MERCADOLIBRE INC — Call Transcript 2026

Thank you everybody for joining. Really appreciate it. We're going to keep this morning going. Today we have Leandro Cuccioli from MercadoLibre. Leandro is the Senior VP of Strategy, Corporate Development, and IR. I thought it would be a great way to start this would be some timely questions, maybe talking a little bit about first quarter results that you guys reported last week. Then we could move on to my favorite subject to talk about with you, and that's AI, how it's impacting product discovery, how it can compress the funnel. My favorite part, MELI is very transparent with how things are trending and how AI is impacting your business. I'm excited to get to that. Let's start with kind of the timely stuff that I know you guys were talking about last week, I'm sure you've been on the road this week talking about, and that's just a bit of the competitive environment that we're seeing in Brazil from Shopee, Amazon, and TikTok. Everybody's playing in different parts of e-commerce. Could you talk about what you're seeing in the competitive landscape year to date? Then we're going to obviously dig in on this, but just MercadoLibre's approach- Yeah to the competition. Well, thank you, Mike, for having us. It's our first time here, hopefully the first one of many. I think it's interesting on Brazil because it's half of our business. It's always been very competitive, right? Sometimes people, they talk to me as if competition started when Shopee arrived, but it never felt that it was not competitive. The difference that we have is that in the last 20 years, we've seen competition come and go. If you look at the last three years, the shape of the competition has changed. The local retailers that were a force, really, in the market, they have, in a way, retrenched. If you look in the last four years, many us had 20% market share. We have 40%, we doubled. Shopee went from zero to 20%, so they are half of our size, and they were nonexistent 3 years ago. Those 20 points of Shopee and our incremental 20 points from our side, they were burnt by probably the local retail. The market has been growing 15%, but in terms of share. Amazon has stayed at the same kind of 10-ish percent, so now they are clear number 3 in the market. I think what it is fair to recognize that in the last 3, 4 years, the Asian players, not only Shopee, I think others, have brought a new sliver of consumers into the market that are probably They are not different consumers. Maybe it is us in some of the shopping missions, that we are willing to sacrifice level of service for price. "Oh, it is a $2 necklace. Well, can I get it in 3 weeks? I don't care. Yeah, it is so cheap that I can wait." That was brought by Temu, Shein, Shopee, and I think that has been the innovation that then we had to adapt, and we can talk how we adapted and responded. Yeah. I mean, the U.S. market, not immune from the Temu and Shein incursion. There was an extended period of time where it was pretty much all I talked about with investors, right? Trying to figure out exactly what they are doing and state ambitions, how they were going to do it. How is MercadoLibre investing behind your strategy to compete with the competition? You talk about it on your earnings calls and in your shareholder letters, a couple of avenues with first-party logistics, marketing, credit. You pulled a couple levers there, so if you could maybe walk through how you are using your strength and your footprint to compete. Yeah. There is a philosophical cornerstone of everything that we are doing is that we are the market leader. The market leader needs to develop the market, right? If not, someone else will do it for you, and you will cease to be the leader. When you look at the size of the pie, because sometimes we think it is a zero-sum game, but we are at only 15% penetration of e-commerce over total commerce in Latin America. Put it another way that it is, for me, easier to probably explain. The average consumer in MercadoLibre buys 10 times a year with us. 10 times a year, so less than once a month. With Amazon in the U.S., it is 50. Yeah. Right? We have 5x transactions out there, and then you adjust, well, GDP per capita and all of that. Just think of transactions. Don't think about the value of those transactions. That's not going to be the same GMV. How many transactions a family does in Latin America, and how many of those we're capturing as the online world and us in MercadoLibre is a fraction. We're very early. That's the first thing that we want to make sure that people understand. Even if we're big, even if we are BRL 100 billion market cap, well, a little bit less today, but the growth that we are seeing in front of us is tremendous, right? I think that in order to capture that and respond to that level of consumer that was unlocked by the Asian players, you see that the more that you remove friction, the more that you bring those people online, and you go from those to 10 to 50 transactions. What is friction? Friction is logistics and the cost of shipping, friction is credit, and friction is assortment or lack of, right? The three areas is where you've seen our investment in the last few quarters, and if you follow us, it's going to be the next quarter and the quarter after that, and three, four quarters from that, and eight quarters from now- Yeah we're going to be talking about the same. At the end of the day is if you want more assortment, you need to build your supply chain from China. We opened our first fulfillment center in China. We have more than 400 people from MercadoLibre in China now. In April, and this, we didn't announce it in the earnings because it was after results, we went into a fully entrusted model like Shein. Basically, the difference between Shein and Temu is that Shein dictates the price and then goes and gets manufacturers to just bid for that price. In order to do that, you need to have a very well-developed web of relationships in mainland China with SMEs. These are not big companies. We started to do that now in April. We are going all in trying to have that assortment that, again, it's not that it's a different consumer. It may be me, that at certain points, I want the BRL 2 necklace, and I can wait three weeks, and in certain points, I want the iPhone and I wanted to get it same day. That's an area of investment. The other, removing the frictions, has been reducing the free shipping threshold. We're different from Amazon. Amazon is Amazon Prime and non-Amazon Prime. Inside Amazon Prime, everything, outside Amazon Prime. Well, you don't want to be outside Amazon Prime. Yeah. Right? Yeah. We are different. We have established a free shipping threshold, anything that you buy above a certain threshold of price, either if you are Meli+ or Amazon Prime or not, you get free shipping. We lowered that six, seven times. It's the fourth, fifth time in Brazil since 2017 in which we introduced this in Brazil. The last reduction was from BRL 79 to BRL 19. The BRL is 5 to 1 to the dollar, just do the math, it's $3, $4 that we are actually at. Over $3-$4, you get free shipping. That created an acceleration of growth that is insane. We went from 26% growth in packages to 56% in the first quarter of this year. We launched this in June of last year. All of these, plus the credit card, that we can talk about it, are our ways to, again, very early in the game, trying to go for those 50 transactions. This reminds me of when I started my coverage at Amazon in 2022. It was coming from the outside looking in. They had gone through a big investment period, built out their fulfillment network. It had been an investment phase, in street parlance, to say a negative revision cycle. It's hard. Investors, despite the name, investors don't always love investment cycles. When I do that similar ramp approach, looking at what MercadoLibre is doing, when I see the results, the acceleration of units in Brazil through the year. What you're doing is working. It's not like you're making these investments and it's not moving the needle. You're really accelerating adoption, taking share. The unit growth is really mind-boggling from a U.S.-based analyst. What have you learned from this process? I think you could argue it's really brought out the best in MercadoLibre. Maybe it required you to pull forward some of these things that might have taken a little bit longer to get to. Have you discovered certain parts of your business where internally you guys look around like, Wow, this moved the needle more than we thought. This might have had to occur faster than we thought, but the unit acceleration is just fascinating. We were surprised, but we shouldn't. At the end of the day, you are surprised that when you remove frictions and you reduce the free shipping threshold, the habits of people, how they buy, it changes. If we all remember in this room how it was before Amazon Prime, remember when Amazon Prime, I think it started at $5. It was GBP 5 in the U.K. when I was living there, and it was free shipping. Remember, until now, I remember it was, I don't know, 2012, 2013, I was assembling carts until then. From Monday to Friday until I could get my free shipping or so, get everything in one order. Then when Amazon Prime came, you started to buy, from thinking to buying like an instant reflex. No wonder that you do that in Latin America. Latin Americans are no different from Americans or Europeans when you give them good service. Yep. They do that as well. The explosion in frequency has been insane, and you see it in the packages. The explosion, we are getting 29%, 30% new buyers into the platform, and you say, we have 125 million. The population of Latin America is 650. How on earth are you bringing 30% more? I think that it's amazing to think that in 2026, there are still people out there that haven't bought online in some of my markets, right? When you make it easier, they say, "I'm going to go and try it." Then when you get it next day in a beautiful yellow bag, and it arrives perfectly, you buy again. It has surprised us the speed that it has taken, and that then poses a big challenge in terms of catching up with the investments that you need to do. Ours is an industrial business. It's not software in a way, right? Yeah. When we get 56% increase in packages, well, boy, you need to deliver them. Yeah. You need to store them. Basically, the increase in investment that we had to do to accommodate this wall of demand has been putting margins under pressure in the short term. I understand investors. They say, "What the hell are you doing? Two years ago, you were earning 15% of margin, and now you're earning 7%. Can you explain to me how is that a good thing?" Well, I think you need to go back to that philosophical angle of where we see the opportunity from 10 to 50 transactions. If we don't agree on that, then this is not the stock. Yeah. Right? This is not the company. Just stay away because it's not changing. That is not changing. I don't see it changing in the next quarters. The way you can monetize that, through ads, through fintech, etcetera, the opportunity is much larger than what we imagined. When you look even in the U.S., I look where MELI sits today, looking at frequency today, Amazon is still getting incredible frequency unlocks by continuing to this. Right? If you look at what they've done with their same-day grocery business, they launched more Amazon Now yesterday. I was at a conference and the Amazon grocery executive was talking about their grocery consumers purchasing 14 times a month. The average American used to buy six times a month. Right? Build the big basket that you talked about. Now, when consumers around the world, it doesn't matter where you're from, realize this, I can just press a button and this is going to show up really quickly. Frequency explodes. You take more wallet share. What you just alluded to, great segue to my next question, I'll use a sports reference because this is what's always on investors' mind. If this was a soccer game or football for you, are we in the first half, are we in the second half of the investment cycle, in the stoppage time? There's a long investment horizon here. Yeah. I would say it's 20 minutes of the first half. Yeah 45. Yeah. Just to make sure that. Yeah. There are two halves. Yeah. We are at 20 minutes in the first half. It's so early that I think investors need to realize that this is not something that goes away next year. They ask me what that means for long-term margins. What I'm still very bullish on that because I can see that we're 2.9% of GMV in advertising versus an Amazon and 67 or what we're doing with fintech. I think that e-commerce is becoming, in an ecosystem like ours, the basis for the data, like a channel for us to have data that allows us to monetize in a way that no one else can in Latin America. I think retail will always be a low margin business, per se, if you take ads, because now it's groceries. Tomorrow it's going to be two hours delivery, and then the drone fleet. Yeah. Just you name it. Right? There's always something in front of you because consumers want it faster and more convenient, and they want a great price. That will not change today or in 2050. Now, how you monetize that layer, if you control that layer, is the game. The guy from Meituan that we respect a lot in China, he was saying, "Look, I'm building the infrastructure because tomorrow is going to be robots. I'm going to control the robots. I'm going to control the infrastructure. I'm going to move the atoms." That always going to be a competitive advantage. I think that we're all looking at that game. It's amazing how quick this all happened, where five years ago, three years ago, we weren't even talking about. Now it's autonomous robots flying around, delivering packages, AI helping you discover your products. Building the infrastructure is going to be the remaining moat- Yeah as the world changes. Transitioning a little bit, the way your business is integrated from the fulfillment, product discovery, to then credit is fascinating, and again, extends, I think, what your competitive advantage is. Something that has repeatedly come up recently is your expansion of the credit portfolio. I'd love to know how MercadoLibre thinks about the risk-reward in expanding the credit portfolio, where you get your comfort from, and maybe what you're seeing within the loan book and the outlook there. Yeah. I think it's need is the mother of all inventions or something like that, right? Yeah. It wasn't the plan. If you go back to 1999 and the plan that was written at Stanford Business School about MercadoLibre, it had Mercado Pago, which is our fintech arm, into it as a payments mean to make sure that sellers could communicate with buyers and trust in each other and exchange goods. Remember that MercadoLibre started as the eBay of Latin America, right? It was an auction site. People didn't trust each other on that, would you deliver the goods, I would get paid, and all of that. Mercado Pago was created out of that need. It was the PayPal to eBay, right? Over time, thinking of how you increase the business in Latin America, we started to discover a region that was widely under-penetrated on financial services. The banks in Latin America have been very comfortable lending to a portion of the population. Dirty little secret of the Spanish banks, if you like to look at balance sheets and those things, look at BBVA, Santander, and all those guys, where they make their money, half of that comes from Mexico. Its ROIs are insane. Well, that tells you something of they haven't been doing. They never included part of the population. Today, in 2026, you have 40% of Mexicans, 40, that don't have a bank account. I say it again because. Yeah 40% of Mexicans don't have a bank account. 