Mercado Libre：电商帝国——[商业拆解，第227期]

Today, we are breaking down the LatAm e-commerce giant Mercado Libre. My guest is Daniel Wu of Bristol Moon Capital. When Bristol Moon wrote a deep dive on Mercado Libre, it caught my attention.

I was introduced to MELI about 15 years ago, when it was still the eBay of LatAm. Similar to a place that you revisit after a long time away, MELI looks a lot different than it did in those early days. Just consider that, with a $120 billion market cap, MELI is 3 times the size of eBay today and has clearly evolved since those early days.

Daniel walks us through the business as it stands today and how MELI paired this Amazon-like e-commerce approach with a complementary but equally impressive fintech business to fuel the company. We get very into the weeds of the segment, so if you're into business analysis, you're going to get a lot of detail on all of the different engines that make Mercado Libre work.

This was a fun episode for me. It's an incredibly interesting business with an incredible backstory and founder story. Daniel, we have Mercado Libre today, which is a business I know has evolved quite a bit since its origin story. I think a great place to start would just be to lay it out, however you would, in digestible terms: what Mercado Libre does and who they are in the market, just to level-set us.

Hi, Matt. Thanks for having me on. I think the simplest way to think about Mercado Libre is that it is an amalgamation of Amazon Retail and Alipay in Latin America.

1. Mercado Libre Runs Two Engines

MELI is the largest e-commerce platform by market share in LatAm, with major operations in Brazil, Mexico, and Argentina, and a presence in 15 other countries. It is also one of the largest fintech platforms in the region, with its Mercado Pago digital wallet and Mercado Crédito credit business.

The e-commerce operation is very similar to Amazon. The marketplace is predominantly third-party merchants, with a small but growing first-party presence. There's a scaled logistics business that is largely unmonetized and a nascent on-site advertising business. MELI even has its own loyalty program called MELI+, which offers free shipping, reward points, and licensed entertainment content. So it's very similar to Amazon Prime.

But MELI wasn't always built in Amazon's image, and we can discuss the company's evolution over time when we talk about the founding story.

I wanted to get to that because when I think of Mercado Libre, which is very much stuck in the past, it was eBay. I considered it the LatAm eBay. Obviously, it has evolved away from that. In that very popular Amazon-versus-eBay comparison, where their ultimate fates diverged, they went with the right model, certainly here.

Bring us back to the beginning. Is there anything around the founding story, the founder, and the evolution of the business that you would hit on? I think it is very unique.

2. MELI Survives The Dot Com Bust

In many ways, MELI has a classic Silicon Valley founding story. The company was founded in 1999 in a Buenos Aires garage by Marcos Galperin and his 2 co-founders, Hernan Kazah and Stelio Kulter.

Galperin was studying for his MBA at Stanford when he came up with the idea for Mercado Libre after witnessing the explosive growth of online marketplaces like eBay, as you mentioned, during the dot-com boom. After the 3 co-founders finished their MBAs, they returned to Argentina to start Mercado Libre.

The initial concept of the business was very heavily inspired by the eBay auction model, so it really wasn't that unique in any way. We have to remember that this was the dot-com era, and there were something like 80 e-commerce startups in LatAm, all pursuing the same or very similar business models. Many of these competitors were growing faster and had more funding as well.

And yet here we are on the podcast talking about MELI. So I guess the question is, why is that? According to the founders, the difference between MELI and the other hot startups was that MELI was focused on building organic growth engines for the long term instead of chasing a big IPO by burning through capital on user acquisition with negative economics.

In the early years, the founders were willing to let MELI grow at a pace that could be sustained by the existing infrastructure at the time, rather than forcing a level of growth that was economically unsustainable. So when the dot-com bubble burst, MELI was one of the few survivors, and that has allowed it to reap 2 decades of demographic, technological, and economic tailwinds in the region.

It's quite interesting. They did not drop out of their MBA program, it sounds like. So it's the Silicon Valley story, but with the finishing education. I admire that.

The evolution away from that auction model—was there a certain time period when that really took place? I admire the focus on the underlying economics and not getting caught in that cash-burning cycle that can leave you exposed to things like the dot-com bust. But when did they truly make the transition away from being a marketplace and move more toward what looks like Amazon today?

I don't think that evolution necessarily happened at a point in time. The team pretty quickly realized that they needed to expand beyond just selling used items on a C2C basis via the auction model.

By the time of the IPO, the fixed-price marketplace was already the main format. Through the 2010s, when the company used to report this metric, fixed-price sales were, I think, 95% or more of GMV.

When did they actually IPO?

They IPO'd in 2007.

Interesting. At that point, you had already seen that taking place. I certainly think that fixed-price sales are—I don't know what percentage of GMV it is for eBay today—but much more common to see out there as things have transitioned.

It would be interesting to hear a little bit about the regional dynamics and how they might have differed from what was going on in the US. Was there anything unique about what Mercado Libre had to do, or tailwinds that they were able to catch, that would have differed from the natural Amazon, eBay, and e-commerce tailwinds that the US players benefited from?

3. LatAm E Commerce Takes Off

There were several regional dynamics that provided tailwinds to MELI's growth through the 2000s. First and foremost, I'd say it was the rapid rise of internet connectivity in Latin America.

Between 2000 and 2007, the number of internet users in LatAm grew from around 18 million to over 122 million, which far outpaced the growth of US internet users. But even with this tremendous growth, LatAm internet penetration was in the 20% range, compared to over 70% of the US population. This explosion of internet users in the region created a ripe environment to scale up an e-commerce platform.

Then you had the demographic tailwinds as well. By the early 2000s, there was a rising middle class in countries like Brazil and Argentina that was seeking a greater variety of products at better prices. In many LatAm cities, physical retail options were limited, so an online marketplace that connected buyers and sellers across the country, or even across a region, was appealing.

In the US, people saw the success of eBay and Amazon, which really helped validate the model for both investors and users as well. It's important to contextualize that even with these tailwinds, we're still talking about an emerging market that was years, if not decades, behind the US across many ease-of-doing-business measures.

As a first mover in LatAm e-commerce, the company had to solve multiple friction points to drive that initial online shopping adoption. These included cultural skepticism toward online transactions, low credit card penetration, and an overall lack of secure digital payments infrastructure. There were patchy logistics networks and a diverse set of regulations across the region as well.

For example, to address the lack of payments infrastructure, MELI launched the Mercado Pago digital payment platform in 2003. To overcome the cultural skepticism and low trust in online transactions, the company introduced measures such as a robust buyer-and-seller feedback system and escrow-like payment protections through Mercado Pago. This is very similar to the role that PayPal played for eBay in reducing friction in an essentially low-trust environment.

