business flows through Mercado Pago, the company is able to collect principal and interest payments from their existing sales on Mercado Libre’s Marketplaces, meaningfully reducing the risk of uncollectability on the loans the company originates to its merchants.

Consumers can access credit lines through the company once it scores and approves them through the company’s proprietary models. Loans can be used for a purchase on the Mercado Libre Marketplace, or on third party sites that use the company’s payments processing technology. Since 2019, the company also extends personal loans to recurring consumer credit borrowers, allowing them to buy products and services outside of the company’s platform via the Mercado Pago digital account. In 2021, the company launched its first Mercado Pago credit card in Brazil, followed by Mexico in 2023, which is free, internationally accepted, digitally managed and can be used on- and off-platform. An advantage of the Mercado Pago credit card is that it allows users to pay in additional installments for purchases on the Mercado Libre Marketplace and accrue additional points to the company’s user loyalty program.

The company collects data in its proprietary credit models, which helps the company better understand and more accurately predict the behavior of the company’s users, and continue increasing the pace of originations while maintaining levels of uncollectible debt at an acceptable level from a business perspective.

The company’s asset management product, which is available in Argentina, Brazil, Mexico and Chile, is a critical pillar to build the company’s alternative two-sided network vision. It incentivizes the company’s users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return the company’s product offers is greater than traditional checking accounts. With a seamless onboarding, this product allows users to withdraw and use the value stored in their digital wallets at any given time through QR code in-store payments, pre-paid and debit cards, or cash withdrawn from an ATM, without requiring that their funds be trapped in a money market fund or a certificate of deposit to obtain an equivalent return. This product is another way in which the company continues to innovate, leveraging the rising trust in third-party e-commerce platforms and low levels of formal sector financial inclusion, which generate a unique opportunity for investment products aimed at users in Latin America who are unbanked or underbanked.

As an extension of the company’s asset management and savings solutions for users, the company launched a digital assets feature as part of the Mercado Pago wallet in Brazil, Mexico and Chile, in 2021, 2022 and 2023, respectively. This service allows the company’s millions of users to purchase, hold and sell selected digital assets through the company’s interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet. In 2022, the company launched savings products in Brazil that enable users to purchase certificates of deposit, which have a higher return than the company’s basic asset management product. In partnership with a third party, the company also launched three investment fund options in Brazil, which enable the company’s users to diversify their investment portfolio in an accessible way and with options for quick withdrawal.

The company’s advertising platform, Mercado Ads, enables businesses to promote their products and services on the Mercado Libre Marketplace and Mercado Pago Fintech platform. Through the company’s advertising platform, brands and sellers are able to display ads on the company’s pages through product searches, banner ads or suggested products. The company’s advertising platform enables merchants and brands to access the millions of consumers that are on the company’s Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion. Advertisers are able to leverage the company’s first-party data to create and target highly particularized audiences.

Through Mercado Libre Classifieds, the company’s online classified listing service, the company’s users can also list and purchase motor vehicles, real estate and services in the countries where the company operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and not final value fees. The company’s classifieds pages are also a major source of traffic to the company’s platform, benefiting both the commerce and fintech businesses.

Complementing the services the company offers, the company’s digital storefront solution, Mercado Shops, allows users to set up, manage and promote their own digital stores. These stores are hosted by Mercado Libre and offer integration with the rest of the company’s ecosystem, namely the company’s Marketplaces, payment services and logistics services. Users can create a store at no cost, and can access additional functionalities and value added services on commission.

In 2023, the company relaunched its loyalty program in Brazil and Mexico, simplifying the experience with the elimination of the prior levels system and offering a brand new paid subscription, Meli+, which includes free shipping on more products, free Disney+ and Star+, as well as Deezer Music Premium free for the first 12 months. The subscription also includes video content discounts for certain third-party content providers, such as HBO Max, Paramount+ and Vix. In Argentina, Chile and Colombia the company still have the original Level 6 subscription.

In addition, in 2023, the company launched Mercado Play, a streaming service available to all users in Argentina, Brazil, Mexico, Colombia, Chile, Peru and Uruguay. The platform offers users access to content from various national and international content studios at no cost.