85% don't have a credit card in 2026. You say that's insane. That's south of the border. If you look at Latin America, more or less, you have a shade of gray of going from Brazil, where in the last 10 years, the financial inclusion has taken off, to Mexico and Argentina in the middle. Right? When we started to grow, we saw that if we didn't have a means of payment and credit, we were having a big friction that would not allow us to grow. We went into credit first because of a necessity for our merchants. What gives us comfort? Well, it's the same thesis that was in 2017 when we went into the merchant lending business for our merchants. We have better data than the rest, right? I think that today you could argue that MELI has better data than the National Institute of Statistics of any of these countries, right? We have real-time data on the economy, real-time data on our merchants. We started lending to these guys working capital loans on the back of what we were seeing in the platform. When we got comfortable with that, we went into consumer. Yep. We started with very short term, buy now, pay later stuff. We went into personal loans, and then we said, "Hey, why don't we go into a credit card?" Why the credit card? Because in a market in which a lot of people don't have financial inclusion, in a market in which 50% of the economy is in the gray economy, you cannot show up in the bank and say, "Where is your payment stub?" "Oh, here it is. This is my payroll." "Right, okay, we'll give you a credit card." "No." "What do you have?" "I have nothing." Basically, the bank says, "Thank you very much. Get out." We went into a segment of the population that we knew better than the rest, and that's what has given us comfort to issue credit cards to people that never had a credit card in their lives. If you look at our NPLs, if we look at the whole of our portfolio, it's been amazing. Why? Because we know better than the rest. There's no credit bureau in Mexico, I mean, good luck in lending. I mean, you can lend. Yeah. You will not get paid. Lending is easy. Getting paid is a difficult thing, right? I think that has created a big moat around it. When we link it to the marketplace in which you have 24 installments to buy in Apple official store in Mexico with the Mercado Pago credit card, you create a cycle that is very hard to replicate. That's been the core. People ask me, "When are you going to partition the two companies? Would you IPO?" No. I mean, they stay together. I think that was the worst mistake of eBay and PayPal back in the day. I mean, you need to keep this ecosystem together. When you're taking your approach of reducing friction, banking people and providing credit that don't have it, that's got to be top of the list, right? Because you can't purchase without it. Following on that, you guys have been a market leader in Argentina for a long time, and now you're making the credit push into Argentina. Why now is the right time to make the push into Argentina for your credit book? Well, I'm Argentine, so the next things I'm going to say, I'm authorized. Yeah. I've been in the government. Yeah of Macri for four years. Yeah. I mean, I think it was crazy, right? Yeah. Just when you have 150% inflation, or you stop counting, it's very hard to lend. You can lend in a very short term, but any structured product, it's very hard to price an interest rate, real interest rate in which you can make money. Someone is going to be very, very hurt after that, right? Either the consumer, or yourself as a lender. As Javier Milei has done a very good job in bringing that down, still is at 30% inflation. Yeah. It's not that it's 2% a year. That unlocks the ability to start pricing some products and being able to, for example, offer a credit card, to a population that, in Argentina. We went to China in 2017 to see innovations, and we were amazed by the QR code, right? We brought back the QR code to Latin America. The only place where it stuck is in Argentina. In Argentina, if you go, you better have Mercado Pago because you will not be able to pay anything without a QR code, right? You go into a shop, it has a QR code, and then pops up, you pay, right? We have 60% of the adults in Argentina using that day to day. I think the other company that I've seen like that is Kaspi.kz in Kazakhstan. There are not MELI examples of such a control in terms of the daily transactions. The credit card, it's like an obvious thing to do there. It had to be ready from a macro point of view. That's why now it's been the moment in which we expanded. We started credit cards in August in Argentina. We're already issuing the same amount of credit cards like in Mexico. Why? Because again, there are 50% of the Argentines that don't have a credit card, but they're with us. It's a very fertile ground. Yeah. You, I mean, in Latin America, you don't need to get either too excited or too pessimistic, right? Just down the middle. Yeah, down the middle. Very careful. I like QR codes for shopping. I'd be okay banning them for restaurant menus. I hate restaurant menus. I think that was one of the worst things of the pandemic. That stuck. Yeah. That, and that stuck. Yeah, it is. Like at some restaurants, I just want to leave when I see that. Yeah. Absolutely. Transitioning now back to what's my bread and butter, right, is e-commerce fulfillment. Your unit costs, and cost of service, we call it in Brazil, I think declined 17%. Yeah in the first quarter. It was down 11% in the fourth quarter from as you're making all these investments, I guess as a U.S.-based analyst, thinking about that much levered on a fulfillment network is mind-boggling. Can you just walk us through how you're finding that leverage? Is it more volumes amortized over cost base, greater efficiencies you're kind of finding through the network? Anything there, I think, would be great. Yeah. We, I'll try not to be too technical so people don't snooze. It's the moment that we lower the free shipping threshold, to BRL 19. We were at BRL 79, we went to BRL 19. From BRL 19-BRL 79, what we're telling the consumer is, "You get it for free, but not fast. It's slow. You don't get it tomorrow, right? You can get it in three, four days." People, again, going back to the $2 necklace, they say, "Well, what the hell." Right. Yeah. I mean, "Sure. Yeah. Send it to me." Interesting, you get a lot of people to the checkout through that, and then some people in the checkout, they look at the price of it being delivered tomorrow, say, "Well, you know what? Actually, I want it tomorrow and I'll pay for it." You already drive them in a way to the checkout with a promise, with the option of being free. That large proportion of the people elected to be free. That what means is that our network that has been head-to-head with Amazon for 10 years, building the fastest network in Latin America, is fast and expensive. Fast is expensive, but slow is cheap. You could imagine that you have a fast network, and then you could layer on top of that a slow network in which now if I had a line haul, which is the big trucks that go between big distribution centers for us, it was 70% full because it had to be tomorrow. Just those items need to get there tomorrow. Now you have another 30% of that truck that you can fill with the stuff that goes in three, four days. The same thing for your warehouse, thing for your last mile, thing for everything, because you can group deliveries and do a lot of that. That, in a way, that scale depresses your cost because you're utilizing your network in a more efficient way. The Asian players are cheap and slow. Amazon and MELI on the other extreme, fast and expensive. I think these guys are trying to become-- they want to go through the ASP range, so they need to be fastest because you don't want to wait for an iPhone for 10 days, because you don't know if it's going to arrive. You're going to get very nervous. At the same time, we are all going into saying, "Look, there is a consumer out there that it's willing to wait, and that allows me to capture economies of scale that I couldn't capture before." That's what's happening. Yeah. That's segmenting the purchasing intent- Yeah over speed is a great approach. That allows you to fill- Yeah your network in a more efficient way. Yeah. U.S. just obsession over speed. I'm not known for being patient myself. You've talked about keeping headcount flat for your product development team- Yeah I believe. As we're also in this world where you see all the companies now, measuring people's token consumption and things like. It's become a debate that's quickly gained a lot of momentum. We went from, I would say, even three months ago, AI is going to disrupt marketplaces. If you earn a digital dollar, everything's going to change, and that was dinging the companies. After last quarter, it's everybody's using a lot of tokens. This could weigh on OpEx. I'm like, wait, we went from AI as a problem to now people are using so much AI to improve their business that now that's the problem. A little head-scratching at times, but how do you marry the balance of headcount, but then also product delivery speed and product velocity? Yeah. You're right that some of these questions are insane, right? You go from one quarter of saying it's going to be the end of the world, to the other quarter of saying, "Oh, you guys are doing great, but you're spending too much to be too great. Yeah. That's fine. I think on the third quarter of last year, we told ourselves we will not increase our headcount, period. Mercado Libre, right? With the exception of logistics, because we still don't have-- While we're doing a big ramp-up in robots, there is not enough capacity in the world of robots to be able to supply everything that we need if we wanted not to have more humans at growing at 56%- Yeah the packages. Makes sense. That is something that we cannot do. In the rest, my teams, I have 60 people in MELI in all my teams. You're going to be at 60. The business is growing 30, 40%, just figure it out. Yeah. Right? How are you going to figure it out? We're going to give you all the tools in the world to figure it out. We are one of the largest rollouts of cloud co-work in the world. We have 31,000 people today using cloud co-work and MELI, which is everyone that is not in a warehouse, call it. Last year, the fourth quarter was all you can eat. Get out, do stuff. N810, you pick it. Do it. This year, we put in your mind everyone's goals for the year. You need to automate some flows with AI as part of your goals for the year. What do you do with that? People just jump into AI like there was no tomorrow. Well, guess what? That puts the cost of tokens through the roof. Yeah. We said, "It's fine." We are in a moment of transformation. Just don't worry about the cost at the beginning. What we started to do this year, once that we saw that we had 98% adoption of AI or some ridiculous number, we said, "Well, now you need to start showing what you do with those tokens." One of my teams has been tasked on getting that to part of your P&L for each manager, having the tokens per person that you have consumed and part of your objectives. You need to tie that to your object, as if you were using any resource, as if you were using the credit card for travel or whatever. We are in that process now. I think in the short term, when you look at our Q1, those results, you see the line in G&A that has, in a way, accounted for this increase in cost. Over time, I think the cost dilution is amazing. Those investors are right. Yeah. What's happening now is that you brought all that cost up front. There is some things that are happening with the AI front that are very hard to say how much of the 73% increase in advertising revenue that we had comes from AI. Well, there is AI there in a lot of things. How much is that helping the search? We can discuss that, then ends in 49% growth in revenue. It's very hard to dissect. I know the data, but we don't show it, that shows how the conversion changes when we roll out the LLM tools in the search because we're showing better things. It's harder for investors from the outside to put a number to the AI net effect, and I get it. Over time, I think it's a no-brainer. Yeah. We get to get to my favorite subject. Right? I could have done 45 minutes with you just on AI. Yeah ads and product discovery, but then I probably would've walked off stage with a bunch of emails about not asking about the investment phase. All right. Let's We have eight minutes to Yeah talk about MercadoLibre's approach to the consumer-facing aspect of AI Yeah which you and I have talked about a bunch, and I think it's fascinating what you're doing, and I love the transparency. Amazon and MercadoLibre and other market-dominant e-commerce players, everybody sat out the ChatGPT checkout, right? Yeah. If you're number one, you weren't doing it. Recently, some of them joined Google's UCP. I would love to hear the strategic rationale for why MercadoLibre wants to, for now, do it themselves, bring it to the consumer on the MercadoLibre platform, and then we're going to start to dig in on that. Yeah, I think they are different. The UCP, it's different from the checkout of Yep. Totally OpenAI, by the way they discontinued the instant checkout. Yeah. I'm glad that we didn't join because it would be over by now. I think it goes back to the principality with the consumer. I think we have achieved a situation, probably Amazon here in the U.S. as well, or in Europe, that the consumer starts their journey at MercadoLibre, right? We fought very hard to get that. It's not very sexy, but fraud protection Yep buyer protection program, getting the stuff in your door next day. "Oh, I don't want it. I want to return it." When it's very easy. All of that, right? Marketplaces work very hard to build that infrastructure, and I think that if you're in the leading position like we are, why on earth would you hand that to someone that can disrupt you in having the relationship with the consumer, right? That's been the discussion with- Yeah OpenAI, very frankly, is saying, "Guys, I can get why Etsy and Walmart does it." They are our second or third in the market. If you are the leader, why would give you my catalog? Right? You basically make their business complete. Yeah. I would make Yes. here you have the keys to e-commerce in Latin America. Yep. Thank you very much. Call us engineers. Yeah. Right? We said, "Look, it doesn't make any sense for us." It makes sense for us that we show in your search, et cetera, but the access to our catalog, so a consumer can ideally complete a transaction from A to Z in ChatGPT is not a good idea for us. You cannot live only a life of blocking someone else from doing something. You need to do it yourself. I think that Amazon, ourselves, Coupang, just you name it, we are all Flipkart. We're all in the same journey of trying to retain that customer inside our platform by offering the discovery tools inside MercadoLibre that allow you to have that kind of AI-assisted discovery of product. I don't believe in a world in which we are going to be in white tunics and someone will buy something for us and say. Yeah. Oh, buy me some shoes." Then. Yeah. That's bullshit, right? I think we love shopping. I believe in you doing a search and the search box of MercadoLibre or Amazon knowing you better than anyone and saying, "The shoes that you're wanting to buy are this." You say, "How on earth do you know?" It's like Meta when you say, "Oh, Instagram is hearing my phone. Yeah. They're so good- Yeah in that, of really understanding and connecting the dots to really bring you the products that you really want. That, I really believe on. Right? You can have a conversation around that, à la Rufus, but sometimes it's not a conversation. You don't want to have a conversation. You want to search for something and bring the right result. That's where we're focusing most of our efforts, and we see the big gap in conversion. This is my single favorite subject in e-commerce right now. I agree with you. I don't believe in autonomous agentic. You say, "I need a 12-inch frying pan," and it just shows up tomorrow. Yeah. Maybe with toilet paper. Yeah. MercadoLibre is the first company to speak transparently about what they're seeing in consumer behavior. You talked in the Q1 call that you rolled out LLM in search. Yeah. I've been annoying all of my companies on their earnings call asking what they're seeing in behavior with this, and they're, "It's still too small." You were very transparent about it. Higher conversion rates, great return on ads. That's the debate, right? Especially some of the Western-based marketplaces, they literally make all of their earnings off of their on-site ads business. If the funnel compressed, there's this concern like, oh, what's it going to mean for the on-site ads? What does it means for the CPCs? If I listen to the language from your call, it sounds really encouraging. You're seeing higher conversion, but I think that you used the words better ad, how the on-site ads business is insulated, how it can behave in this type of new product discovery world, and what it means. Yeah. You said it's early, right? What we're seeing We never had a big branding business, a very big top of the funnel advertising business. 85% of our business is search. In a way, if I bring a customer from an LLM that kept 20 minutes discovering the best pair of shoes, then they come and they buy the HOKA shoe inside MercadoLibre, my bread and butter has always been and continues to be having advertisers bidding for a position- Yep there in the search. Actually, I'm bringing a better customer with a higher conversion intent. If I have good, on the other side, better LLMs for doing the advertising, I can show the right advertisement to that person. We are seeing that weird effect that the more that we, in a way, makes things easier, so fewer clicks in a way, just to get to where you want. On the other side, that it's worth more for whoever is bidding money to show your product in front of that face. That you see it in what's happening with advertising right now. Again, we don't have a big brand in business that we may be losing to the discovery phase, in which probably the banner and the things that you're trying to show an impression, not a conversion. Ours has always been a conversion business, I think we're more insulated in a way. It's early days, right? I think the question still is a very good one. Yeah. Just, I don't want to put words in your mouth. If the funnel compresses fewer clicks, some marketplaces have talked about double-digit amount of clicks per purchase. Yeah. You're like, okay, well. I think it was 14 it was 14, Amazon said at the unbox event 2021. Yeah. If that goes to seven, and we're just arbitrarily picking a number, it sounds like what you're saying is the CPCs, the value of those clicks can go up proportionally enough- Correct to offset the declining clicks. Yeah. That, and one aspect that we generally I don't see in the analysis on the other side, if you take our two, three million sellers in Latin America, only a fraction, a very tiny fraction, less than 10%, are advertisers in MercadoLibre. What AI does is that it lowers the barriers to entry to these guys, because you bring a very rough video, we can make an advertising for you. You lower the barriers on the one side, and then you make it a better return on the other side. Well, I think you already have a very booming advertising business. You can have one. I mean, it's not a doom scenario by itself. I love this. The fact that you are the first really to talk more transparently about it. A lot of people are avoiding the subject. It has been an absolute pleasure, Leandro. Thank you so much for- Thank you joining us today. I love observing MercadoLibre. Truly fascinating business. You should initiate on MercadoLibre. I'm always working. Thank you. Thank you so much. Appreciate it.