To address the shipping pain point, MELI launched Mercado Envíos in 2013, which is its managed shipping service. Rather than leaving it up to the buyer and the seller to figure out how a package would be delivered, Mercado Envíos allows sellers to print shipping labels and use MELI's negotiated carriers for a more consistent delivery experience.

As MELI continued to invest in its logistics network, that delivery experience has only improved for both buyers and sellers.

And me saying they were a copycat in any way would be massively downplaying the execution of what they accomplished.

It’s interesting to hear all of the examples, from eBay to Mercado Pago looking quite similar to PayPal to the logistics network. Was there anything that they did that was innovative that was then copied elsewhere? I’m curious. It certainly helps investors appreciate what you’re doing when there is an example elsewhere in the world. But from your perspective, was there anything that they really innovated in this broader model before some of the global competitors did it?

If you listen to the words of the founders themselves, they would admit that they weren’t particularly innovative. Essentially, they just took the idea that eBay presented. I think if you look at the evolution of the business—what Amazon did and then what Mercado Libre did—you could probably say that, yeah, they definitely took a lot of inspiration from Amazon over time as well.

But MELI, of course, has some of its own homegrown innovations as well. For example, MELI Delivery Day lets buyers set a fixed day of the week to receive their slow-delivery orders. The slow-delivery layer of the logistics network essentially stages a buyer’s non-fast-shipping packages for a single day, which increases delivery route density and the number of packages per stop. This is what allows MELI to provide free shipping on orders below 79 reais.

Overall, I’d say MELI has succeeded largely by bringing existing innovations into the LatAm market at scale and then just executing better than other competitors in the region, and that includes Amazon itself. So even though MELI may not have led any particular initiative on a global basis, that doesn’t mean they can’t do really well in their own region.

Absolutely, yeah. There’s proof of that. I attribute it to them finishing that education. It allows them to study and then implement. So, plus one there for taking a different route.

Let’s talk about the business model today. I think you referenced it in the first answer. How do you think about the segments and just categorizing them, whatever way they either report or you would view the business? Explain that.

4. The Mercado Libre Flywheel

Today, MELI’s business consists of 2 segments: commerce and fintech. Total revenue was nearly $21 billion in 2024, and that’s up from $1.4 billion in 2018. Commerce revenue is just under 60% of total revenue, and that mix has stayed relatively consistent since 2018, except for the period immediately post-COVID, when commerce growth saw a sharp spike.

Within the commerce segment, we’ve got the marketplace, the logistics business, and the advertising business. I’ll go into detail on these when we get to the segment deep dives. On the fintech side, the 2 main businesses are payments and credit.

From the consumer perspective, Mercado Pago is a digital wallet that can be used on and off the marketplace. From a merchant perspective, Pago is a merchant acquirer that processes payments and handles installments, and we’ll get to that later as well. The credit business offers personal loans and credit cards to consumers and working capital to merchants.

As you can imagine, these 2 complementary segments join together to form the Mercado Libre ecosystem. Consumption on the marketplace drives payments, and then adoption of consumer credit and the digital wallet drives consumption in the marketplace. So there’s that flywheel effect going on.

Perhaps surprisingly, in practice, these 2 segments have also been quite countercyclical. When one segment is weak, the other segment has been able to outperform and carry the overall top-line growth. I think this is actually one of the key reasons why MELI didn’t experience a post-COVID growth hangover like a lot of other pandemic darlings, including Amazon. When commerce growth slowed sharply in 2022, fintech growth accelerated to offset much of that commerce drag.

What would you attribute that to? It’s not logical to me why that would actually happen. Was there something specific driving it?

Yeah. In 2021, they launched the credit card business in Brazil, and that has been the main driver of the credit business, which has been the main driver of the fintech business. That happened just as commerce growth in Brazil and Mexico was starting to taper off from the initial, very strong growth of 2020 and 2021.

So, idiosyncratic. That makes more sense. And then, from a geographical perspective, what are the big countries in LatAm, and is there a way to isolate the weightings of those countries?

Yes. If we just look at the business from a geographic split, Brazil is the largest geography at 52% of last-12-month revenue, followed by Mexico and Argentina at 22% each. The rest of LatAm is just 4%. So it really is these key countries that make up the majority of the revenue.

The mix of commerce and fintech also differs across these markets. Argentina has the highest fintech mix at 65%. Mexico is the opposite, and Brazil shakes out closer to the group average. You can also see this mix impact in the contribution margins as well. Argentina has by far the highest contribution margin, in the mid-40s. Brazil is at less than half of that, and then Mexico is even lower, in the high teens.

Let’s get deeper into each segment. I have a lot of questions that I want to talk about on each one, but we’ll start with commerce. What does the market share look like? You referenced that in the early days there were a lot of competitors going after the same opportunity. Where does that stand today in terms of MELI specifically?

Would you highlight any key competitors, whether it’s in LatAm broadly or country-specific, that are top of mind when considering the market?

5. MELI Leads A Fragmented Market

Before I talk about MELI’s market share, I guess it’s good to lay out the playing field in terms of e-commerce in LatAm. E-commerce penetration in LatAm is still quite low despite the post-COVID step change. We’ve seen estimates in the sort of 13% to 14% range across the region, and this year it’s probably, call it, 15%. That compares to U.S. e-commerce penetration, which is in the low 20s. At the extreme, you’ve got countries like the U.K. and China, where penetration is into the 30% range.

In terms of MELI’s market share of that market, it’s a bit harder to pin down because of how fragmented the LatAm market is and also the fact that the company doesn’t report GMV by country. But we’ve seen sell-side estimates indicating that MELI’s LatAm share is in the mid- to high-20% range.

That spans from over 80% share in Argentina, where MELI is completely dominant, to around 40% in Brazil and then negligible share in some of the other countries. Overall, we understand MELI’s LatAm market share is higher than the next 11 operators combined, so they are in a very strong position. But it also goes to show that e-commerce in LatAm is still a very fragmented market.

Is there anything that artificially caps e-commerce penetration when you think about the drivers of that? What would you point to as stopping it from being at the same level as the U.S., let alone some of the bigger players?

Yeah. I don’t see anything that’s necessarily fundamental to preventing e-commerce penetration from getting up to those levels. I think LatAm just started at a lower point compared to the U.S. As I mentioned, a lot of the infrastructure had to be built out over the past couple of decades, and MELI was one of the main companies responsible for doing that.

In many ways, I think that’s why penetration has been lower compared to the U.S. But I don’t think the fact that LatAm is an emerging market should put a cap on the potential for e-commerce penetration, because you look at a country like China, where they managed to get to 30% in a very short period of time. It’s going to take longer for LatAm, but we do think that there’s a lot more runway to go for e-commerce.

And then, just on the competitive dynamics, e-commerce is incredibly competitive for periods of time, where you will see aggressive market-share grabs, oftentimes sacrificing economics to capture more of the market. That oftentimes fades away as the industry matures in its respective country or cycles turn.

