RIO DE JANEIRO, BRAZIL – Mercado Libre is not only the most potent e-commerce company in Latin America but also one of the most valuable and thriving companies. The news about the e-commerce giant, which is reproduced every day in the media, shows enormous machinery that adds more and more gears and never stops its activity.
In the third quarter of 2021, it recorded revenues of US$1.9 billion (a year-on-year increase of 66% in dollars). Meanwhile, its unique active user base is already around 80 million.
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To feed this machinery, Marcos Galperin’s company recently offered one million shares and obtained US$1.55 billion to accelerate its expansion. This is the first stock offering on Wall Street in a little more than two years, and the bet is to continue developing its logistics and financial services strategy in the region.
Given these overwhelming numbers, the question arises as to how relevant Argentina continues to be for its strategy. This country represents 24% of its revenues, compared to 70% for Brazil and Mexico. The remaining 6% is distributed among other South American markets.
REGIONAL EXPANSION
Although in Argentina, the latest announcements refer to the authorization for minors between 13 and 17 years old to open a digital account in Mercado Pago, to commercialize cell phone insurance in alliance with La Caja, or the possibility of paying for Uber trips from the app, the truth is that its operations in the surrounding region are the subject of more glittering announcements.
In Chile, Mercado Pago has just been authorized by the Financial Market Commission (CMF) to become a prepaid card issuer. This will undoubtedly lead to new launches associated with the fintech business in that territory in the coming years. “In this way, Mercado Pago will be able to start issuing payment instruments, something it did not have in Chile,” Ignacio Carballo, director of the Fintech Ecosystem at UCA, told iProUP.
In Brazil, it also took another step forward in its ecosystem of services with the launch of its credit card in alliance with Visa. The card does not allow cashback transactions but enables users to pay in up to 18 interest-free installments at specific merchants and accumulate points in its loyalty program.
The announcement of the credit card was made almost simultaneously with the launch of contactless payments via QR. In line with this advance in Brazil, Mercado Pago obtained the approval of the Central Bank to act as a financial institution.
According to Tulio Oliveira, vice-president of Mercado Pago in Brazil, this will allow it “greater autonomy to formulate financial and credit products and services”. In addition, to “access different sources of financing, which will complement the company’s financing strategy.”
For Carballo, both Mercado Pago and the main fintechs will sooner rather than later go for everything. That is, they will go out to offer all possible financial and banking services. The unicorn has already started its advance with expanding its payment ecosystem in its most relevant markets.
In Brazil, it has already obtained a financial institution license and can even issue credit cards. In Chile, it is disembarking with its prepaid card, which has been available since 2017 and has issued 4 million Mastercard pieces of plastic in Argentina.
“It will move forward in those places where it is easier for it in political terms and more profitable in economic terms. Observing its strategy in Brazil, Mexico, Argentina, Colombia, and Chile, there is no doubt that it will do so until it can provide the full range of financial products,” he adds.
It also maintains a solid commitment to its distribution and logistics network in the Brazilian market. Mexico has its land fleet and dedicated aircraft for deliveries in less than 24 hours.
To consolidate its strategy, it acquired Kangu, a logistics operator with 5,000 pickup and delivery points. It operates in Mexico and Brazil, two relevant markets for Mercado Libre.
According to the company, it will end 2021 with eight distribution centers, 18 cross-docking centers, and more than 100 last-mile centers in Brazil, where it expects to expand its fresh food retail business after registering a record gross merchandise volume of US$7.3 billion in the third quarter of the year.
Following the flow in Brazil, Galperín himself announced that as of November, Mercado Libre and Mercado Pago users in Brazil would be able to buy, store and sell cryptocurrencies.
Number of employees per country as per end of 2021, compared with end-2020:
Argentina 9,908 +40%
Brazil 12,169 +145%
Chile 719 +72%
Colombia 1,815 +88%
Mexico 5,722 +460%
Uruguay 1,276 +13%
AND BACK HOME IN ARGENTINA?
Thus, for Mercado Libre, everything seems to be moving at an accelerated pace in other markets, compared to Argentina where, in addition to the complex macroeconomic variables, such as exchange rate instability and inflation, there are the various political and union conflicts, such as those of Camioneros or Bancaria.
The last blow came from Sergio Palazzo, leader of the Banking Association, who requested the board of directors of the Central Bank “the immediate inspection of the company Mercado Libre and its related companies, Mercado Crédito and Mercado Pago”.
The industry leader requested the reframing of its business model and accused Mercado Libre of extending the activities regulated by the BCRA (Central Bank of Argentina) by arranging credit and savings transactions through its payment system without, in his opinion, is authorized to do so.
For Carballo, Mercado Libre’s projects in each country depend on the regulation, the macroeconomy, and the competitive environment. This last variable will not rely exclusively on the players in each market but also on regulation and unions, among other things.
“Argentina has a battered macroeconomy and a volatile currency. It makes sense to move forward in other geographies with such ambitious investment plans in the real economy, as the context is different.”
Along the same lines, Larravide says that although Mercado Libre is not lowering its presence in its home country, it is focusing on others, such as Mexico and Brazil, because they are larger, more competitive markets and the fintech ecosystem is not as developed.
Mexico is an exciting market where Mercado Pago and Ualá are doing very well. With the Marketplace, Mercado Libre has vast competition since the presence of eBay and Amazon is powerful. On the other hand, Amazon does not exist in Argentina, so Mercado Libre leads by far.
Argentina has 5 million digital wallets and more stores than Prisma or First Data networks. At the same time, in other territories, it buys airplanes and keeps bankers awake at night.
While it is true that it is one of the countries with its ecosystem more installed, the macroeconomic scenario and union harassment, to name a few variables, are substantial obstacles to progress.