Speaker 2: Thank you everybody for joining. Really appreciate it. We're going to keep this morning going. Today we have Leandro Cuccioli from MercadoLibre. Leandro is the Senior VP of Strategy, Corporate Development, and IR. I thought it would be a great way to start this would be some timely questions, maybe talking a little bit about first quarter results that you guys reported last week. Then we could move on to my favorite subject to talk about with you, and that's AI, how it's impacting product discovery, how it can compress the funnel. My favorite part, MELI is very transparent with how things are trending and how AI is impacting your business. I'm excited to get to that. Thank you everybody for joining. thank you everybody for joining Really appreciate it. really appreciate it We're going to keep this morning going. we're going to keep this morning going Today we have Leandro Cuccioli from MercadoLibre. today we have leandro cuccioli from mercadolibre Leandro is the Senior VP of Strategy, Corporate Development, and IR. leandro is the senior vp of strategy corporate development and ir I thought it would be a great way to start this would be some timely questions, maybe talking a little bit about first quarter results that you guys reported last week. i thought it would be a great way to start this would be some timely questions maybe talking a little bit about first quarter results that you guys reported last week Then we could move on to my favorite subject to talk about with you, and that's AI, how it's impacting product discovery, how it can compress the funnel. then we could move on to my favorite subject to talk about with you and that's ai how it's impacting product discovery how it can compress the funnel My favorite part, MELI is very transparent with how things are trending and how AI is impacting your business. my favorite part meli is very transparent with how things are trending and how ai is impacting your business I'm excited to get to that. i'm excited to get to that Let's start with kind of the timely stuff that I know you guys were talking about last week, I'm sure you've been on the road this week talking about, and that's just a bit of the competitive environment that we're seeing in Brazil from Shopee, Amazon, and TikTok. Everybody's playing in different parts of e-commerce. Could you talk about what you're seeing in the competitive landscape year to date? Then we're going to obviously dig in on this, but just MercadoLibre's approach- Let's start with kind of the timely stuff that I know you guys were talking about last week, I'm sure you've been on the road this week talking about, and that's just a bit of the competitive environment that we're seeing in Brazil from Shopee, Amazon, and TikTok. let's start with kind of the timely stuff that i know you guys were talking about last week i'm sure you've been on the road this week talking about and that's just a bit of the competitive environment that we're seeing in brazil from shopee amazon and tiktok Everybody's playing in different parts of e-commerce. everybody's playing in different parts of e-commerce Could you talk about what you're seeing in the competitive landscape year to date? could you talk about what you're seeing in the competitive landscape year to date Then we're going to obviously dig in on this, but just MercadoLibre's approach- then we're going to obviously dig in on this but just mercadolibre's approach-

Speaker 1: Yeah Yeah yeah

Speaker 2: to the competition. to the competition. to the competition

Speaker 1: Well, thank you, Mike, for having us. It's our first time here, hopefully the first one of many. I think it's interesting on Brazil because it's half of our business. It's always been very competitive, right? Sometimes people, they talk to me as if competition started when Shopee arrived, but it never felt that it was not competitive. The difference that we have is that in the last 20 years, we've seen competition come and go. If you look at the last three years, the shape of the competition has changed. The local retailers that were a force, really, in the market, they have, in a way, retrenched. If you look in the last four years, many us had 20% market share. We have 40%, we doubled. Well, thank you, Mike, for having us. well thank you mike for having us It's our first time here, hopefully the first one of many. it's our first time here hopefully the first one of many I think it's interesting on Brazil because it's half of our business. i think it's interesting on brazil because it's half of our business It's always been very competitive, right? it's always been very competitive right Sometimes people, they talk to me as if competition started when Shopee arrived, but it never felt that it was not competitive. sometimes people they talk to me as if competition started when shopee arrived but it never felt that it was not competitive The difference that we have is that in the last 20 years, we've seen competition come and go. the difference that we have is that in the last 20 years we've seen competition come and go If you look at the last three years, the shape of the competition has changed. if you look at the last three years the shape of the competition has changed The local retailers that were a force, really, in the market, they have, in a way, retrenched. the local retailers that were a force really in the market they have in a way retrenched If you look in the last four years, many us had 20% market share. if you look in the last four years many us had 20% market share We have 40%, we doubled. we have 40% we doubled Shopee went from zero to 20%, so they are half of our size, and they were nonexistent 3 years ago. Those 20 points of Shopee and our incremental 20 points from our side, they were burnt by probably the local retail. The market has been growing 15%, but in terms of share. Amazon has stayed at the same kind of 10-ish percent, so now they are clear number 3 in the market. I think what it is fair to recognize that in the last 3, 4 years, the Asian players, not only Shopee, I think others, have brought a new sliver of consumers into the market that are probably They are not different consumers. Maybe it is us in some of the shopping missions, that we are willing to sacrifice level of service for price. "Oh, it is a $2 necklace. Well, can I get it in 3 weeks? Shopee went from zero to 20%, so they are half of our size, and they were nonexistent 3 years ago. shopee went from zero to 20% so they are half of our size and they were nonexistent 3 years ago Those 20 points of Shopee and our incremental 20 points from our side, they were burnt by probably the local retail. those 20 points of shopee and our incremental 20 points from our side they were burnt by probably the local retail The market has been growing 15%, but in terms of share. the market has been growing 15% but in terms of share Amazon has stayed at the same kind of 10-ish percent, so now they are clear number 3 in the market. amazon has stayed at the same kind of 10-ish percent so now they are clear number 3 in the market I think what it is fair to recognize that in the last 3, 4 years, the Asian players, not only Shopee, I think others, have brought a new sliver of consumers into the market that are probably They are not different consumers. i think what it is fair to recognize that in the last 3 4 years the asian players not only shopee i think others have brought a new sliver of consumers into the market that are probably they are not different consumers Maybe it is us in some of the shopping missions, that we are willing to sacrifice level of service for price. "Oh, it is a $2 necklace. maybe it is us in some of the shopping missions that we are willing to sacrifice level of service for price "oh it is a $2 necklace Well, can I get it in 3 weeks? well can i get it in 3 weeks I don't care. Yeah, it is so cheap that I can wait." That was brought by Temu, Shein, Shopee, and I think that has been the innovation that then we had to adapt, and we can talk how we adapted and responded. I don't care. i don't care Yeah, it is so cheap that I can wait." That was brought by Temu, Shein, Shopee, and I think that has been the innovation that then we had to adapt, and we can talk how we adapted and responded. yeah it is so cheap that i can wait." that was brought by temu shein shopee and i think that has been the innovation that then we had to adapt and we can talk how we adapted and responded

Speaker 2: Yeah. I mean, the U.S. market, not immune from the Temu and Shein incursion. There was an extended period of time where it was pretty much all I talked about with investors, right? Trying to figure out exactly what they are doing and state ambitions, how they were going to do it. How is MercadoLibre investing behind your strategy to compete with the competition? You talk about it on your earnings calls and in your shareholder letters, a couple of avenues with first-party logistics, marketing, credit. You pulled a couple levers there, so if you could maybe walk through how you are using your strength and your footprint to compete. Yeah. yeah I mean, the U.S. market, not immune from the Temu and Shein incursion. i mean the u.s market not immune from the temu and shein incursion There was an extended period of time where it was pretty much all I talked about with investors, right? there was an extended period of time where it was pretty much all i talked about with investors right Trying to figure out exactly what they are doing and state ambitions, how they were going to do it. trying to figure out exactly what they are doing and state ambitions how they were going to do it How is MercadoLibre investing behind your strategy to compete with the competition? how is mercadolibre investing behind your strategy to compete with the competition You talk about it on your earnings calls and in your shareholder letters, a couple of avenues with first-party logistics, marketing, credit. you talk about it on your earnings calls and in your shareholder letters a couple of avenues with first-party logistics marketing credit You pulled a couple levers there, so if you could maybe walk through how you are using your strength and your footprint to compete. you pulled a couple levers there so if you could maybe walk through how you are using your strength and your footprint to compete

Speaker 1: Yeah. There is a philosophical cornerstone of everything that we are doing is that we are the market leader. The market leader needs to develop the market, right? If not, someone else will do it for you, and you will cease to be the leader. When you look at the size of the pie, because sometimes we think it is a zero-sum game, but we are at only 15% penetration of e-commerce over total commerce in Latin America. Put it another way that it is, for me, easier to probably explain. The average consumer in MercadoLibre buys 10 times a year with us. 10 times a year, so less than once a month. With Amazon in the U.S., it is 50. Yeah. yeah There is a philosophical cornerstone of everything that we are doing is that we are the market leader. there is a philosophical cornerstone of everything that we are doing is that we are the market leader The market leader needs to develop the market, right? the market leader needs to develop the market right If not, someone else will do it for you, and you will cease to be the leader. if not someone else will do it for you and you will cease to be the leader When you look at the size of the pie, because sometimes we think it is a zero-sum game, but we are at only 15% penetration of e-commerce over total commerce in Latin America. when you look at the size of the pie because sometimes we think it is a zero-sum game but we are at only 15% penetration of e-commerce over total commerce in latin america Put it another way that it is, for me, easier to probably explain. put it another way that it is for me easier to probably explain The average consumer in MercadoLibre buys 10 times a year with us. 10 times a year, so less than once a month. the average consumer in mercadolibre buys 10 times a year with us 10 times a year so less than once a month With Amazon in the U.S., it is 50. with amazon in the u.s it is 50

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? We have 5x transactions out there, and then you adjust, well, GDP per capita and all of that. Just think of transactions. Don't think about the value of those transactions. That's not going to be the same GMV. How many transactions a family does in Latin America, and how many of those we're capturing as the online world and us in MercadoLibre is a fraction. We're very early. That's the first thing that we want to make sure that people understand. Even if we're big, even if we are BRL 100 billion market cap, well, a little bit less today, but the growth that we are seeing in front of us is tremendous, right? Right? right We have 5x transactions out there, and then you adjust, well, GDP per capita and all of that. we have 5x transactions out there and then you adjust well gdp per capita and all of that Just think of transactions. just think of transactions Don't think about the value of those transactions. don't think about the value of those transactions That's not going to be the same GMV. that's not going to be the same gmv How many transactions a family does in Latin America, and how many of those we're capturing as the online world and us in MercadoLibre is a fraction. how many transactions a family does in latin america and how many of those we're capturing as the online world and us in mercadolibre is a fraction We're very early. we're very early That's the first thing that we want to make sure that people understand. that's the first thing that we want to make sure that people understand Even if we're big, even if we are BRL 100 billion market cap, well, a little bit less today, but the growth that we are seeing in front of us is tremendous, right? even if we're big even if we are brl 100 billion market cap well a little bit less today but the growth that we are seeing in front of us is tremendous right I think that in order to capture that and respond to that level of consumer that was unlocked by the Asian players, you see that the more that you remove friction, the more that you bring those people online, and you go from those to 10 to 50 transactions. What is friction? Friction is logistics and the cost of shipping, friction is credit, and friction is assortment or lack of, right? The three areas is where you've seen our investment in the last few quarters, and if you follow us, it's going to be the next quarter and the quarter after that, and three, four quarters from that, and eight quarters from now- I think that in order to capture that and respond to that level of consumer that was unlocked by the Asian players, you see that the more that you remove friction, the more that you bring those people online, and you go from those to 10 to 50 transactions. i think that in order to capture that and respond to that level of consumer that was unlocked by the asian players you see that the more that you remove friction the more that you bring those people online and you go from those to 10 to 50 transactions What is friction? what is friction Friction is logistics and the cost of shipping, friction is credit, and friction is assortment or lack of, right? friction is logistics and the cost of shipping friction is credit and friction is assortment or lack of right The three areas is where you've seen our investment in the last few quarters, and if you follow us, it's going to be the next quarter and the quarter after that, and three, four quarters from that, and eight quarters from now- the three areas is where you've seen our investment in the last few quarters and if you follow us it's going to be the next quarter and the quarter after that and three four quarters from that and eight quarters from now-