Where would you put Latin America? If you need to break it down by country, where would you put it in terms of the stability of that market share, maybe looking backward and then thinking a little bit forward about their ability to either maintain that share or grow that share in the future?

Yeah. I think there was certainly a lot of competition in the LatAm market during the COVID period, especially from international e-commerce players that were trying to enter the market. You’ve got Shopee, which is Sea Limited’s e-commerce arm, and you had Temu as well.

Amazon has been in the market for a long time, and they’ve got pretty stable market share—relatively negligible for how long they’ve been in the market, I guess you could say. Then there are a lot of long-tail e-commerce businesses from physical retailers, and they have been the ones that have mainly lost share to the pure-play e-commerce players.

You mentioned the intense competition, particularly during the COVID period. What did that look like in terms of having any impact on the business? And then, thinking about some of that competition that still exists in the market, it’s always very interesting to me to see e-commerce in certain countries or regions and when it can be incredibly competitive, where you see very low take rates, versus when there is a little bit more stability and take rates come up.

So what would you say happened then, and then where does it stand today?

In terms of the evolution of e-commerce competition, at least over the past few years, the best example is probably Shopee. Shopee, which is Sea Limited’s e-commerce business, entered Brazil in, I think, December 2019 as a cross-border marketplace, and then it began to build out the local logistics and seller network in 2020. The business competed pretty heavily during those years. I think if you look at the app download data and the monthly active user data, Shopee actually exceeded MELI’s monthly active users sometime in 2022.

You could argue that it had actually gotten more traction than MELI despite only being there for a couple of years. Then the business basically went into hibernation during the 2022 global rate hike cycle, when Sea pulled out of all of its expansion markets except Brazil to focus on its Southeast Asia business. Over the past 2 years, there’s been a bit of a resurgence from that business, and I think it really caught the market’s attention when Sea announced that Shopee Brazil was EBITDA-positive in the third quarter of last year. Since then, Shopee Brazil has been growing at a pretty healthy clip, taking market share while still remaining profitable.

That’s the background. Back in June this year, MELI lowered its free-shipping threshold from 79 reais to 19 reais, which followed a reduction in its merchant fees in May as well. This was perceived as a defensive move by the market to stave off Shopee’s growing threat, particularly at the lower-value end of the market. We’d argue that this is more of a reinvestment decision to drive higher engagement, frequency, and ultimately longer-term growth for the marketplace.

MELI has lowered its free-shipping threshold twice in the past since launching it in 2017, and each time it has led to higher sales and greater logistics efficiency that mitigated much of the cost impact. So this is very much a page out of Amazon’s playbook: pass on cost savings to consumers to drive greater scale and lead to additional cost savings. I think that’s generally pretty hard to argue against. Free shipping is a key value proposition for driving e-commerce penetration.

Reducing the free-shipping threshold and leveraging MELI’s superior logistics network should further strengthen MELI’s competitive position as the leading Brazilian e-commerce platform. Shopee opened its first Brazilian fulfillment center in September 2024. Meanwhile, MELI expects to finish 2025 with 22 fulfillment centers. So the network scale and service quality are incomparable.

You mentioned just a little bit in terms of Shopee’s inflection in terms of being EBITDA-positive in Brazil. Is there a way to compare that against Mercado Libre’s EBITDA numbers in Brazil? I know they don’t break it out, but do you have a sense of profitability in that particular segment, in that particular region?

As I said earlier about the geographic split, the contribution margin in Brazil bounces around from 20% to the high teens, depending on whether the company is reinvesting or not. Now, it’s hard to know how much of that is coming from fintech and how much of that is coming from commerce. Shopee, at the moment, really only has an e-commerce business in Brazil. We can talk about the potential margin of fintech when we get to that segment deep dive.

I would say that most of the margin is probably coming from e-commerce at the moment. So you can call it in the mid-teens, maybe, if you allocate the corporate costs to that country as well.

Quite interesting. Going through some of the segments, the marketplace itself—third-party versus first-party—is there anything that you can share there? Is there a noticeable difference versus what you’ve seen with Amazon, which I have some type of mental model for? Can you describe a little bit about that segment within the segment?

6. The Commerce Monetization Engine

It’s probably worth, at a high level, outlining how we think about the composition of the business. Obviously, there are 2 reported segments: commerce and fintech. But within those segments, there are distinct business lines that the company doesn’t report on, but it does provide enough disclosure in its filings for us to estimate revenue buckets with some reasonable degree of confidence. I think this is also just the best way, I guess, from the bottom up, to think about the drivers of revenue and earnings for the company.

To decompose the commerce segment, there’s the Mercado Libre marketplace, which includes third-party and first-party sales; the Mercado Envíos logistics business; and Mercado Ads, which is the retail media advertising business. On the fintech side, I’d categorize that segment into Mercado Pago merchant acquiring, the Mercado Pago digital wallet, and the Mercado Crédito credit business. I’ll go through each of these business lines, and then we can tie it together with their revenue contributions.

Back to your question about the marketplace specifically: the marketplace is the core platform that connects the buyers and sellers for Mercado Libre. There were over 100 million unique active buyers in 2024, and the marketplace generated $51 billion in GMV. That unique-buyer number has more than doubled since before COVID, and yet it still represents less than 40% of the adult population of MELI’s 3 core markets.

You asked how the MELI marketplace differs from or is similar to Amazon. It is pretty similar. On first-party sales, where MELI acts as a merchant, this is still a relatively new initiative that began during COVID, and it was just over 6% of GMV in the most recent quarter. You compare that to Amazon, which has been doing first-party sales for a lot longer, and that’s probably more in the 30% to 50% range.

MELI basically uses its first-party sales as a way to sharpen pricing in categories where third-party pricing might not be sufficiently competitive, such as consumer electronics. More recently, it has also used first-party sales to expand into grocery and supermarket categories, where the economics currently don’t stack up for third-party merchants. If we exclude first-party sales from total GMV, the reported third-party take rate crept up to 21% of GMV in the first half of this year, up from a reported 13% in 2021.

It looks like a pretty big jump optically, but there have been some changes to how MELI calculates and reports that take rate. So I think the equivalent 2021 figure, by our estimate, is more like 17%. In terms of the actual fee structure, it is very similar to other online marketplace platforms. If we take Brazil as an example, MELI charges a final-value fee on successful transactions, and that ranges between 10% and 14%, depending on the category.

There’s a fixed fee per unit for any product sold under 79 reais, which is $15. And then, if sellers want to offer interest-free installments, there’s an additional 5% fee. So we estimate that the core seller final-value fee is just under 13%, up from 12% in 2021. That means substantially all of the take-rate expansion that we just talked about has come from value-added services such as logistics and advertising, and that’s what you want to see as a shareholder, right?