The company has two distinctive revenue streams in its business:

Commerce Revenue

The company’s Commerce business is consisted of two primary revenue streams: Services and Product Sales. The company’s Services revenue stream is mainly generated from Marketplace fees that include final value fees and flat fees for transactions below a certain merchandise value, related shipping fees net of third-party carrier costs (when the company acts as an agent) and storage fees, classifieds fees, advertising sales fees, and fees from other ancillary businesses. The company’s Product Sales revenue stream entails selling merchandise on a first-party basis from the company’s own inventory and related shipping fees.

Fintech Revenue

The company’s Fintech business is consisted of three primary revenue streams: (a) Fintech Services, which includes revenues from commissions the company charges for transactions off-platform derived from use of the payment solution, offering installments, either when the company finances transactions directly or when the company sells the corresponding financial assets, as well as Mercado Pago credit and debit card fees, and insurtech fees; (b) Credit Revenues, which includes revenues from interest earned on loans and advances granted to merchants and consumers, and interest earned on Mercado Pago credit card transactions; and (c) Fintech Product Sales, which includes revenues from sales of mobile point of sales devices.

Strategy

The company’s main focus is to serve people in Latin America by enabling wider access to retail, digital payments and e-commerce services, and by providing compelling technology-based solutions that democratize commerce and money, thus contributing to the development of a large and growing digital economy in a region with a population of over 650 million people and one of the fastest-growing e-commerce and internet penetration rates in the world.

The company serves its buyers by giving them access to a broad and affordable variety of products and services, a selection larger than otherwise available to them via other online and offline sources serving the company’s Latin American markets. The company serves its sellers by giving them access to a larger and more geographically diverse user base at a lower overall cost and investment than offline venues serving the company’s Latin American markets. Additionally, the company provides payment settlement services and shipping solutions to facilitate such transactions, and advertising solutions to promote them. The company also serves its users by making capital more accessible through different credit products and fostering entrepreneurship and social mobility.

The company’s strategies are to expand into additional transactional service offerings; continue to improve the shopping experience for the company’s users; continue to grow the company’s business and maintain market leadership; increase the monetization of the company’s transactions; and take advantage of the natural synergies that exist among the company’s services.

Marketing

The company’s marketing strategy is designed to grow its platform by promoting the Mercado Libre and Mercado Pago brands, attracting new users, generating more frequent trading by the company’s existing users and cross-selling services among the company’s existing user base within the company’s entire ecosystem of commerce and fintech. To this end, the company employs various means of advertising, including placement in leading online channels across Latin America, paid and organic positioning in leading search engines, email and push notification marketing, onsite marketing, presence in offline media, sponsorship of large events, and use of targeted promotional discount coupons.

During 2023, the company strengthened its buyers acquisition and demand generation efforts in Mercado Libre with multiple initiatives that helped the company drives total gross merchandise volume (‘TGMV’) while gaining efficiency in the company’s budget investments. The company also relaunched its loyalty program (Meli+) to increase users engagement and accelerated the company’s digital financial services positioning for Mercado Pago. These campaigns were rolled out across public TV, cable TV, radio, billboards and online media. The company continued carrying out a complete coverage of promotional campaigns on commercial dates such as Children’s Day, Mother’s Day, Father’s Day, Christmas and dates specific to the e-commerce industry, such as Hot Sale, CyberMonday, Black Friday and Buen Fin, leveraging the company’s unique ecosystem of solutions within advertising, Mercado Credito, Mercado Shops and Mercado Envios.

Seasonality

Like most retail businesses, the company experiences the effects of seasonality in all of the countries in which the company operates throughout the calendar year (year ended December 2023). Although much of the company’s seasonality is due to the year-end promotional campaigns and the Christmas holiday season, the geographic diversity of the company’s operations (i.e. southern and northern hemispheres) helps mitigate the seasonality attributed to summer vacation time and national holidays.

Typically, the fourth quarter of the year is the strongest in terms of revenue in every country where the company operates due to the significant increase in transactions before the holiday season. The first quarter of the year is generally the company’s slowest period. The months of January, February and March correspond to summer vacation time in Argentina, Brazil, Chile, Peru and Uruguay. Additionally, the Easter holiday falls in March or April, and Brazil celebrates Carnival for one week in February or March. This first quarter seasonality is partially mitigated by the company’s operations in the countries located in the northern hemisphere, such as Colombia and Mexico, the slowest months for which are the summer months of July, August and September. Lastly, commercial campaigns like Hot Sale, CyberMonday, Black Friday and Buen Fin generate an increase in transactions.