Speaker 2: Yeah Yeah yeah

Speaker 1: we're going to be talking about the same. At the end of the day is if you want more assortment, you need to build your supply chain from China. We opened our first fulfillment center in China. We have more than 400 people from MercadoLibre in China now. In April, and this, we didn't announce it in the earnings because it was after results, we went into a fully entrusted model like Shein. Basically, the difference between Shein and Temu is that Shein dictates the price and then goes and gets manufacturers to just bid for that price. In order to do that, you need to have a very well-developed web of relationships in mainland China with SMEs. These are not big companies. We started to do that now in April. we're going to be talking about the same. we're going to be talking about the same At the end of the day is if you want more assortment, you need to build your supply chain from China. at the end of the day is if you want more assortment you need to build your supply chain from china We opened our first fulfillment center in China. we opened our first fulfillment center in china We have more than 400 people from MercadoLibre in China now. we have more than 400 people from mercadolibre in china now In April, and this, we didn't announce it in the earnings because it was after results, we went into a fully entrusted model like Shein. in april and this we didn't announce it in the earnings because it was after results we went into a fully entrusted model like shein Basically, the difference between Shein and Temu is that Shein dictates the price and then goes and gets manufacturers to just bid for that price. basically the difference between shein and temu is that shein dictates the price and then goes and gets manufacturers to just bid for that price In order to do that, you need to have a very well-developed web of relationships in mainland China with SMEs. in order to do that you need to have a very well-developed web of relationships in mainland china with smes These are not big companies. these are not big companies We started to do that now in April. we started to do that now in april We are going all in trying to have that assortment that, again, it's not that it's a different consumer. It may be me, that at certain points, I want the BRL 2 necklace, and I can wait three weeks, and in certain points, I want the iPhone and I wanted to get it same day. That's an area of investment. The other, removing the frictions, has been reducing the free shipping threshold. We're different from Amazon. Amazon is Amazon Prime and non-Amazon Prime. Inside Amazon Prime, everything, outside Amazon Prime. Well, you don't want to be outside Amazon Prime. We are going all in trying to have that assortment that, again, it's not that it's a different consumer. we are going all in trying to have that assortment that again it's not that it's a different consumer It may be me, that at certain points, I want the BRL 2 necklace, and I can wait three weeks, and in certain points, I want the iPhone and I wanted to get it same day. it may be me that at certain points i want the brl 2 necklace and i can wait three weeks and in certain points i want the iphone and i wanted to get it same day That's an area of investment. that's an area of investment The other, removing the frictions, has been reducing the free shipping threshold. the other removing the frictions has been reducing the free shipping threshold We're different from Amazon. we're different from amazon Amazon is Amazon Prime and non-Amazon Prime. amazon is amazon prime and non-amazon prime Inside Amazon Prime, everything, outside Amazon Prime. inside amazon prime everything outside amazon prime Well, you don't want to be outside Amazon Prime. well you don't want to be outside amazon prime

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? Right? right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: We are different. We have established a free shipping threshold, anything that you buy above a certain threshold of price, either if you are Meli+ or Amazon Prime or not, you get free shipping. We lowered that six, seven times. It's the fourth, fifth time in Brazil since 2017 in which we introduced this in Brazil. The last reduction was from BRL 79 to BRL 19. The BRL is 5 to 1 to the dollar, just do the math, it's $3, $4 that we are actually at. Over $3-$4, you get free shipping. That created an acceleration of growth that is insane. We went from 26% growth in packages to 56% in the first quarter of this year. We launched this in June of last year. We are different. we are different We have established a free shipping threshold, anything that you buy above a certain threshold of price, either if you are Meli+ or Amazon Prime or not, you get free shipping. we have established a free shipping threshold anything that you buy above a certain threshold of price either if you are meli+ or amazon prime or not you get free shipping We lowered that six, seven times. we lowered that six seven times It's the fourth, fifth time in Brazil since 2017 in which we introduced this in Brazil. it's the fourth fifth time in brazil since 2017 in which we introduced this in brazil The last reduction was from BRL 79 to BRL 19. the last reduction was from brl 79 to brl 19 The BRL is 5 to 1 to the dollar, just do the math, it's $3, $4 that we are actually at. the brl is 5 to 1 to the dollar just do the math it's $3 $4 that we are actually at Over $3-$4, you get free shipping. over $3-$4 you get free shipping That created an acceleration of growth that is insane. that created an acceleration of growth that is insane We went from 26% growth in packages to 56% in the first quarter of this year. we went from 26% growth in packages to 56% in the first quarter of this year We launched this in June of last year. we launched this in june of last year All of these, plus the credit card, that we can talk about it, are our ways to, again, very early in the game, trying to go for those 50 transactions. All of these, plus the credit card, that we can talk about it, are our ways to, again, very early in the game, trying to go for those 50 transactions. all of these plus the credit card that we can talk about it are our ways to again very early in the game trying to go for those 50 transactions

Speaker 2: This reminds me of when I started my coverage at Amazon in 2022. It was coming from the outside looking in. They had gone through a big investment period, built out their fulfillment network. It had been an investment phase, in street parlance, to say a negative revision cycle. It's hard. Investors, despite the name, investors don't always love investment cycles. When I do that similar ramp approach, looking at what MercadoLibre is doing, when I see the results, the acceleration of units in Brazil through the year. What you're doing is working. It's not like you're making these investments and it's not moving the needle. You're really accelerating adoption, taking share. The unit growth is really mind-boggling from a U.S.-based analyst. What have you learned from this process? I think you could argue it's really brought out the best in MercadoLibre. This reminds me of when I started my coverage at Amazon in 2022. this reminds me of when i started my coverage at amazon in 2022 It was coming from the outside looking in. it was coming from the outside looking in They had gone through a big investment period, built out their fulfillment network. they had gone through a big investment period built out their fulfillment network It had been an investment phase, in street parlance, to say a negative revision cycle. it had been an investment phase in street parlance to say a negative revision cycle It's hard. it's hard Investors, despite the name, investors don't always love investment cycles. investors despite the name investors don't always love investment cycles When I do that similar ramp approach, looking at what MercadoLibre is doing, when I see the results, the acceleration of units in Brazil through the year. when i do that similar ramp approach looking at what mercadolibre is doing when i see the results the acceleration of units in brazil through the year What you're doing is working. what you're doing is working It's not like you're making these investments and it's not moving the needle. it's not like you're making these investments and it's not moving the needle You're really accelerating adoption, taking share. you're really accelerating adoption taking share The unit growth is really mind-boggling from a U.S.-based analyst. the unit growth is really mind-boggling from a u.s.-based analyst What have you learned from this process? what have you learned from this process I think you could argue it's really brought out the best in MercadoLibre. i think you could argue it's really brought out the best in mercadolibre Maybe it required you to pull forward some of these things that might have taken a little bit longer to get to. Have you discovered certain parts of your business where internally you guys look around like, Wow, this moved the needle more than we thought. This might have had to occur faster than we thought, but the unit acceleration is just fascinating. Maybe it required you to pull forward some of these things that might have taken a little bit longer to get to. maybe it required you to pull forward some of these things that might have taken a little bit longer to get to Have you discovered certain parts of your business where internally you guys look around like, Wow, this moved the needle more than we thought. have you discovered certain parts of your business where internally you guys look around like wow this moved the needle more than we thought This might have had to occur faster than we thought, but the unit acceleration is just fascinating. this might have had to occur faster than we thought but the unit acceleration is just fascinating

Speaker 1: We were surprised, but we shouldn't. At the end of the day, you are surprised that when you remove frictions and you reduce the free shipping threshold, the habits of people, how they buy, it changes. If we all remember in this room how it was before Amazon Prime, remember when Amazon Prime, I think it started at $5. It was GBP 5 in the U.K. when I was living there, and it was free shipping. Remember, until now, I remember it was, I don't know, 2012, 2013, I was assembling carts until then. From Monday to Friday until I could get my free shipping or so, get everything in one order. Then when Amazon Prime came, you started to buy, from thinking to buying like an instant reflex. No wonder that you do that in Latin America. We were surprised, but we shouldn't. we were surprised but we shouldn't At the end of the day, you are surprised that when you remove frictions and you reduce the free shipping threshold, the habits of people, how they buy, it changes. at the end of the day you are surprised that when you remove frictions and you reduce the free shipping threshold the habits of people how they buy it changes If we all remember in this room how it was before Amazon Prime, remember when Amazon Prime, I think it started at $5. if we all remember in this room how it was before amazon prime remember when amazon prime i think it started at $5 It was GBP 5 in the U.K. when I was living there, and it was free shipping. it was gbp 5 in the u.k when i was living there and it was free shipping Remember, until now, I remember it was, I don't know, 2012, 2013, I was assembling carts until then. remember until now i remember it was i don't know 2012 2013 i was assembling carts until then From Monday to Friday until I could get my free shipping or so, get everything in one order. from monday to friday until i could get my free shipping or so get everything in one order Then when Amazon Prime came, you started to buy, from thinking to buying like an instant reflex. then when amazon prime came you started to buy from thinking to buying like an instant reflex No wonder that you do that in Latin America. no wonder that you do that in latin america Latin Americans are no different from Americans or Europeans when you give them good service. Latin Americans are no different from Americans or Europeans when you give them good service. latin americans are no different from americans or europeans when you give them good service

Speaker 2: Yep. Yep. yep

Speaker 1: They do that as well. The explosion in frequency has been insane, and you see it in the packages. The explosion, we are getting 29%, 30% new buyers into the platform, and you say, we have 125 million. The population of Latin America is 650. How on earth are you bringing 30% more? I think that it's amazing to think that in 2026, there are still people out there that haven't bought online in some of my markets, right? When you make it easier, they say, "I'm going to go and try it." Then when you get it next day in a beautiful yellow bag, and it arrives perfectly, you buy again. It has surprised us the speed that it has taken, and that then poses a big challenge in terms of catching up with the investments that you need to do. They do that as well. they do that as well The explosion in frequency has been insane, and you see it in the packages. the explosion in frequency has been insane and you see it in the packages The explosion, we are getting 29%, 30% new buyers into the platform, and you say, we have 125 million. the explosion we are getting 29% 30% new buyers into the platform and you say we have 125 million The population of Latin America is 650. the population of latin america is 650 How on earth are you bringing 30% more? how on earth are you bringing 30% more I think that it's amazing to think that in 2026, there are still people out there that haven't bought online in some of my markets, right? i think that it's amazing to think that in 2026 there are still people out there that haven't bought online in some of my markets right When you make it easier, they say, "I'm going to go and try it." Then when you get it next day in a beautiful yellow bag, and it arrives perfectly, you buy again. when you make it easier they say "i'm going to go and try it." then when you get it next day in a beautiful yellow bag and it arrives perfectly you buy again It has surprised us the speed that it has taken, and that then poses a big challenge in terms of catching up with the investments that you need to do. it has surprised us the speed that it has taken and that then poses a big challenge in terms of catching up with the investments that you need to do Ours is an industrial business. It's not software in a way, right? Ours is an industrial business. ours is an industrial business It's not software in a way, right? it's not software in a way right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: When we get 56% increase in packages, well, boy, you need to deliver them. When we get 56% increase in packages, well, boy, you need to deliver them. when we get 56% increase in packages well boy you need to deliver them

Speaker 2: Yeah. Yeah. yeah

Speaker 1: You need to store them. Basically, the increase in investment that we had to do to accommodate this wall of demand has been putting margins under pressure in the short term. I understand investors. They say, "What the hell are you doing? Two years ago, you were earning 15% of margin, and now you're earning 7%. Can you explain to me how is that a good thing?" Well, I think you need to go back to that philosophical angle of where we see the opportunity from 10 to 50 transactions. If we don't agree on that, then this is not the stock. You need to store them. you need to store them Basically, the increase in investment that we had to do to accommodate this wall of demand has been putting margins under pressure in the short term. basically the increase in investment that we had to do to accommodate this wall of demand has been putting margins under pressure in the short term I understand investors. i understand investors They say, "What the hell are you doing? they say "what the hell are you doing Two years ago, you were earning 15% of margin, and now you're earning 7%. two years ago you were earning 15% of margin and now you're earning 7% Can you explain to me how is that a good thing?" Well, I think you need to go back to that philosophical angle of where we see the opportunity from 10 to 50 transactions. can you explain to me how is that a good thing?" well i think you need to go back to that philosophical angle of where we see the opportunity from 10 to 50 transactions If we don't agree on that, then this is not the stock. if we don't agree on that then this is not the stock

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? This is not the company. Just stay away because it's not changing. That is not changing. I don't see it changing in the next quarters. The way you can monetize that, through ads, through fintech, etcetera, the opportunity is much larger than what we imagined. Right? right This is not the company. this is not the company Just stay away because it's not changing. just stay away because it's not changing That is not changing. that is not changing I don't see it changing in the next quarters. i don't see it changing in the next quarters The way you can monetize that, through ads, through fintech, etcetera, the opportunity is much larger than what we imagined. the way you can monetize that, through ads through fintech etcetera the opportunity is much larger than what we imagined

Speaker 2: When you look even in the U.S., I look where MELI sits today, looking at frequency today, Amazon is still getting incredible frequency unlocks by continuing to this. Right? If you look at what they've done with their same-day grocery business, they launched more Amazon Now yesterday. I was at a conference and the Amazon grocery executive was talking about their grocery consumers purchasing 14 times a month. The average American used to buy six times a month. Right? Build the big basket that you talked about. Now, when consumers around the world, it doesn't matter where you're from, realize this, I can just press a button and this is going to show up really quickly. Frequency explodes. You take more wallet share. What you just alluded to, great segue to my next question, I'll use a sports reference because this is what's always on investors' mind. When you look even in the U.S., I look where MELI sits today, looking at frequency today, Amazon is still getting incredible frequency unlocks by continuing to this. when you look even in the u.s i look where meli sits today looking at frequency today amazon is still getting incredible frequency unlocks by continuing to this Right? right If you look at what they've done with their same-day grocery business, they launched more Amazon Now yesterday. if you look at what they've done with their same-day grocery business they launched more amazon now yesterday I was at a conference and the Amazon grocery executive was talking about their grocery consumers purchasing 14 times a month. i was at a conference and the amazon grocery executive was talking about their grocery consumers purchasing 14 times a month The average American used to buy six times a month. the average american used to buy six times a month Right? right Build the big basket that you talked about. build the big basket that you talked about Now, when consumers around the world, it doesn't matter where you're from, realize this, I can just press a button and this is going to show up really quickly. now when consumers around the world it doesn't matter where you're from realize this i can just press a button and this is going to show up really quickly Frequency explodes. frequency explodes You take more wallet share. you take more wallet share What you just alluded to, great segue to my next question, I'll use a sports reference because this is what's always on investors' mind. what you just alluded to great segue to my next question i'll use a sports reference because this is what's always on investors' mind If this was a soccer game or football for you, are we in the first half, are we in the second half of the investment cycle, in the stoppage time? There's a long investment horizon here. If this was a soccer game or football for you, are we in the first half, are we in the second half of the investment cycle, in the stoppage time? if this was a soccer game or football for you are we in the first half are we in the second half of the investment cycle in the stoppage time There's a long investment horizon here. there's a long investment horizon here