You want take-rate expansion that comes from driving adoption of value-added services rather than from squeezing merchants on core fees. I think that’s also very similar to what’s happened with Amazon. Its core final-value fees have stayed relatively stable, and then it has layered on FBA, or Fulfillment by Amazon, advertising, and various other services to merchants to drive that take rate higher.

It’s hard to separate each of these segments because they have such an impact on one another. They’re complementary, and they’re certainly complementary drivers. I’m curious about the logistics piece. As you referenced, there’s been expansion in the fulfillment-center footprint. How has that evolution gone?

I think sometimes it’s overlooked how incredible what Amazon accomplished in the U.S. is. How would you categorize that for MELI in terms of its ability to expand that effort while also keeping the economics in consideration?

Mercado Envíos is MELI’s logistics operation, and it provides storage, warehousing, and delivery to marketplace sellers. We can break that down into 3 levels of service. You’ve got Full, which is basically analogous to Fulfillment by Amazon, and that’s where sellers store their inventory in MELI’s fulfillment centers, and the inventory is picked and shipped by MELI.

There’s Cross Docking, where sellers deliver packages to a MELI cross-docking or sortation center, and then MELI sorts and delivers the packages. Finally, there’s Flex, where the seller ships directly to the buyer using a MELI-contracted courier. When Mercado Envíos first launched back in 2013, it was basically the latter—Flex, essentially.

Mercado would contract with existing third-party carriers, get negotiated rates, and then allow sellers to use those rates and carriers, creating a more consistent shipping experience. Over time, MELI has invested in broadening out its logistics network. Right now, that logistics network in Latin America spans dozens of fulfillment centers, hundreds of smaller logistics hubs, and thousands of pickup and drop-off locations.

The transportation network itself includes dedicated aircraft, trucks, and thousands of last-mile delivery vans, and that's predominantly owned and operated by third-party carriers.

My impression based on that answer is that it feels like it's an earlier stage of Amazon's larger logistics build-out, prior to having the air fleet and a lot of the trucking and vehicle fleet, which were some of the most capital-intensive pieces of that logistics build-out, in my view. Is that fair to categorize it that way? And then where would you put the capital intensity of the logistics effort today and looking forward? Is that something that they're investing a lot into? There's the operating expense line, but then there's also the CapEx.

I think the difference between the way that Amazon builds out its logistics network and the way that MELI does it is probably going to remain. MELI mainly leases its assets, whereas Amazon obviously invests billions and billions of CapEx into owning a lot of these facilities and the transportation network as well.

You look at MELI's ongoing investments into its logistics network, but realistically, the business is still relatively capital-light. And again, that's because a lot of that logistics infrastructure is leased. I'd say that management's hyper-focused on maximizing the efficiencies of the logistics network and expanding capacity more on an as-needed basis, rather than undertaking heavy investment cycles ahead of demand, which is what we saw with Amazon coming out of COVID.

Now, having said that, the company's also announced plans, back in September last year, to double its fulfillment capacity in Brazil by the end of 2025. And that has contributed to some margin contraction in subsequent quarters because apparently it takes a few years for new warehouses to hit peak utilization.

The other point that I'd make about the logistics business is that it's currently largely unmonetized. So if you look at what Amazon does, they monetize logistics beyond just the shipping fee that they charge. You've got the entire Fulfillment by Amazon operation going on there.

For MELI, the company in the last few years has said that they are essentially waiting for fulfillment penetration in Brazil to grow to Mexico levels before they start really hitting that monetization button. And Brazil is currently at about 60% fulfillment penetration, up from 50% last year, while Mexico is in the 70s. So we could potentially see monetization of fulfillment start happening at some point next year.

That's interesting, just in terms of future levers to pull. Touching on advertising, it became such a huge engine for Amazon. We've seen it elsewhere, with Walmart—not traditional e-commerce—but where this becomes such a major driver of revenue and growth, where does it stand within Mercado Libre as being a key component of what the business is today, but also, and more importantly, what it's doing in the future?

Advertising has been available on the Mercado Libre marketplace in some form or other for over a decade now. So it may perhaps come as a surprise that advertising revenue as a percentage of GMV is only 2% as of last year, and that's up from 50 basis points in 2019. So I think it's not unfair to say that seller adoption has been relatively slow for this product.

Over that same 5-year period, if you look at Amazon's ad revenue, that grew from under 4% of total GMV to 7%. And if we just look at Amazon's third-party GMV, the ad penetration is probably more in the 10% range.

Now, we think there are a few reasons why advertising uptake for MELI has been slower. It could be that overall digital advertising adoption in Latin America is just lower, and merchants are less sophisticated or less experienced with performance advertising compared to their US or Chinese counterparts.

MELI's ad offering itself has been pretty rudimentary for a long time. It wasn't until early 2023 that the company launched a full-stack solution with a self-serve console, measurement, and reporting tools. But we do believe that the company is very well aware of the size of the advertising opportunity.

On their Q4 call earlier this year, management talked about the dense product roadmap for ads, the work that they're doing with brands and agencies to expand up the funnel, and plans to expand inventory beyond MELI's ecosystem. The way that we think about ads is that there's a very long runway of growth, and while it might take some time to realize, there's no fundamental reason why ad penetration can't get up to 3%, 4%, or 5% of GMV. And if we think about the margins for an advertising business compared to the e-commerce side, that can be a pretty meaningful earnings driver, if not a revenue driver.

Absolutely. And you mentioned loyalty within this broader commerce segment. Is there anything to touch on there? It's a common strategy for almost any business now, but is there anything that stands out about what MELI is doing and how it's actually impacting their business?

The company provides no disclosure around MELI+, so it's quite difficult to determine the impact that it has on marketplace performance. But just taking a step back and summarizing what MELI+ is, it began, I believe, as a tiered points program where you collect points and get some perks from that. But it was relaunched in late 2023 to be more like Amazon Prime.

For $2 USD, MELI+ members receive lower free-shipping thresholds and cashback on the marketplace, cashback on Mercado Pago spend, and some other benefits. And then, for $5 a month, members also get access to Disney+ and discounts on some other streaming services.

Now, given the recent relaunch, we think adoption is probably still quite early for this program. But we also think that it's reasonable to believe that MELI+ will ultimately achieve the stated goal of increasing ecosystem engagement and reducing churn. And that's largely just based on what we have seen from other membership programs, particularly Prime.

Whether it can spin the flywheel to the same extent as Prime can, I think that remains to be seen. In large part, I think it's because MELI+ doesn't offer free shipping without minimums. There's still, I believe, a 19-reais minimum to get free shipping there.