Government Regulation

The company is subject to significant general data protection and privacy-related regulations in many of the jurisdictions in which the company operates (e.g. Law 13,709 (LGPD) in Brazil, Law 25,326 in Argentina, Federal Law on the Protection of Personal Data on Private Sector Possession in Mexico, Laws No. 1581/2012 and 1266/2008 in Colombia, Law No. 19,628 in Chile, Law No. 18,331 in Uruguay and Law No. 29,733 in Peru).

Brazil

Mercado Pago’s activities are subject to a number of laws and regulations that relate to payment schemes and payment institutions, including Law No. 12,865/2013, which established the first set of rules regulating the electronic payments industry within the Brazilian Payment System (the Sistema de Pagamentos Brasileiro, or ‘SPB’) and created the concepts of payment schemes and payment institutions.

According to the BACEN’s regulation, Mercado Pago is required to maintain funds in an amount equal to the value of the balance of funds held in a payment account and in transit between payment accounts at the same payment institution in: (i) a specific account in the BACEN (Correspondent Account for Electronic Currency - CCME) or (ii) federal government bonds, registered at the Special Settlement and Custody System (‘SELIC’).

In addition, Mercado Pago as a payment institution in Brazil is subject to:

Anti-Money Laundering Rules: Mercado Pago is subject to Brazilian laws and regulations relating to anti-money laundering, terrorism financing and other potentially illegal activities. These rules require the company to implement policies and internal procedures to manage, monitor, identify, and if applicable, report suspicious transactions to the relevant authorities to prevent the practice of crimes of ‘money laundering’ or concealment of assets.

Register of Receivables from Payment: Mercado Pago is also subject to rules regarding the register of credit card receivables and credit operations in a centralized system operated by an entity authorized by the BACEN. These recent regulations aim to promote transparency in credit transactions, a broader credit offer and to allow merchants to offer their credit card receivables as collateral to receive better loan offers, improving competition and reducing the cost of credit.

Cybersecurity Policies: In 2018 the BACEN published new rules setting forth cybersecurity policies and requirements for the contracting relevant data processing and storage services as well as cloud-based computing services, which are applicable both to Mercado Pago and Mercado Credito.

Data Protection Law: In August 2018, Brazil approved its first comprehensive data protection law (the ‘Lei Geral de Proteção de Dados Pessoais’ or ‘LGPD’), which became applicable to the company’s business in Brazil in August 2020. In December 2018, the former president of Brazil issued Provisional Measure No. 869/2018 which amended the LGPD and created Brazil’s national data protection authority (the ‘ANPDP’). The company has created a program to implement the relevant changes to the company’s business processes, compliance infrastructures and IT systems to reflect the new requirements and comply with the LGPD. The LGPD establishes detailed rules for the collection, use, processing and storage of personal data and affects all economic sectors, including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected, whether in a digital or physical environment.

Secrecy rules: In addition to regulations affecting payment schemes, Mercado Pago is also subject to laws relating to internet activities and e-commerce, as well as banking secrecy laws, consumer protection laws, tax laws (and related obligations such as the rules governing the sharing of customer information with tax and financial authorities) and other regulations applicable to Brazilian companies generally. Internet activities in Brazil are regulated by Law No. 12,965/2014, known as the Brazilian Civil Rights Framework for the internet, which embodies a substantial set of rights of internet users and obligations relating to internet service providers, including data protection.

Argentina

The company has been registered as a ‘Proveedor No Financiero de Credito’ (non-financial loan provider) with the CBA since December 18, 2020. The regulation also requires that the company complies with certain rules established by the Central Bank of Argentina (CBA) regarding, among other things: (i) interest rates in loan operations; (ii) protection of users of financial services; (iii) methods of communication with users of financial services; and (iv) such users’ access to information concerning their contractual obligations.

Mexico

On April 29, 2022, MercadoLibre, S.A. de C.V. Institución de Fondos de Pago Electrónico, a Mexican subsidiary, obtained the final approval by the CNBV to operate as an Electronic Payment Institution (Institución de Fondos de Pago Electrónico or ‘IFPE’, as referred to by the Financial Technology Institutions Act), which enables the entity to issue, manage, redeem and make electronic transfers of money on behalf of its clients, through computer applications, interfaces, web sites or any other means of electronic or digital communication.