Speaker 1: Yeah. I would say it's 20 minutes of the first half. Yeah. yeah I would say it's 20 minutes of the first half. i would say it's 20 minutes of the first half

Speaker 2: Yeah Yeah yeah

Speaker 1: 45. 45. 45

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Just to make sure that. Just to make sure that. just to make sure that

Speaker 2: Yeah. Yeah. yeah

Speaker 1: There are two halves. There are two halves. there are two halves

Speaker 2: Yeah. Yeah. yeah

Speaker 1: We are at 20 minutes in the first half. It's so early that I think investors need to realize that this is not something that goes away next year. They ask me what that means for long-term margins. What I'm still very bullish on that because I can see that we're 2.9% of GMV in advertising versus an Amazon and 67 or what we're doing with fintech. I think that e-commerce is becoming, in an ecosystem like ours, the basis for the data, like a channel for us to have data that allows us to monetize in a way that no one else can in Latin America. I think retail will always be a low margin business, per se, if you take ads, because now it's groceries. Tomorrow it's going to be two hours delivery, and then the drone fleet. We are at 20 minutes in the first half. we are at 20 minutes in the first half It's so early that I think investors need to realize that this is not something that goes away next year. it's so early that i think investors need to realize that this is not something that goes away next year They ask me what that means for long-term margins. they ask me what that means for long-term margins What I'm still very bullish on that because I can see that we're 2.9% of GMV in advertising versus an Amazon and 67 or what we're doing with fintech. what i'm still very bullish on that because i can see that we're 2.9% of gmv in advertising versus an amazon and 67 or what we're doing with fintech I think that e-commerce is becoming, in an ecosystem like ours, the basis for the data, like a channel for us to have data that allows us to monetize in a way that no one else can in Latin America. i think that e-commerce is becoming in an ecosystem like ours the basis for the data like a channel for us to have data that allows us to monetize in a way that no one else can in latin america I think retail will always be a low margin business, per se, if you take ads, because now it's groceries. i think retail will always be a low margin business per se if you take ads because now it's groceries Tomorrow it's going to be two hours delivery, and then the drone fleet. tomorrow it's going to be two hours delivery and then the drone fleet

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Just you name it. Right? There's always something in front of you because consumers want it faster and more convenient, and they want a great price. That will not change today or in 2050. Now, how you monetize that layer, if you control that layer, is the game. The guy from Meituan that we respect a lot in China, he was saying, "Look, I'm building the infrastructure because tomorrow is going to be robots. I'm going to control the robots. I'm going to control the infrastructure. I'm going to move the atoms." That always going to be a competitive advantage. I think that we're all looking at that game. Just you name it. just you name it Right? right There's always something in front of you because consumers want it faster and more convenient, and they want a great price. there's always something in front of you because consumers want it faster and more convenient and they want a great price That will not change today or in 2050. that will not change today or in 2050 Now, how you monetize that layer, if you control that layer, is the game. now how you monetize that layer if you control that layer is the game The guy from Meituan that we respect a lot in China, he was saying, "Look, I'm building the infrastructure because tomorrow is going to be robots. the guy from meituan that we respect a lot in china he was saying "look i'm building the infrastructure because tomorrow is going to be robots I'm going to control the robots. i'm going to control the robots I'm going to control the infrastructure. i'm going to control the infrastructure I'm going to move the atoms." That always going to be a competitive advantage. i'm going to move the atoms." that always going to be a competitive advantage I think that we're all looking at that game. i think that we're all looking at that game

Speaker 2: It's amazing how quick this all happened, where five years ago, three years ago, we weren't even talking about. Now it's autonomous robots flying around, delivering packages, AI helping you discover your products. Building the infrastructure is going to be the remaining moat- It's amazing how quick this all happened, where five years ago, three years ago, we weren't even talking about. it's amazing how quick this all happened where five years ago three years ago we weren't even talking about Now it's autonomous robots flying around, delivering packages, AI helping you discover your products. now it's autonomous robots flying around delivering packages ai helping you discover your products Building the infrastructure is going to be the remaining moat- building the infrastructure is going to be the remaining moat-

Speaker 1: Yeah Yeah yeah

Speaker 2: as the world changes. Transitioning a little bit, the way your business is integrated from the fulfillment, product discovery, to then credit is fascinating, and again, extends, I think, what your competitive advantage is. Something that has repeatedly come up recently is your expansion of the credit portfolio. I'd love to know how MercadoLibre thinks about the risk-reward in expanding the credit portfolio, where you get your comfort from, and maybe what you're seeing within the loan book and the outlook there. as the world changes. as the world changes Transitioning a little bit, the way your business is integrated from the fulfillment, product discovery, to then credit is fascinating, and again, extends, I think, what your competitive advantage is. transitioning a little bit the way your business is integrated from the fulfillment product discovery to then credit is fascinating and again extends i think what your competitive advantage is Something that has repeatedly come up recently is your expansion of the credit portfolio. something that has repeatedly come up recently is your expansion of the credit portfolio I'd love to know how MercadoLibre thinks about the risk-reward in expanding the credit portfolio, where you get your comfort from, and maybe what you're seeing within the loan book and the outlook there. i'd love to know how mercadolibre thinks about the risk-reward in expanding the credit portfolio where you get your comfort from and maybe what you're seeing within the loan book and the outlook there

Speaker 1: Yeah. I think it's need is the mother of all inventions or something like that, right? Yeah. yeah I think it's need is the mother of all inventions or something like that, right? i think it's need is the mother of all inventions or something like that right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: It wasn't the plan. If you go back to 1999 and the plan that was written at Stanford Business School about MercadoLibre, it had Mercado Pago, which is our fintech arm, into it as a payments mean to make sure that sellers could communicate with buyers and trust in each other and exchange goods. Remember that MercadoLibre started as the eBay of Latin America, right? It was an auction site. People didn't trust each other on that, would you deliver the goods, I would get paid, and all of that. Mercado Pago was created out of that need. It was the PayPal to eBay, right? Over time, thinking of how you increase the business in Latin America, we started to discover a region that was widely under-penetrated on financial services. It wasn't the plan. it wasn't the plan If you go back to 1999 and the plan that was written at Stanford Business School about MercadoLibre, it had Mercado Pago, which is our fintech arm, into it as a payments mean to make sure that sellers could communicate with buyers and trust in each other and exchange goods. if you go back to 1999 and the plan that was written at stanford business school about mercadolibre it had mercado pago which is our fintech arm into it as a payments mean to make sure that sellers could communicate with buyers and trust in each other and exchange goods Remember that MercadoLibre started as the eBay of Latin America, right? remember that mercadolibre started as the ebay of latin america right It was an auction site. it was an auction site People didn't trust each other on that, would you deliver the goods, I would get paid, and all of that. people didn't trust each other on that would you deliver the goods i would get paid and all of that Mercado Pago was created out of that need. mercado pago was created out of that need It was the PayPal to eBay, right? it was the paypal to ebay right Over time, thinking of how you increase the business in Latin America, we started to discover a region that was widely under-penetrated on financial services. over time thinking of how you increase the business in latin america we started to discover a region that was widely under-penetrated on financial services The banks in Latin America have been very comfortable lending to a portion of the population. Dirty little secret of the Spanish banks, if you like to look at balance sheets and those things, look at BBVA, Santander, and all those guys, where they make their money, half of that comes from Mexico. Its ROIs are insane. Well, that tells you something of they haven't been doing. They never included part of the population. Today, in 2026, you have 40% of Mexicans, 40, that don't have a bank account. I say it again because. The banks in Latin America have been very comfortable lending to a portion of the population. the banks in latin america have been very comfortable lending to a portion of the population Dirty little secret of the Spanish banks, if you like to look at balance sheets and those things, look at BBVA, Santander, and all those guys, where they make their money, half of that comes from Mexico. dirty little secret of the spanish banks if you like to look at balance sheets and those things look at bbva santander and all those guys where they make their money half of that comes from mexico Its ROIs are insane. its rois are insane Well, that tells you something of they haven't been doing. well that tells you something of they haven't been doing They never included part of the population. they never included part of the population Today, in 2026, you have 40% of Mexicans, 40, that don't have a bank account. today in 2026 you have 40% of mexicans 40 that don't have a bank account I say it again because. i say it again because

Speaker 2: Yeah Yeah yeah

Speaker 1: 40% of Mexicans don't have a bank account. 85% don't have a credit card in 2026. You say that's insane. That's south of the border. If you look at Latin America, more or less, you have a shade of gray of going from Brazil, where in the last 10 years, the financial inclusion has taken off, to Mexico and Argentina in the middle. Right? When we started to grow, we saw that if we didn't have a means of payment and credit, we were having a big friction that would not allow us to grow. We went into credit first because of a necessity for our merchants. What gives us comfort? Well, it's the same thesis that was in 2017 when we went into the merchant lending business for our merchants. We have better data than the rest, right? 40% of Mexicans don't have a bank account. 85% don't have a credit card in 2026. 40% of mexicans don't have a bank account 85% don't have a credit card in 2026 You say that's insane. you say that's insane That's south of the border. that's south of the border If you look at Latin America, more or less, you have a shade of gray of going from Brazil, where in the last 10 years, the financial inclusion has taken off, to Mexico and Argentina in the middle. if you look at latin america more or less you have a shade of gray of going from brazil where in the last 10 years the financial inclusion has taken off to mexico and argentina in the middle Right? right When we started to grow, we saw that if we didn't have a means of payment and credit, we were having a big friction that would not allow us to grow. when we started to grow we saw that if we didn't have a means of payment and credit we were having a big friction that would not allow us to grow We went into credit first because of a necessity for our merchants. we went into credit first because of a necessity for our merchants What gives us comfort? what gives us comfort Well, it's the same thesis that was in 2017 when we went into the merchant lending business for our merchants. well it's the same thesis that was in 2017 when we went into the merchant lending business for our merchants We have better data than the rest, right? we have better data than the rest right I think that today you could argue that MELI has better data than the National Institute of Statistics of any of these countries, right? We have real-time data on the economy, real-time data on our merchants. We started lending to these guys working capital loans on the back of what we were seeing in the platform. When we got comfortable with that, we went into consumer. I think that today you could argue that MELI has better data than the National Institute of Statistics of any of these countries, right? i think that today you could argue that meli has better data than the national institute of statistics of any of these countries right We have real-time data on the economy, real-time data on our merchants. we have real-time data on the economy real-time data on our merchants We started lending to these guys working capital loans on the back of what we were seeing in the platform. When we got comfortable with that, we went into consumer. we started lending to these guys working capital loans on the back of what we were seeing in the platform. when we got comfortable with that we went into consumer

Speaker 2: Yep. Yep. yep

Speaker 1: We started with very short term, buy now, pay later stuff. We went into personal loans, and then we said, "Hey, why don't we go into a credit card?" Why the credit card? Because in a market in which a lot of people don't have financial inclusion, in a market in which 50% of the economy is in the gray economy, you cannot show up in the bank and say, "Where is your payment stub?" "Oh, here it is. This is my payroll." "Right, okay, we'll give you a credit card." "No." "What do you have?" "I have nothing." Basically, the bank says, "Thank you very much. We started with very short term, buy now, pay later stuff. we started with very short term buy now pay later stuff We went into personal loans, and then we said, "Hey, why don't we go into a credit card?" Why the credit card? we went into personal loans and then we said "hey why don't we go into a credit card?" why the credit card Because in a market in which a lot of people don't have financial inclusion, in a market in which 50% of the economy is in the gray economy, you cannot show up in the bank and say, "Where is your payment stub?" "Oh, here it is. because in a market in which a lot of people don't have financial inclusion in a market in which 50% of the economy is in the gray economy you cannot show up in the bank and say "where is your payment stub?" "oh here it is This is my payroll." "Right, okay, we'll give you a credit card." "No." "What do you have?" "I have nothing." Basically, the bank says, "Thank you very much. this is my payroll." "right okay we'll give you a credit card." "no." "what do you have?" "i have nothing." basically the bank says "thank you very much Get out." We went into a segment of the population that we knew better than the rest, and that's what has given us comfort to issue credit cards to people that never had a credit card in their lives. If you look at our NPLs, if we look at the whole of our portfolio, it's been amazing. Why? Because we know better than the rest. There's no credit bureau in Mexico, I mean, good luck in lending. I mean, you can lend. Get out." We went into a segment of the population that we knew better than the rest, and that's what has given us comfort to issue credit cards to people that never had a credit card in their lives. get out." we went into a segment of the population that we knew better than the rest and that's what has given us comfort to issue credit cards to people that never had a credit card in their lives If you look at our NPLs, if we look at the whole of our portfolio, it's been amazing. if you look at our npls if we look at the whole of our portfolio it's been amazing Why? why Because we know better than the rest. because we know better than the rest There's no credit bureau in Mexico, I mean, good luck in lending. there's no credit bureau in mexico i mean good luck in lending I mean, you can lend. i mean you can lend