You answered my follow-up question there. So just going through each of these, if you were to compile them all together and attribute whatever you might to each bucket, how would you lay that out or think about that?

Yeah, sure. I will just caveat that these are all our estimates because the company doesn't report any of this directly. They do provide a few tidbits here and there, but you do have to make some assumptions to get to these numbers.

By our estimates, commerce revenue, which was just over $12 billion for 2024, we believe $6 billion of that comes from third-party marketplace fees and $2 billion from first-party sales. And then we estimate that approximately $3 billion comes from net shipping revenue, which is essentially the shipping piece of Mercado Envíos. And finally, there's about $1 billion of ad revenue.

So you take all of those numbers and divide them by the $51 billion of GMV, and you can get the approximate contributions to the overall take rate of 24%.

Interesting. And then to transition into the fintech segment, maybe we start with Mercado Pago—the digital wallet, merchant acquiring, payment processing, the straightforward description that you gave before. Can you go into a bit more about the strategy there and then what's ultimately happening?

7. Payments Expand The Addressable Market

So I said earlier that there are 2 distinct businesses in there. There's the digital wallet for the consumer and merchant acquiring for the merchant.

Within the merchant acquiring business, there are 2 sources of revenue. One is payment processing for off-marketplace merchants, and the other is prepayments, which is also known as anticipation of receivables, for both on- and off-marketplace merchants.

And the reason I'm calling out on- and off-marketplace merchants is that payment processing for on-marketplace transactions is incorporated within the seller final value fee. So MELI doesn't explicitly earn any fintech revenue on that piece.

Total payment volume for 2024 was $197 billion, and that excludes peer-to-peer transactions, which are free. There was $55 billion of on-marketplace volume, $88 billion of off-marketplace acquiring volume, and then $54 billion of digital wallet volume where MELI wasn't the acquirer.

On the payment-processing side—and we'll focus on that because that's where most of the revenues are—the merchant-acquiring business is pretty standard. MELI charges merchants a fee, which is known as a merchant discount rate, to basically accept and process their digital payments.

A portion of that is going to be interchange, which goes to the card issuer. A portion of that is the network fee, which goes to the card network. And then the remainder is gross profit for MELI.

The merchant discount rate for Mercado Pago is pretty much industry-standard. That ranges from 1% to 3% for debit cards, depending on the payment channel and the settlement time; 4% to 5% for credit cards; and 0% to 1% for instant payments such as Pix in Brazil.

These fees tend to be on the higher end because Pago mainly serves micro and small merchants with limited payment volumes and negotiating power. But overall, merchant discount rates in Latin America have been structurally declining over time as competition for payment processing has intensified.

Specific to MELI, we also know that strategically, management is actively trying to push up the merchant-size spectrum, which is another headwind for the merchant discount rate.

But this should be more than offset by higher processing volumes and revenue dollars.

Is this something that could expand outside of what's happening within the MELI ecosystem?

Yeah. They've already taken that outside the MELI ecosystem. In 2009, I believe, Mercado Pago launched as a merchant-acquiring service for digital merchants that were not on the marketplace. At some point later, they also expanded into physical points of sale for off-marketplace merchants. As I mentioned previously, $88 billion of GMV last year came from merchants that weren't directly on the marketplace.

That has been the main driver of growth for the payment-processing business. It's that expansion off the marketplace, because then you've got a massive TAM versus just the GMV of the marketplace. We'll see that when we talk about the credit business as well, where there will be even further expansion off the marketplace through products like the credit card, which can be used anywhere.

On the processing side, who are they competing against in that region?

The main payment processors are going to be the large banks. Then there are the fintech processors, of which Mercado Libre is one. A few others might be PagSeguro or StoneCo.

Generally speaking, the competition looks pretty similar to what you have in the U.S. You'll have large banks that do a lot of the payment processing for very large merchants. These are going to have very low fees, or it might be a cents-per-transaction fee instead of a percentage take rate. In the area where Mercado Libre plays, which is with the smaller merchants, it'll be more of an area for fintechs to compete in.

You've referenced credit. I find the credit business here quite interesting because it's very different in regions outside of the U.S., which I can appreciate. Can you talk a little bit about not only how they've grown that business, but also how they manage the risk of the credit business?

Mercado Crédito is MELI's consumer and merchant credit business. They basically write short-term loans to marketplace buyers and merchants, as well as Pago wallet users. MELI launched short-term loans in Argentina in 2016 before expanding into Brazil and Mexico a year later. In 2021, it began issuing credit cards in Brazil, expanded that to Mexico in 2023, and is preparing to launch credit cards in Argentina later this year.

Crédito has historically served underbanked users and micro and small merchants with limited or no access to credit. By facilitating access to credit for these underserved cohorts, MELI can strengthen the engagement and stickiness of users and drive consumption across its entire ecosystem. Credit card adoption in particular brings significant ecosystem benefits to MELI beyond just the card spend itself. That's one of the key pillars to Mercado Pago achieving what management likes to call greater principality in its users' financial lives—essentially, trying to bring Mercado Pago up to the top of wallet.

The credit business is arguably the most important growth driver for fintech, if not the entire company. Credit revenue was 33% of fintech revenue in 2021, and that grew to 42% in 2024. This was entirely driven by the phenomenal growth of the credit portfolio, up from $480 million at the end of 2020 to $9.3 billion today. Within that, credit cards have gone from zero to $4 billion.

Partly offsetting that growth in the credit portfolio has been the steady decline in the yield of the portfolio. Gross interest margin after loan losses was annualizing at 50% at the end of 2020, and that's fallen to 28% today. These days, MELI just reports a net interest margin after losses, or NIMAL, but the funding costs haven't really changed that much, so there are other structural factors at play. The main one is that credit cards are just a structurally lower-NIMAL product.

I'm going to give some background on the credit card business in Brazil because it's not entirely intuitive that credit cards would be lower margin. If you look at Brazil, where the majority of the credit card portfolio sits, the average rate on credit card revolving balances is 15% a month. Matt, I'll let you take a guess as to what that APY is.

30% to 40%.

Yeah. It actually annualizes to 450% a year.

Wow.

Which is absolutely insane. There's a lower rate for credit card installments with interest, and that's around 180%. So then the question is: How can that be a low-margin product?

If we take a step back and look at the credit card data, nearly 80% of credit card receivables in Brazil are interest-free installments. This means that the 20% of credit card receivables that do pay interest need to earn enough interest income to cover the credit losses for the entire card pool, plus the funding costs for the entire card pool, plus the operational overhead, and still earn an acceptable margin for the card issuer.

If you look at the U.S., I think two-thirds of credit card balances are interest-earning, and even in Mexico, that number is over 60%. Once you blend that rate out and adjust for the fact that there's effectively a 45-day interest-free period on card balances, the gross yield ends up being something like 40%.