MercadoLibre, S.A. de C.V. Institución de Fondos de Pago Electrónico became a regulated financial entity towards third parties, effective on May 11, 2022 duly published in the Official Gazette, and is subject to the supervision and jurisdiction of the relevant Mexican financial regulators, including but not limited to the National Commission for the Protection and Defense of Users of Financial Services, CNBV and the Central Bank of Mexico.

Chile

In November 2021, the Chilean Commission for the Financial Market (‘CMF’) granted Mercado Pago, through its entities Mercado Pago Emisora S.A. and Mercado Pago Operadora S.A. (formerly know as MercadoPago S.A.), a prepaid card issuer license and payment card operator license, respectively. These licenses transformed Mercado Pago Emisora S.A. and Mercado Pago Operadora S.A. into regulated entities, supervised by the CMF and the Chilean Financial Analysis Unit (‘UAF’, in charge of supervising anti-money laundering activities in Chile), and became obligated, among other things, to: (i) deliver information on its financial and operational management on a regular basis; (ii) maintain certain minimum capital required; (iii) set up a determined liquidity reserve; (iv) deposit and maintain users’ funds in specific banks’ accounts (only applicable to Mercado Pago Emisora S.A.); and (v) perform know the client and anti-money laundering duties.

On October 12, 2022, the Chilean Congress approved the Fintech and Open-Banking Law Project, which was published on January 4, 2023, and came into effect on February 3, 2023. This law established a regulatory framework for certain technological financial services that did not have their own legal framework. These services are: (i) Alternative Transaction Systems, (ii) Crowdfunding Financing Platforms, (iii) Financial Instrument Intermediation, (iv) Order Routing, (v) Credit Advisory, and (vi) Investment Advisory. Pursuant to this law, Mercado Pago Crypto S.A. shall file a license request with the CMF in order to continue offering Order Routing services through the ‘buy, hold and sell’ product launched in 2023 in collaboration with Ripio Chile SpAp. The rules governing the specifics of this filing and the license that CMF must grant, were issued on January 12, 2024, giving Mercado Pago Crypto S.A. until February 2025 to file the license request. In addition, an Open Finance System is created to allow financial service providers to exchange customer financial information. The CMF has until June 3, 2024 to issue secondary regulation.

On October 24, 2022, Mercado Pago Corredores de Seguros SpA was registered as an Insurance Broker in the Registry of Trade Assistants for Insurance of the CMF. The main objective of the company is the remunerated intermediation of general and life insurance contracts with any insurer based in Chile.

In September 2016, the company obtained the registration of the company’s Uruguayan subsidiary Deremate.com de Uruguay S.R.L. from the Central Bank of Uruguay (‘BCU’) as an entity entitled to provide services of payments and collections (‘PSPC’). Thus, on November 1, 2016, Mercado Pago was launched in Uruguay. In July 2023, MercadoPago Uruguay S.R.L. obtained the approval by the BCU to operate as an Electronic Money Issuing Institution (‘IEDE’) facilitating electronic money transfers. On October 1, 2023, MercadoPago Uruguay S.R.L. started operations, and since then, must adhere to regulations regarding the placement of user funds, including the obligation to deposit and maintain these funds in designated local bank accounts to guarantee the availability of balances in each user’s digital account. In October 2023, MercadoPago Uruguay S.R.L. was authorized by the BCU, subject to the terms of the regulations, to invest its user funds in short-term investments, including ‘overnight’ bank deposits, leveraging results and assuming associated risks.

In July 2023, Communication No. 2023/147, superseded by Communication No. 2024/018 on February 1, 2024, established regulations for reporting security incidents. In October 2023, Communication No. 2023/196 mandated bi-monthly reports on administered fund compositions, and significant modifications addressing fast payment systems and regulatory rules were made to the payment system rules.

Peru

On November 10, 2022, the Central Reserve Bank of Peru (‘BCRP’) enacted regulations related to the card payment processing system that applies to issuers, acquirers and payment facilitators. On January 27, 2023, MercadoPago Perú S.R.L. was registered by the BCRP as a payment facilitator entity, allowing it to (a) affiliate merchants to the card payment system, (b) offer POS, and (c) transmit or process card payment orders and /or participate in the process of settlement to the merchants affiliated.

History

MercadoLibre, Inc., a Delaware corporation, was founded in 1999. The company was incorporated in 1999.