Speaker 2: Yeah. Yeah. yeah

Speaker 1: You will not get paid. Lending is easy. Getting paid is a difficult thing, right? I think that has created a big moat around it. When we link it to the marketplace in which you have 24 installments to buy in Apple official store in Mexico with the Mercado Pago credit card, you create a cycle that is very hard to replicate. That's been the core. People ask me, "When are you going to partition the two companies? Would you IPO?" No. I mean, they stay together. I think that was the worst mistake of eBay and PayPal back in the day. I mean, you need to keep this ecosystem together. You will not get paid. you will not get paid Lending is easy. lending is easy Getting paid is a difficult thing, right? getting paid is a difficult thing right I think that has created a big moat around it. i think that has created a big moat around it When we link it to the marketplace in which you have 24 installments to buy in Apple official store in Mexico with the Mercado Pago credit card, you create a cycle that is very hard to replicate. when we link it to the marketplace in which you have 24 installments to buy in apple official store in mexico with the mercado pago credit card you create a cycle that is very hard to replicate That's been the core. that's been the core People ask me, "When are you going to partition the two companies? people ask me "when are you going to partition the two companies Would you IPO?" No. would you ipo?" no I mean, they stay together. i mean they stay together I think that was the worst mistake of eBay and PayPal back in the day. i think that was the worst mistake of ebay and paypal back in the day I mean, you need to keep this ecosystem together. i mean you need to keep this ecosystem together

Speaker 2: When you're taking your approach of reducing friction, banking people and providing credit that don't have it, that's got to be top of the list, right? Because you can't purchase without it. Following on that, you guys have been a market leader in Argentina for a long time, and now you're making the credit push into Argentina. Why now is the right time to make the push into Argentina for your credit book? When you're taking your approach of reducing friction, banking people and providing credit that don't have it, that's got to be top of the list, right? when you're taking your approach of reducing friction banking people and providing credit that don't have it that's got to be top of the list right Because you can't purchase without it. because you can't purchase without it Following on that, you guys have been a market leader in Argentina for a long time, and now you're making the credit push into Argentina. following on that you guys have been a market leader in argentina for a long time and now you're making the credit push into argentina Why now is the right time to make the push into Argentina for your credit book? why now is the right time to make the push into argentina for your credit book

Speaker 1: Well, I'm Argentine, so the next things I'm going to say, I'm authorized. Well, I'm Argentine, so the next things I'm going to say, I'm authorized. well i'm argentine so the next things i'm going to say i'm authorized

Speaker 2: Yeah. Yeah. yeah

Speaker 1: I've been in the government. I've been in the government. i've been in the government

Speaker 2: Yeah Yeah yeah

Speaker 1: of Macri for four years. of Macri for four years. of macri for four years

Speaker 2: Yeah. Yeah. yeah

Speaker 1: I mean, I think it was crazy, right? I mean, I think it was crazy, right? i mean i think it was crazy right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Just when you have 150% inflation, or you stop counting, it's very hard to lend. You can lend in a very short term, but any structured product, it's very hard to price an interest rate, real interest rate in which you can make money. Someone is going to be very, very hurt after that, right? Either the consumer, or yourself as a lender. As Javier Milei has done a very good job in bringing that down, still is at 30% inflation. Just when you have 150% inflation, or you stop counting, it's very hard to lend. just when you have 150% inflation or you stop counting it's very hard to lend You can lend in a very short term, but any structured product, it's very hard to price an interest rate, real interest rate in which you can make money. you can lend in a very short term but any structured product it's very hard to price an interest rate real interest rate in which you can make money Someone is going to be very, very hurt after that, right? someone is going to be very very hurt after that right Either the consumer, or yourself as a lender. either the consumer or yourself as a lender As Javier Milei has done a very good job in bringing that down, still is at 30% inflation. as javier milei has done a very good job in bringing that down still is at 30% inflation

Speaker 2: Yeah. Yeah. yeah

Speaker 1: It's not that it's 2% a year. That unlocks the ability to start pricing some products and being able to, for example, offer a credit card, to a population that, in Argentina. We went to China in 2017 to see innovations, and we were amazed by the QR code, right? We brought back the QR code to Latin America. The only place where it stuck is in Argentina. In Argentina, if you go, you better have Mercado Pago because you will not be able to pay anything without a QR code, right? You go into a shop, it has a QR code, and then pops up, you pay, right? We have 60% of the adults in Argentina using that day to day. I think the other company that I've seen like that is Kaspi.kz in Kazakhstan. It's not that it's 2% a year. it's not that it's 2% a year That unlocks the ability to start pricing some products and being able to, for example, offer a credit card, to a population that, in Argentina. that unlocks the ability to start pricing some products and being able to for example offer a credit card to a population that in argentina We went to China in 2017 to see innovations, and we were amazed by the QR code, right? we went to china in 2017 to see innovations and we were amazed by the qr code right We brought back the QR code to Latin America. we brought back the qr code to latin america The only place where it stuck is in Argentina. the only place where it stuck is in argentina In Argentina, if you go, you better have Mercado Pago because you will not be able to pay anything without a QR code, right? in argentina if you go you better have mercado pago because you will not be able to pay anything without a qr code right You go into a shop, it has a QR code, and then pops up, you pay, right? you go into a shop it has a qr code and then pops up you pay right We have 60% of the adults in Argentina using that day to day. we have 60% of the adults in argentina using that day to day I think the other company that I've seen like that is Kaspi.kz in Kazakhstan. i think the other company that i've seen like that is kaspi.kz in kazakhstan There are not MELI examples of such a control in terms of the daily transactions. The credit card, it's like an obvious thing to do there. It had to be ready from a macro point of view. That's why now it's been the moment in which we expanded. We started credit cards in August in Argentina. We're already issuing the same amount of credit cards like in Mexico. Why? Because again, there are 50% of the Argentines that don't have a credit card, but they're with us. It's a very fertile ground. There are not MELI examples of such a control in terms of the daily transactions. there are not meli examples of such a control in terms of the daily transactions The credit card, it's like an obvious thing to do there. the credit card it's like an obvious thing to do there It had to be ready from a macro point of view. it had to be ready from a macro point of view That's why now it's been the moment in which we expanded. that's why now it's been the moment in which we expanded We started credit cards in August in Argentina. we started credit cards in august in argentina We're already issuing the same amount of credit cards like in Mexico. we're already issuing the same amount of credit cards like in mexico Why? why Because again, there are 50% of the Argentines that don't have a credit card, but they're with us. because again there are 50% of the argentines that don't have a credit card but they're with us It's a very fertile ground. it's a very fertile ground

Speaker 2: Yeah. Yeah. yeah

Speaker 1: You, I mean, in Latin America, you don't need to get either too excited or too pessimistic, right? You, I mean, in Latin America, you don't need to get either too excited or too pessimistic, right? you i mean in latin america you don't need to get either too excited or too pessimistic right

Speaker 2: Just down the middle. Just down the middle. just down the middle

Speaker 1: Yeah, down the middle. Very careful. Yeah, down the middle. yeah down the middle Very careful. very careful

Speaker 2: I like QR codes for shopping. I'd be okay banning them for restaurant menus. I like QR codes for shopping. i like qr codes for shopping I'd be okay banning them for restaurant menus. i'd be okay banning them for restaurant menus

Speaker 1: I hate restaurant menus. I think that was one of the worst things of the pandemic. I hate restaurant menus. i hate restaurant menus I think that was one of the worst things of the pandemic. i think that was one of the worst things of the pandemic

Speaker 2: That stuck. Yeah. That stuck. that stuck Yeah. yeah

Speaker 1: That, and that stuck. That, and that stuck. that and that stuck

Speaker 2: Yeah, it is. Like at some restaurants, I just want to leave when I see that. Yeah, it is. yeah it is Like at some restaurants, I just want to leave when I see that. like at some restaurants i just want to leave when i see that

Speaker 1: Yeah. Absolutely. Yeah. yeah Absolutely. absolutely

Speaker 2: Transitioning now back to what's my bread and butter, right, is e-commerce fulfillment. Your unit costs, and cost of service, we call it in Brazil, I think declined 17%. Transitioning now back to what's my bread and butter, right, is e-commerce fulfillment. transitioning now back to what's my bread and butter right is e-commerce fulfillment Your unit costs, and cost of service, we call it in Brazil, I think declined 17%. your unit costs and cost of service we call it in brazil i think declined 17%

Speaker 1: Yeah Yeah yeah

Speaker 2: in the first quarter. It was down 11% in the fourth quarter from as you're making all these investments, I guess as a U.S.-based analyst, thinking about that much levered on a fulfillment network is mind-boggling. Can you just walk us through how you're finding that leverage? Is it more volumes amortized over cost base, greater efficiencies you're kind of finding through the network? Anything there, I think, would be great. in the first quarter. in the first quarter It was down 11% in the fourth quarter from as you're making all these investments, I guess as a U.S.-based analyst, thinking about that much levered on a fulfillment network is mind-boggling. it was down 11% in the fourth quarter from as you're making all these investments i guess as a u.s.-based analyst thinking about that much levered on a fulfillment network is mind-boggling Can you just walk us through how you're finding that leverage? can you just walk us through how you're finding that leverage Is it more volumes amortized over cost base, greater efficiencies you're kind of finding through the network? is it more volumes amortized over cost base greater efficiencies you're kind of finding through the network Anything there, I think, would be great. anything there i think would be great

Speaker 1: Yeah. We, I'll try not to be too technical so people don't snooze. It's the moment that we lower the free shipping threshold, to BRL 19. We were at BRL 79, we went to BRL 19. From BRL 19-BRL 79, what we're telling the consumer is, "You get it for free, but not fast. It's slow. You don't get it tomorrow, right? You can get it in three, four days." People, again, going back to the $2 necklace, they say, "Well, what the hell." Right. Yeah. yeah We, I'll try not to be too technical so people don't snooze. we i'll try not to be too technical so people don't snooze It's the moment that we lower the free shipping threshold, to BRL 19. it's the moment that we lower the free shipping threshold to brl 19 We were at BRL 79, we went to BRL 19. we were at brl 79 we went to brl 19 From BRL 19-BRL 79, what we're telling the consumer is, "You get it for free, but not fast. from brl 19-brl 79 what we're telling the consumer is "you get it for free but not fast It's slow. it's slow You don't get it tomorrow, right? you don't get it tomorrow right You can get it in three, four days." People, again, going back to the $2 necklace, they say, "Well, what the hell." Right. you can get it in three four days." people again going back to the $2 necklace they say "well what the hell." right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: I mean, "Sure. I mean, "Sure. i mean "sure

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Send it to me." Interesting, you get a lot of people to the checkout through that, and then some people in the checkout, they look at the price of it being delivered tomorrow, say, "Well, you know what? Actually, I want it tomorrow and I'll pay for it." You already drive them in a way to the checkout with a promise, with the option of being free. That large proportion of the people elected to be free. That what means is that our network that has been head-to-head with Amazon for 10 years, building the fastest network in Latin America, is fast and expensive. Fast is expensive, but slow is cheap. Send it to me." Interesting, you get a lot of people to the checkout through that, and then some people in the checkout, they look at the price of it being delivered tomorrow, say, "Well, you know what? send it to me." interesting you get a lot of people to the checkout through that and then some people in the checkout they look at the price of it being delivered tomorrow say "well you know what Actually, I want it tomorrow and I'll pay for it." You already drive them in a way to the checkout with a promise, with the option of being free. actually i want it tomorrow and i'll pay for it." you already drive them in a way to the checkout with a promise with the option of being free That large proportion of the people elected to be free. that large proportion of the people elected to be free That what means is that our network that has been head-to-head with Amazon for 10 years, building the fastest network in Latin America, is fast and expensive. that what means is that our network that has been head-to-head with amazon for 10 years building the fastest network in latin america is fast and expensive Fast is expensive, but slow is cheap. fast is expensive but slow is cheap You could imagine that you have a fast network, and then you could layer on top of that a slow network in which now if I had a line haul, which is the big trucks that go between big distribution centers for us, it was 70% full because it had to be tomorrow. Just those items need to get there tomorrow. Now you have another 30% of that truck that you can fill with the stuff that goes in three, four days. The same thing for your warehouse, thing for your last mile, thing for everything, because you can group deliveries and do a lot of that. That, in a way, that scale depresses your cost because you're utilizing your network in a more efficient way. The Asian players are cheap and slow. Amazon and MELI on the other extreme, fast and expensive. You could imagine that you have a fast network, and then you could layer on top of that a slow network in which now if I had a line haul, which is the big trucks that go between big distribution centers for us, it was 70% full because it had to be tomorrow. you could imagine that you have a fast network and then you could layer on top of that a slow network in which now if i had a line haul which is the big trucks that go between big distribution centers for us it was 70% full because it had to be tomorrow Just those items need to get there tomorrow. just those items need to get there tomorrow Now you have another 30% of that truck that you can fill with the stuff that goes in three, four days. now you have another 30% of that truck that you can fill with the stuff that goes in three four days The same thing for your warehouse, thing for your last mile, thing for everything, because you can group deliveries and do a lot of that. the same thing for your warehouse thing for your last mile thing for everything because you can group deliveries and do a lot of that That, in a way, that scale depresses your cost because you're utilizing your network in a more efficient way. that in a way that scale depresses your cost because you're utilizing your network in a more efficient way The Asian players are cheap and slow. the asian players are cheap and slow Amazon and MELI on the other extreme, fast and expensive. amazon and meli on the other extreme fast and expensive I think these guys are trying to become-- they want to go through the ASP range, so they need to be fastest because you don't want to wait for an iPhone for 10 days, because you don't know if it's going to arrive. You're going to get very nervous. At the same time, we are all going into saying, "Look, there is a consumer out there that it's willing to wait, and that allows me to capture economies of scale that I couldn't capture before." That's what's happening. I think these guys are trying to become-- they want to go through the ASP range, so they need to be fastest because you don't want to wait for an iPhone for 10 days, because you don't know if it's going to arrive. i think these guys are trying to become-- they want to go through the asp range so they need to be fastest because you don't want to wait for an iphone for 10 days because you don't know if it's going to arrive You're going to get very nervous. you're going to get very nervous At the same time, we are all going into saying, "Look, there is a consumer out there that it's willing to wait, and that allows me to capture economies of scale that I couldn't capture before." That's what's happening. at the same time we are all going into saying "look there is a consumer out there that it's willing to wait and that allows me to capture economies of scale that i couldn't capture before." that's what's happening