Compare that to the gross yield on personal loans, which has been north of 80% over the past few years, especially in Argentina, and we can see why the credit card business is a lower-margin product. As a matter of fact, MELI's entire Brazilian 2023 credit card cohort only became NIMAL-positive this year, and only 51% of the Brazilian credit card portfolio is currently NIMAL-positive. The Mexico portfolio is still NIMAL-negative, and Argentina is also expected to be NIMAL-negative for the first few years after the product launches.

The other reason this is a structurally declining NIMAL is that the credit business continues to push upmarket into higher-credit-quality cohorts, and that's obviously going to come with lower interest income. We do think it is necessary for the healthy long-term growth of the credit portfolio.

You mentioned credit risk as well. Given the rapid growth of the credit business and the relatively high credit-risk profile of the borrower base, I think it's fair to be concerned about blowup risk, especially in an emerging market where economic conditions tend to be more unstable. If we look at the reported credit metrics, nonperforming loans have been broadly stable since the launch of the credit card business, except for a few quarters in 2022, and the portfolio has been adequately provisioned in all periods.

For us, beyond the reported metrics, we think management has been very prudent when it comes to managing the growth of the credit portfolio. Even though originations have grown at an extremely fast clip, the priority is on building a sustainable credit business over the long term. For example, when credit conditions started deteriorating in Brazil and Argentina in mid-2022, the company immediately scaled back origination volume and significantly tightened its underwriting standards. While there was some temporary degradation of the credit metrics, it wasn't anything concerning to us, and the provisions were more than adequate.

What does the NPL percentage typically run around? You mentioned it was pretty stable.

Yeah. I believe the NPL percentage is quite high relative to what we might think of in a developed market, but I think it bounced around from the mid-30s to the low 20s. For the past several quarters, it's been around 28%.

If you think about it, a quarter of the credit book is essentially past due at any given point in time. That also contributes to why the net interest margin after losses can be relatively low for the credit business.

It can also explain those yields that are associated with them. Some of those numbers were eye-popping. This provides a nice basis for why that might be the case.

You also made reference to non-interest installment payments as being a big piece of credit. I'm picturing this as the buy-now, pay-later program. First, is that the right way to frame it? Second, why would you use that approach given the credit dynamics and the potential challenges with managing credit risk?

Yeah, that is absolutely the right analogy. I would say the parcelados are basically the original buy-now, pay-later. This is something that is unique to Latin America, and more specifically, Brazil. The Brazilian credit market is, as we've already discussed, unlike any other market in the world.

In Brazil, the credit card settlement period is D+30 days, compared with the international standard of D+1 or D+2. This means that when a customer pays for a purchase using a credit card, the merchant only receives cash payment after 30 days. You can imagine the working-capital challenges this creates for any merchant that accepts credit cards.

Culturally, Brazilians also love installment payments, or what's called parcelados. This feature is only available on credit cards and allows consumers to split their purchases into a number of interest-free monthly payments, typically ranging from 3 to 12.

Instead of charging the entire purchase to their credit card upfront and then having all of it fall due a month later, the card issuer bills the cardholder in equal monthly installments, with each installment falling due according to the standard credit card agreement. From the merchant's perspective, this further exacerbates the working-capital challenge. Instead of receiving full payment 30 days after the sale, if it's a 3-month installment, the merchant will receive a third of the sale amount every 30 days.

And if it’s 4 installments, then it’s a quarter. And for a 12-month installment, the merchant isn’t receiving the final payment until 360 days after the sale, which is pretty crazy if you think about it. So, to get around this cash flow timing problem, merchant acquirers created a solution known as the anticipation of receivables.

For a fee that reflects the time value of money plus a margin to the merchant acquirer, the merchant can elect to receive all of those installment payments upfront, which is why this business is also called prepayments. This ends up being a win-win for all the parties involved. The merchant gets a discounted upfront cash inflow, the consumer gets to split large purchases into multiple interest-free installments, and the merchant acquirer receives a fat, risk-free fee.

This is because, ultimately, it’s the card issuer that guarantees the receivables in the event of cardholder default. Now, once the acquirer has bought the stream of credit card receivables from the merchant, it has 2 options. It can either put the receivables onto its balance sheet and collect each installment as they settle, or it can sell those receivables to a bank.

Either option comes with its own funding costs, which then turns the anticipation of receivables into more of a spread business. We estimate that MELI earns circa 3% net spread on its prepayment business, which is higher than the merchant discount rate that it earns on the payment processing business. If you dig into MELI’s filings, there’s disclosure around the percentage of TPV that comes from installment payments, and they also provide net prepayment revenue as well. So, you can use that to calculate the net spread.

Interestingly, we’ve observed that the net spread has actually widened to over 4% over the past 3 years, which on the face of it looks pretty attractive. But we think that this is actually because MELI has been increasingly turning to wholesale and deposit funding rather than discounting the receivables back to a bank. By our estimates, the percentage of credit card receivables that MELI holds on its balance sheet has risen to over 40% of gross credit card receivables, up from around 11% in 2019.

Net prepayment revenue only includes the cost of discounting receivables to a bank, and it doesn’t include the interest cost of wholesale funding. So, that ends up overstating the net spread. Essentially, we think net spread is probably still around that 3% range.

Fascinating. I could probably go on for hours just in terms of the dynamics going on here. But rather than derail us, I’ll try to push us forward a little bit. Just in terms of managing that risk on the books, as you mentioned, and going the wholesale route, it does feel like it would introduce risk, and then from a cash flow perspective, it has implications.

It’s interesting to me that they would go that route. Do you think there’s anything that drives that? Because it increasingly makes this a credit business, which operationally requires different muscles than e-commerce and the marketplace. So, how do you think about that exposure?

You’re right, Matt, in the sense that as that credit business grows, it just continues to introduce a different set of risks versus what the original business around the marketplace has been. We get comfort around the credit piece of the business just based on the historical performance of that credit book and how management goes about managing the risks there.

In particular, the number-one priority for that business is to essentially control the risk rather than try to grow the credit portfolio as fast as possible. I believe management has said in the past that none of the leaders of the credit team have a KPI where they’ve got to grow the credit book by a certain amount every period.

MELI has also developed its own credit-scoring and underwriting models because, as you can imagine in LATAM, where a lot of the population is underbanked, things like FICO or VantageScore aren’t going to be applicable. That means that you do need to have a lot of proprietary data to feed into your underwriting models.

Having that marketplace business, where you can see the transaction history and the payment history for the buyers and also for the merchants, and being able to even sweep the merchant cash if you give them any credit, reduces the risk a lot for the credit business compared with being just a standalone credit card issuer in, say, Brazil.

Fascinating again. If we were to take everything together and look at the financial drivers, particularly on the top line, if you want to break it down by segment, that’s great. Can you just outline, when you think about MELI on a consolidated basis, how you think about those drivers going forward?

8. The Long Term Reinvestment Case

If we put everything together—all of these business lines that we just discussed—we essentially have a company that has grown its top line by a 55% CAGR since 2019, which is pre-COVID, and by a 43% CAGR since the COVID peak of 2021. So, there’s barely been a growth hangover.

Commerce revenue growth has been underpinned by very healthy double-digit growth in the number of items sold, the rise in the share of first-party sales, and also the take-rate expansion from advertising and the OS net shipping fees that we talked about.

On the Fintech side, growth has been driven increasingly by off-marketplace merchant acquiring, which, as we said, greatly expands Mercado Pago’s serviceable addressable market beyond just marketplace transactions. It has also been driven by credit revenue, which since the launch of credit cards in 2021 has grown at a 65% CAGR.

I’d say that one of the remarkable things about the MELI ecosystem is that it has 3 opportunities to earn revenue on the same dollar of marketplace GMV. Firstly, you’ve got the marketplace fee from the transaction itself. Then there’s the prepayment fee if it’s a credit card transaction. Finally, if it’s a Mercado Pago credit card, MELI also earns the interchange and potentially net interest income on that transaction as well. So, it’s a pretty attractive model.

Absolutely. I find these businesses very interesting when there are complementary layers that can be stacked on top of one another, and that would certainly apply from a margin perspective as well. How would you frame it, whether you want to take it at a gross margin level or immediately go down into operating margins? How do you think about it on a consolidated basis and any of the key drivers, whether it’s mix shifts or whatever it might be?

I’d say gross margin is probably not as relevant for MELI, just given the growth of its credit business, where defining gross margin for credit is very different from gross margin for, say, the marketplace business. So, let’s just go straight down to operating earnings.

The first thing I’d say is that the company doesn’t disclose operating income by segment, which is unfortunate because it would be very interesting to see how those operating earnings shake out between the 2 segments. But working with what we have, company-level operating margin is essentially a tale of 2 halves.

From IPO through 2013, MELI was a mid-30% margin business. Then, from 2014 to 2016, there were some hyperinflationary issues in Venezuela, which was MELI’s highest-margin country, and that caused margins to fall down to 21%. With the launch of free shipping in 2017, margins got absolutely crushed down to just 5%, and then they turned negative in 2018 and 2019.

Since that 2019 trough, operating margins have made a steady recovery back to the mid-teens level in 2023, before the company embarked on another reinvestment phase. With the free-shipping changes that we mentioned earlier this year, we think the margins remain under pressure for this year and next year as well.

What I would say is that this timeline of events is a good demonstration of MELI’s long-term reinvestment strategy. When free shipping was launched in 2017, the growth of marketplace items sold was still very healthy, so it wasn’t like MELI was responding to a slowdown in the business. And yet, we’re fairly confident that without turning on free shipping in 2017, MELI wouldn’t have been in a position to capitalize on the COVID disruptions, and it would have a smaller share of a smaller e-commerce pie today.

You referenced a bit in terms of lighter capital intensity than you might see at somewhere like Amazon, but how would you think about that margin flowing down into earnings, free cash flow, and just some of the capital allocation framework in terms of how they think about it? You mentioned reinvestment into the business. That can happen in a few different ways, but I’m thinking more from the below-the-line and free cash flow dynamics.

I’d say that, in terms of the incremental operating margins, they can be relatively high for the marketplace business, depending on where the reinvestments are being made. Obviously, with the third-party merchant business, they’re just collecting a fee. So, any growth and penetration of advertising, or when they eventually start monetizing logistics, should all fall through to the bottom line at a pretty high rate.

But, of course, the company is also investing more into its first-party sales as well. I think that’s pretty important for expanding the different categories that the marketplace is able to address, especially around the higher-value consumer electronics pieces and then the much lower-value grocery business as well.

On the Fintech side, as we discussed, the biggest driver is going to be the compression of the NIMR, but that ends up being offset by faster dollar growth of Fintech operating income. Our understanding is that the company doesn't really manage the business through margins either. They're much more focused on the long-term opportunity, and they will sacrifice short-term profits if they can extend the long-term growth runway or position the business for stronger growth in the long term.

Just lastly, on free cash flow and capital allocation. Free cash flow, defined as operating cash flow less CapEx, is distorted by the credit and digital wallet businesses, given the non-cash charges, the changes in credit receivables, and customer deposits. The company started reporting an adjusted free cash flow number last year, which strips out the impacts of the Fintech business.

That figure was 1.3 billion for 2024 and 1.4 billion for 2023. You also need to make some non-cash adjustments to net income to approximate a conversion ratio, which falls between 60% and 80% for the 2 years we have available. As for capital allocation, the priority is very clearly organic reinvestment, which includes funding the credit business as well. Since the 2007 IPO, there's been just over 1 billion in buybacks and just over 200 million spent on M&A. So the majority of the reinvestment has been back into the logistics business and the expansion of the credit business.

I think we've laid out the risks throughout the discussion, and there are some fairly obvious ones. But sitting in the investment seat, what stands out the most to you in terms of the risks to the business that you would worry about the most, or that the market worries about the most?

I think the key risk is around international competition, particularly from Shopee, which we've already discussed, so I won't touch on that again. But I would say this is probably more limited to Shopee specifically, because if you look at Amazon, Amazon was a very early mover into LATAM and didn't really catch on anywhere except Mexico. For Temu, I believe they made a splash when they launched in Brazil last year.

But as a cross-border e-commerce player, I think it's very hard to compete with the local players on any meaningful metric, whether it's delivery speed, service experience, or even product quality, in Temu's case. So the only thing that Temu has going for it is a very, very, very low price. Shopee is also a strong player in that lower-price segment, so it's hard to see Temu having a relevant market within Brazil where it can actually attack.

I think the same could be said for Mexico as well. We saw Temu launch in Mexico, and there was a spike in downloads and MAUs. That came back pretty quickly as soon as they stopped advertising and doing user acquisition as well.

In terms of the other risks, I think there are a few other risks that are worth touching on. Firstly, there's the saturation of digital payments in Brazil. Back in November 2020, the Brazilian Central Bank launched Pix, which is a 24/7 instant payment system operated by the Central Bank. That's been an absolutely massive success.

Today, over 90% of personal consumption expenditure has been digitalized. As a result of Pix, card payments have lost significant share in Brazil. But credit card volumes have still grown on an absolute basis and at a pretty healthy double-digit rate as well. So it's mainly been debit cards that have lost share, both as a percentage and in terms of dollars.

The other thing I'd say is that, in the long run, this might even be a tailwind for credit card adoption. Once underbanked individuals are pulled into the digital banking system via Pix, it becomes much easier for them to graduate onto credit cards, where most of the value lies for the Fintechs that offer them.