Speaker 2: Yeah. That's segmenting the purchasing intent- Yeah. yeah That's segmenting the purchasing intent- that's segmenting the purchasing intent-

Speaker 1: Yeah Yeah yeah

Speaker 2: over speed is a great approach. over speed is a great approach. over speed is a great approach

Speaker 1: That allows you to fill- That allows you to fill- that allows you to fill-

Speaker 2: Yeah Yeah yeah

Speaker 1: your network in a more efficient way. your network in a more efficient way. your network in a more efficient way

Speaker 2: Yeah. U.S. just obsession over speed. I'm not known for being patient myself. You've talked about keeping headcount flat for your product development team- Yeah. yeah U.S. just obsession over speed. u.s just obsession over speed I'm not known for being patient myself. i'm not known for being patient myself You've talked about keeping headcount flat for your product development team- you've talked about keeping headcount flat for your product development team-

Speaker 1: Yeah Yeah yeah

Speaker 2: I believe. As we're also in this world where you see all the companies now, measuring people's token consumption and things like. It's become a debate that's quickly gained a lot of momentum. We went from, I would say, even three months ago, AI is going to disrupt marketplaces. If you earn a digital dollar, everything's going to change, and that was dinging the companies. After last quarter, it's everybody's using a lot of tokens. This could weigh on OpEx. I'm like, wait, we went from AI as a problem to now people are using so much AI to improve their business that now that's the problem. A little head-scratching at times, but how do you marry the balance of headcount, but then also product delivery speed and product velocity? I believe. i believe As we're also in this world where you see all the companies now, measuring people's token consumption and things like. as we're also in this world where you see all the companies now measuring people's token consumption and things like It's become a debate that's quickly gained a lot of momentum. it's become a debate that's quickly gained a lot of momentum We went from, I would say, even three months ago, AI is going to disrupt marketplaces. we went from i would say even three months ago ai is going to disrupt marketplaces If you earn a digital dollar, everything's going to change, and that was dinging the companies. if you earn a digital dollar everything's going to change and that was dinging the companies After last quarter, it's everybody's using a lot of tokens. after last quarter it's everybody's using a lot of tokens This could weigh on OpEx. this could weigh on opex I'm like, wait, we went from AI as a problem to now people are using so much AI to improve their business that now that's the problem. i'm like wait we went from ai as a problem to now people are using so much ai to improve their business that now that's the problem A little head-scratching at times, but how do you marry the balance of headcount, but then also product delivery speed and product velocity? a little head-scratching at times but how do you marry the balance of headcount but then also product delivery speed and product velocity

Speaker 1: Yeah. You're right that some of these questions are insane, right? You go from one quarter of saying it's going to be the end of the world, to the other quarter of saying, "Oh, you guys are doing great, but you're spending too much to be too great. Yeah. yeah You're right that some of these questions are insane, right? you're right that some of these questions are insane right You go from one quarter of saying it's going to be the end of the world, to the other quarter of saying, "Oh, you guys are doing great, but you're spending too much to be too great. you go from one quarter of saying it's going to be the end of the world to the other quarter of saying "oh you guys are doing great but you're spending too much to be too great

Speaker 2: Yeah. Yeah. yeah

Speaker 1: That's fine. I think on the third quarter of last year, we told ourselves we will not increase our headcount, period. Mercado Libre, right? With the exception of logistics, because we still don't have-- While we're doing a big ramp-up in robots, there is not enough capacity in the world of robots to be able to supply everything that we need if we wanted not to have more humans at growing at 56%- That's fine. that's fine I think on the third quarter of last year, we told ourselves we will not increase our headcount, period. i think on the third quarter of last year we told ourselves we will not increase our headcount period Mercado Libre, right? mercado libre right With the exception of logistics, because we still don't have-- While we're doing a big ramp-up in robots, there is not enough capacity in the world of robots to be able to supply everything that we need if we wanted not to have more humans at growing at 56%- with the exception of logistics because we still don't have-- while we're doing a big ramp-up in robots there is not enough capacity in the world of robots to be able to supply everything that we need if we wanted not to have more humans at growing at 56%-

Speaker 2: Yeah Yeah yeah

Speaker 1: the packages. the packages. the packages

Speaker 2: Makes sense. Makes sense. makes sense

Speaker 1: That is something that we cannot do. In the rest, my teams, I have 60 people in MELI in all my teams. You're going to be at 60. The business is growing 30, 40%, just figure it out. That is something that we cannot do. that is something that we cannot do In the rest, my teams, I have 60 people in MELI in all my teams. in the rest my teams i have 60 people in meli in all my teams You're going to be at 60. you're going to be at 60 The business is growing 30, 40%, just figure it out. the business is growing 30 40% just figure it out

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? How are you going to figure it out? We're going to give you all the tools in the world to figure it out. We are one of the largest rollouts of cloud co-work in the world. We have 31,000 people today using cloud co-work and MELI, which is everyone that is not in a warehouse, call it. Last year, the fourth quarter was all you can eat. Get out, do stuff. N810, you pick it. Do it. This year, we put in your mind everyone's goals for the year. You need to automate some flows with AI as part of your goals for the year. What do you do with that? People just jump into AI like there was no tomorrow. Well, guess what? That puts the cost of tokens through the roof. Right? right How are you going to figure it out? how are you going to figure it out We're going to give you all the tools in the world to figure it out. we're going to give you all the tools in the world to figure it out We are one of the largest rollouts of cloud co-work in the world. we are one of the largest rollouts of cloud co-work in the world We have 31,000 people today using cloud co-work and MELI, which is everyone that is not in a warehouse, call it. we have 31,000 people today using cloud co-work and meli which is everyone that is not in a warehouse call it Last year, the fourth quarter was all you can eat. last year the fourth quarter was all you can eat Get out, do stuff. get out do stuff N810, you pick it. n810 you pick it Do it. do it This year, we put in your mind everyone's goals for the year. this year we put in your mind everyone's goals for the year You need to automate some flows with AI as part of your goals for the year. you need to automate some flows with ai as part of your goals for the year What do you do with that? what do you do with that People just jump into AI like there was no tomorrow. people just jump into ai like there was no tomorrow Well, guess what? well guess what That puts the cost of tokens through the roof. that puts the cost of tokens through the roof

Speaker 2: Yeah. Yeah. yeah

Speaker 1: We said, "It's fine." We are in a moment of transformation. Just don't worry about the cost at the beginning. What we started to do this year, once that we saw that we had 98% adoption of AI or some ridiculous number, we said, "Well, now you need to start showing what you do with those tokens." One of my teams has been tasked on getting that to part of your P&L for each manager, having the tokens per person that you have consumed and part of your objectives. You need to tie that to your object, as if you were using any resource, as if you were using the credit card for travel or whatever. We are in that process now. We said, "It's fine." We are in a moment of transformation. we said "it's fine." we are in a moment of transformation Just don't worry about the cost at the beginning. just don't worry about the cost at the beginning What we started to do this year, once that we saw that we had 98% adoption of AI or some ridiculous number, we said, "Well, now you need to start showing what you do with those tokens." One of my teams has been tasked on getting that to part of your P&L for each manager, having the tokens per person that you have consumed and part of your objectives. what we started to do this year once that we saw that we had 98% adoption of ai or some ridiculous number we said "well now you need to start showing what you do with those tokens." one of my teams has been tasked on getting that to part of your p&l for each manager having the tokens per person that you have consumed and part of your objectives You need to tie that to your object, as if you were using any resource, as if you were using the credit card for travel or whatever. you need to tie that to your object as if you were using any resource as if you were using the credit card for travel or whatever We are in that process now. we are in that process now I think in the short term, when you look at our Q1, those results, you see the line in G&A that has, in a way, accounted for this increase in cost. Over time, I think the cost dilution is amazing. Those investors are right. I think in the short term, when you look at our Q1, those results, you see the line in G&A that has, in a way, accounted for this increase in cost. i think in the short term when you look at our q1 those results you see the line in g&a that has in a way accounted for this increase in cost Over time, I think the cost dilution is amazing. over time i think the cost dilution is amazing Those investors are right. those investors are right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: What's happening now is that you brought all that cost up front. There is some things that are happening with the AI front that are very hard to say how much of the 73% increase in advertising revenue that we had comes from AI. Well, there is AI there in a lot of things. How much is that helping the search? We can discuss that, then ends in 49% growth in revenue. It's very hard to dissect. I know the data, but we don't show it, that shows how the conversion changes when we roll out the LLM tools in the search because we're showing better things. It's harder for investors from the outside to put a number to the AI net effect, and I get it. Over time, I think it's a no-brainer. What's happening now is that you brought all that cost up front. what's happening now is that you brought all that cost up front There is some things that are happening with the AI front that are very hard to say how much of the 73% increase in advertising revenue that we had comes from AI. there is some things that are happening with the ai front that are very hard to say how much of the 73% increase in advertising revenue that we had comes from ai Well, there is AI there in a lot of things. well there is ai there in a lot of things How much is that helping the search? how much is that helping the search We can discuss that, then ends in 49% growth in revenue. we can discuss that then ends in 49% growth in revenue It's very hard to dissect. it's very hard to dissect I know the data, but we don't show it, that shows how the conversion changes when we roll out the LLM tools in the search because we're showing better things. i know the data but we don't show it that shows how the conversion changes when we roll out the llm tools in the search because we're showing better things It's harder for investors from the outside to put a number to the AI net effect, and I get it. it's harder for investors from the outside to put a number to the ai net effect and i get it Over time, I think it's a no-brainer. over time i think it's a no-brainer

Speaker 2: Yeah. We get to get to my favorite subject. Right? I could have done 45 minutes with you just on AI. Yeah. yeah We get to get to my favorite subject. we get to get to my favorite subject Right? right I could have done 45 minutes with you just on AI. i could have done 45 minutes with you just on ai

Speaker 1: Yeah Yeah yeah

Speaker 2: ads and product discovery, but then I probably would've walked off stage with a bunch of emails about not asking about the investment phase. All right. Let's We have eight minutes to ads and product discovery, but then I probably would've walked off stage with a bunch of emails about not asking about the investment phase. ads and product discovery but then i probably would've walked off stage with a bunch of emails about not asking about the investment phase All right. all right Let's We have eight minutes to let's we have eight minutes to

Speaker 1: Yeah Yeah yeah

Speaker 2: talk about MercadoLibre's approach to the consumer-facing aspect of AI talk about MercadoLibre's approach to the consumer-facing aspect of AI talk about mercadolibre's approach to the consumer-facing aspect of ai

Speaker 1: Yeah Yeah yeah

Speaker 2: which you and I have talked about a bunch, and I think it's fascinating what you're doing, and I love the transparency. Amazon and MercadoLibre and other market-dominant e-commerce players, everybody sat out the ChatGPT checkout, right? which you and I have talked about a bunch, and I think it's fascinating what you're doing, and I love the transparency. which you and i have talked about a bunch and i think it's fascinating what you're doing and i love the transparency Amazon and MercadoLibre and other market-dominant e-commerce players, everybody sat out the ChatGPT checkout, right? amazon and mercadolibre and other market-dominant e-commerce players everybody sat out the chatgpt checkout right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: If you're number one, you weren't doing it. Recently, some of them joined Google's UCP. I would love to hear the strategic rationale for why MercadoLibre wants to, for now, do it themselves, bring it to the consumer on the MercadoLibre platform, and then we're going to start to dig in on that. If you're number one, you weren't doing it. if you're number one you weren't doing it Recently, some of them joined Google's UCP. recently some of them joined google's ucp I would love to hear the strategic rationale for why MercadoLibre wants to, for now, do it themselves, bring it to the consumer on the MercadoLibre platform, and then we're going to start to dig in on that. i would love to hear the strategic rationale for why mercadolibre wants to for now do it themselves bring it to the consumer on the mercadolibre platform and then we're going to start to dig in on that

Speaker 1: Yeah, I think they are different. The UCP, it's different from the checkout of Yeah, I think they are different. yeah i think they are different The UCP, it's different from the checkout of the ucp it's different from the checkout of

Speaker 2: Yep. Totally Yep. yep Totally totally

Speaker 1: OpenAI, by the way they discontinued the instant checkout. OpenAI, by the way they discontinued the instant checkout. openai by the way they discontinued the instant checkout

Speaker 2: Yeah. Yeah. yeah

Speaker 1: I'm glad that we didn't join because it would be over by now. I think it goes back to the principality with the consumer. I think we have achieved a situation, probably Amazon here in the U.S. as well, or in Europe, that the consumer starts their journey at MercadoLibre, right? We fought very hard to get that. It's not very sexy, but fraud protection I'm glad that we didn't join because it would be over by now. i'm glad that we didn't join because it would be over by now I think it goes back to the principality with the consumer. i think it goes back to the principality with the consumer I think we have achieved a situation, probably Amazon here in the U.S. as well, or in Europe, that the consumer starts their journey at MercadoLibre, right? i think we have achieved a situation probably amazon here in the u.s as well or in europe that the consumer starts their journey at mercadolibre right We fought very hard to get that. we fought very hard to get that It's not very sexy, but fraud protection it's not very sexy but fraud protection