The second risk is that there are occasional regulatory rumblings in the payments industry. The Central Bank of Brazil has been toying with aligning the credit card settlement period to international standards, and there's also further regulation being touted for the extremely high rates on revolving credit card balances. We think these changes would fundamentally alter the business models of all the parties involved in the payment system, and not necessarily for the better, because I think most of these changes will result in lower consumer spending.

These regulatory proposals haven't really gained that much traction. Finally, I think it's worth mentioning that there is some antitrust litigation happening in Argentina, where a consortium of banks has sued MELI for monopolizing the country's digital payments market. MELI has countersued, alleging that the banks have formed a cartel.

We would say that it's pretty hard to argue against MELI being a monopoly in Argentina, given its 80% share of e-commerce and probably an even higher share in the Fintech space. But it's not really clear to us who is being hurt by this. On top of that, there's President Javier Milei, who disdains excessive regulation. So it's also not clear what the regulators would actually do if MELI lost.

Those are the risks that I would highlight. Obviously, anyone investing in EMs is going to face typical EM macro risk and FX risk as well. Particularly for LATAM, I think you have to be mindful of that FX piece, because some of these currencies can devalue pretty quickly and pretty steeply, and that distorts the reported results for MELI.

You have to dig a level deeper to understand how the business is performing. For example, if GMV growth is 20% in USD but 80% on an FX-neutral basis, then you'd argue that the 20% USD growth isn't really reflective of the underlying business and that you should look at the 80% FX-neutral growth.

On the other hand, with that 80% FX-neutral growth, how much of it is coming from the fact that, say, Argentina is inflating at 50% a year or Brazil's inflation is at 14%? It does mean that it's harder to track the underlying performance of the business. That's why I've referred a few times to growth in units sold for the marketplace, because that's probably the best metric for the underlying growth of the marketplace business.

Yeah, it's incredibly difficult to isolate the variables. I think we touched on it earlier, but the execution is incredible, just in terms of how they've been able to evolve. You mentioned Marcos Galperin as the leader here. What else, if anything, would you reference in terms of the culture and leadership that went into executing on what is an academic case study of learning from some of the other businesses around the world and applying it with your own unique approach?

For any founder-led company, ultimately the culture is going to be largely a manifestation of the founder's own personality and beliefs. Marcos Galperin has described the company's culture as that of a professional sports team. Unfortunately, I think that's become a bit cliché after Reed Hastings popularized that metaphor. But I believe Galperin did almost become a professional rugby player, so there's some merit to that metaphor.

He's described the culture as a very competitive meritocracy with a long-term focus, where people are incentivized to take risks because everyone wins or loses as a team. That willingness to sacrifice short-term profits in pursuit of long-term objectives is largely born out of surviving the dot-com bust and then having to build out, piece by piece, all the vertical components required to scale e-commerce in Latin America.

That's why there's such a big focus on technology as well, because MELI has needed to build its own solutions to a lot of the problems and frictions that it has encountered. As a matter of fact, the company's mission statement is to democratize commerce in Latin America through technology.

If you look at the broader leadership team, Galperin has definitely fostered a very long-tenured and talented group of executives. Many of the C-suite executives have been with the company since the start, and departures have typically been succeeded by internal promotions. I think this level of leadership continuity is not only good for maintaining long-term strategic focus, but is also good for the culture of the organization.

The last thing I'd say on the leadership topic is that earlier this year, the company announced a leadership transition. After 26 years, Marcos Galperin is stepping back as CEO and assuming an executive chairman role. Ariel Sharfstein, who is currently the president of commerce, will be promoted to CEO starting next year.

Ariel has been running the commerce business since 2022, so I think the fact that the commerce segment has delivered very strong performance compared to global peers coming out of the COVID boom is a strong testament to his capabilities. As a matter of fact, Marcos Galperin hasn't spoken on an earnings call for 5 years, and if you listen to Ariel talk about the business during Q&A, you would think that he was actually the CEO.

I think it's also interesting that it was the commerce president, rather than the more experienced Fintech president, who was promoted to CEO. That suggests to us that the long-term opportunity for the company is still centered around the Mercado Libre marketplace.

Just on to your outlook question: in terms of the qualitative outlook for MELI, I'd say we're very positive on it. E-commerce penetration across Latin America is still relatively low, and we think that can support double-digit market growth for the long term.

And then you add on top the potential share gains by MELI as well, and then the take-rate expansion from the value-added services. It's plausible that the commerce revenues will continue to grow above 20% for the foreseeable future.

On the fintech side, payments-related revenue likely decelerates going forward, given the digital payment saturation in Brazil and the dominant position already achieved in Argentina. But Mexico is still a growth market for them. In fact, I think Mexico cash usage for consumer purchases is still in the 40% range.

We also expect that the revenue mix will continue to shift toward credit, particularly as the credit card business continues to scale in Mexico and also launches in Argentina. And then, just on operating margins, we would expect that the margins continue to expand over the long term, though that won't necessarily be linear, given management's preference to reinvest in the business to extend its growth runway.

But structurally speaking, the penetration of advertising and logistics monetization in the commerce segment and the continued improvement of credit card NIMAs in the fintech segment should be long-term tailwinds for margin expansion and also for earnings growth.

This has been fascinating, Daniel. There are a lot of things that I look forward to reading more about after this discussion. But we close these conversations out with the lessons that you can take from this particular business and potentially apply elsewhere. What would stand out the most to you about MELI?

I think the key lesson from MELI that could be applied as a lens when looking at other businesses is just the power of reinvestment and reinvention. MELI started life as an auction marketplace, quickly introduced fixed-price sales to expand that market, and then invested in payments and logistics to solve customer pain points, and that unlocked further growth.

Then the company completely reinvented itself after nearly 2 decades in existence by introducing free shipping. At the time, the financial performance of the business didn't suggest that such a drastic change was necessary, but Marcos Galperin went ahead and did what was best for the customer anyway.

And that free-shipping reinvention had a dramatic and negative impact on operating margins, and yet investors were willing to look past that because of the long-term growth runway that it unlocked. There's probably some pattern recognition there from Amazon as well, but I think it still required very solid execution by management to pull it off.

For investors, I'd say also that it's important to basically find and back an exceptional management team, and one that's focused on seizing the multiyear opportunity rather than managing the business to near-term expectations. I don't know if MELI was ever objectively cheap, at least in the time that I've been following it, but shareholders have certainly done very well by paying a fair price and just letting Galperin and his team execute against the long-term vision.

Fascinating. Well, Daniel, this has been extensive and in areas deeper than we'll typically go, but I enjoyed every second of it. So thank you very much for sharing the knowledge.

Thanks for having me on. It was good fun.