Speaker 2: Yep Yep yep

Speaker 1: buyer protection program, getting the stuff in your door next day. "Oh, I don't want it. I want to return it." When it's very easy. All of that, right? Marketplaces work very hard to build that infrastructure, and I think that if you're in the leading position like we are, why on earth would you hand that to someone that can disrupt you in having the relationship with the consumer, right? That's been the discussion with- buyer protection program, getting the stuff in your door next day. "Oh, I don't want it. buyer protection program getting the stuff in your door next day "oh i don't want it I want to return it." When it's very easy. i want to return it." when it's very easy All of that, right? all of that right Marketplaces work very hard to build that infrastructure, and I think that if you're in the leading position like we are, why on earth would you hand that to someone that can disrupt you in having the relationship with the consumer, right? marketplaces work very hard to build that infrastructure and i think that if you're in the leading position like we are why on earth would you hand that to someone that can disrupt you in having the relationship with the consumer right That's been the discussion with- that's been the discussion with-

Speaker 2: Yeah Yeah yeah

Speaker 1: OpenAI, very frankly, is saying, "Guys, I can get why Etsy and Walmart does it." They are our second or third in the market. If you are the leader, why would give you my catalog? Right? OpenAI, very frankly, is saying, "Guys, I can get why Etsy and Walmart does it." They are our second or third in the market. openai very frankly is saying "guys i can get why etsy and walmart does it." they are our second or third in the market If you are the leader, why would give you my catalog? if you are the leader why would give you my catalog Right? right

Speaker 2: You basically make their business complete. You basically make their business complete. you basically make their business complete

Speaker 1: Yeah. I would make Yeah. yeah I would make i would make

Speaker 2: Yes. Yes. yes

Speaker 1: here you have the keys to e-commerce in Latin America. here you have the keys to e-commerce in Latin America. here you have the keys to e-commerce in latin america

Speaker 2: Yep. Yep. yep

Speaker 1: Thank you very much. Call us engineers. Thank you very much. thank you very much Call us engineers. call us engineers

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? We said, "Look, it doesn't make any sense for us." It makes sense for us that we show in your search, et cetera, but the access to our catalog, so a consumer can ideally complete a transaction from A to Z in ChatGPT is not a good idea for us. You cannot live only a life of blocking someone else from doing something. You need to do it yourself. I think that Amazon, ourselves, Coupang, just you name it, we are all Flipkart. We're all in the same journey of trying to retain that customer inside our platform by offering the discovery tools inside MercadoLibre that allow you to have that kind of AI-assisted discovery of product. I don't believe in a world in which we are going to be in white tunics and someone will buy something for us and say. Right? right We said, "Look, it doesn't make any sense for us." It makes sense for us that we show in your search, et cetera, but the access to our catalog, so a consumer can ideally complete a transaction from A to Z in ChatGPT is not a good idea for us. we said "look it doesn't make any sense for us." it makes sense for us that we show in your search et cetera but the access to our catalog so a consumer can ideally complete a transaction from a to z in chatgpt is not a good idea for us You cannot live only a life of blocking someone else from doing something. you cannot live only a life of blocking someone else from doing something You need to do it yourself. you need to do it yourself I think that Amazon, ourselves, Coupang, just you name it, we are all Flipkart. i think that amazon ourselves coupang just you name it we are all flipkart We're all in the same journey of trying to retain that customer inside our platform by offering the discovery tools inside MercadoLibre that allow you to have that kind of AI-assisted discovery of product. we're all in the same journey of trying to retain that customer inside our platform by offering the discovery tools inside mercadolibre that allow you to have that kind of ai-assisted discovery of product I don't believe in a world in which we are going to be in white tunics and someone will buy something for us and say. i don't believe in a world in which we are going to be in white tunics and someone will buy something for us and say

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Oh, buy me some shoes." Then. Oh, buy me some shoes." Then. oh buy me some shoes." then

Speaker 2: Yeah. Yeah. yeah

Speaker 1: That's bullshit, right? I think we love shopping. I believe in you doing a search and the search box of MercadoLibre or Amazon knowing you better than anyone and saying, "The shoes that you're wanting to buy are this." You say, "How on earth do you know?" It's like Meta when you say, "Oh, Instagram is hearing my phone. That's bullshit, right? that's bullshit right I think we love shopping. i think we love shopping I believe in you doing a search and the search box of MercadoLibre or Amazon knowing you better than anyone and saying, "The shoes that you're wanting to buy are this." You say, "How on earth do you know?" It's like Meta when you say, "Oh, Instagram is hearing my phone. i believe in you doing a search and the search box of mercadolibre or amazon knowing you better than anyone and saying "the shoes that you're wanting to buy are this." you say "how on earth do you know?" it's like meta when you say "oh instagram is hearing my phone

Speaker 2: Yeah. Yeah. yeah

Speaker 1: They're so good- They're so good- they're so good-

Speaker 2: Yeah Yeah yeah

Speaker 1: in that, of really understanding and connecting the dots to really bring you the products that you really want. That, I really believe on. Right? You can have a conversation around that, à la Rufus, but sometimes it's not a conversation. You don't want to have a conversation. You want to search for something and bring the right result. That's where we're focusing most of our efforts, and we see the big gap in conversion. in that, of really understanding and connecting the dots to really bring you the products that you really want. in that of really understanding and connecting the dots to really bring you the products that you really want That, I really believe on. that i really believe on Right? right You can have a conversation around that, à la Rufus, but sometimes it's not a conversation. you can have a conversation around that à la rufus but sometimes it's not a conversation You don't want to have a conversation. you don't want to have a conversation You want to search for something and bring the right result. you want to search for something and bring the right result That's where we're focusing most of our efforts, and we see the big gap in conversion. that's where we're focusing most of our efforts and we see the big gap in conversion

Speaker 2: This is my single favorite subject in e-commerce right now. I agree with you. I don't believe in autonomous agentic. You say, "I need a 12-inch frying pan," and it just shows up tomorrow. This is my single favorite subject in e-commerce right now. this is my single favorite subject in e-commerce right now I agree with you. i agree with you I don't believe in autonomous agentic. i don't believe in autonomous agentic You say, "I need a 12-inch frying pan," and it just shows up tomorrow. you say "i need a 12-inch frying pan," and it just shows up tomorrow

Speaker 1: Yeah. Maybe with toilet paper. Yeah. yeah Maybe with toilet paper. maybe with toilet paper

Speaker 2: Yeah. MercadoLibre is the first company to speak transparently about what they're seeing in consumer behavior. You talked in the Q1 call that you rolled out LLM in search. Yeah. yeah MercadoLibre is the first company to speak transparently about what they're seeing in consumer behavior. mercadolibre is the first company to speak transparently about what they're seeing in consumer behavior You talked in the Q1 call that you rolled out LLM in search. you talked in the q1 call that you rolled out llm in search

Speaker 1: Yeah. Yeah. yeah

Speaker 2: I've been annoying all of my companies on their earnings call asking what they're seeing in behavior with this, and they're, "It's still too small." You were very transparent about it. Higher conversion rates, great return on ads. That's the debate, right? Especially some of the Western-based marketplaces, they literally make all of their earnings off of their on-site ads business. If the funnel compressed, there's this concern like, oh, what's it going to mean for the on-site ads? What does it means for the CPCs? If I listen to the language from your call, it sounds really encouraging. You're seeing higher conversion, but I think that you used the words better ad, how the on-site ads business is insulated, how it can behave in this type of new product discovery world, and what it means. I've been annoying all of my companies on their earnings call asking what they're seeing in behavior with this, and they're, "It's still too small." You were very transparent about it. i've been annoying all of my companies on their earnings call asking what they're seeing in behavior with this and they're "it's still too small." you were very transparent about it Higher conversion rates, great return on ads. higher conversion rates great return on ads That's the debate, right? that's the debate right Especially some of the Western-based marketplaces, they literally make all of their earnings off of their on-site ads business. especially some of the western-based marketplaces they literally make all of their earnings off of their on-site ads business If the funnel compressed, there's this concern like, oh, what's it going to mean for the on-site ads? if the funnel compressed there's this concern like oh what's it going to mean for the on-site ads What does it means for the CPCs? what does it means for the cpcs If I listen to the language from your call, it sounds really encouraging. if i listen to the language from your call it sounds really encouraging You're seeing higher conversion, but I think that you used the words better ad, how the on-site ads business is insulated, how it can behave in this type of new product discovery world, and what it means. you're seeing higher conversion but i think that you used the words better ad how the on-site ads business is insulated how it can behave in this type of new product discovery world and what it means

Speaker 1: Yeah. You said it's early, right? What we're seeing We never had a big branding business, a very big top of the funnel advertising business. 85% of our business is search. In a way, if I bring a customer from an LLM that kept 20 minutes discovering the best pair of shoes, then they come and they buy the HOKA shoe inside MercadoLibre, my bread and butter has always been and continues to be having advertisers bidding for a position- Yeah. yeah You said it's early, right? you said it's early right What we're seeing We never had a big branding business, a very big top of the funnel advertising business. 85% of our business is search. what we're seeing we never had a big branding business a very big top of the funnel advertising business 85% of our business is search In a way, if I bring a customer from an LLM that kept 20 minutes discovering the best pair of shoes, then they come and they buy the HOKA shoe inside MercadoLibre, my bread and butter has always been and continues to be having advertisers bidding for a position- in a way if i bring a customer from an llm that kept 20 minutes discovering the best pair of shoes then they come and they buy the hoka shoe inside mercadolibre my bread and butter has always been and continues to be having advertisers bidding for a position-

Speaker 2: Yep Yep yep

Speaker 1: there in the search. Actually, I'm bringing a better customer with a higher conversion intent. If I have good, on the other side, better LLMs for doing the advertising, I can show the right advertisement to that person. We are seeing that weird effect that the more that we, in a way, makes things easier, so fewer clicks in a way, just to get to where you want. On the other side, that it's worth more for whoever is bidding money to show your product in front of that face. That you see it in what's happening with advertising right now. Again, we don't have a big brand in business that we may be losing to the discovery phase, in which probably the banner and the things that you're trying to show an impression, not a conversion. there in the search. there in the search Actually, I'm bringing a better customer with a higher conversion intent. actually i'm bringing a better customer with a higher conversion intent If I have good, on the other side, better LLMs for doing the advertising, I can show the right advertisement to that person. if i have good on the other side better llms for doing the advertising i can show the right advertisement to that person We are seeing that weird effect that the more that we, in a way, makes things easier, so fewer clicks in a way, just to get to where you want. we are seeing that weird effect that the more that we in a way makes things easier so fewer clicks in a way just to get to where you want On the other side, that it's worth more for whoever is bidding money to show your product in front of that face. on the other side that it's worth more for whoever is bidding money to show your product in front of that face That you see it in what's happening with advertising right now. that you see it in what's happening with advertising right now Again, we don't have a big brand in business that we may be losing to the discovery phase, in which probably the banner and the things that you're trying to show an impression, not a conversion. again we don't have a big brand in business that we may be losing to the discovery phase in which probably the banner and the things that you're trying to show an impression not a conversion Ours has always been a conversion business, I think we're more insulated in a way. It's early days, right? I think the question still is a very good one. Ours has always been a conversion business, I think we're more insulated in a way. ours has always been a conversion business i think we're more insulated in a way It's early days, right? it's early days right I think the question still is a very good one. i think the question still is a very good one

Speaker 2: Yeah. Just, I don't want to put words in your mouth. If the funnel compresses fewer clicks, some marketplaces have talked about double-digit amount of clicks per purchase. Yeah. yeah Just, I don't want to put words in your mouth. just i don't want to put words in your mouth If the funnel compresses fewer clicks, some marketplaces have talked about double-digit amount of clicks per purchase. if the funnel compresses fewer clicks some marketplaces have talked about double-digit amount of clicks per purchase

Speaker 1: Yeah. Yeah. yeah

Speaker 2: You're like, okay, well. You're like, okay, well. you're like okay well

Speaker 1: I think it was 14 I think it was 14 i think it was 14

Speaker 2: it was 14, Amazon said at the unbox event 2021. it was 14, Amazon said at the unbox event 2021. it was 14 amazon said at the unbox event 2021

Speaker 1: Yeah. Yeah. yeah

Speaker 2: If that goes to seven, and we're just arbitrarily picking a number, it sounds like what you're saying is the CPCs, the value of those clicks can go up proportionally enough- If that goes to seven, and we're just arbitrarily picking a number, it sounds like what you're saying is the CPCs, the value of those clicks can go up proportionally enough- if that goes to seven and we're just arbitrarily picking a number it sounds like what you're saying is the cpcs the value of those clicks can go up proportionally enough-

Speaker 1: Correct Correct correct

Speaker 2: to offset the declining clicks. to offset the declining clicks. to offset the declining clicks

Speaker 1: Yeah. That, and one aspect that we generally I don't see in the analysis on the other side, if you take our two, three million sellers in Latin America, only a fraction, a very tiny fraction, less than 10%, are advertisers in MercadoLibre. What AI does is that it lowers the barriers to entry to these guys, because you bring a very rough video, we can make an advertising for you. You lower the barriers on the one side, and then you make it a better return on the other side. Well, I think you already have a very booming advertising business. You can have one. I mean, it's not a doom scenario by itself. Yeah. yeah That, and one aspect that we generally I don't see in the analysis on the other side, if you take our two, three million sellers in Latin America, only a fraction, a very tiny fraction, less than 10%, are advertisers in MercadoLibre. that and one aspect that we generally i don't see in the analysis on the other side if you take our two three million sellers in latin america only a fraction a very tiny fraction less than 10% are advertisers in mercadolibre What AI does is that it lowers the barriers to entry to these guys, because you bring a very rough video, we can make an advertising for you. what ai does is that it lowers the barriers to entry to these guys because you bring a very rough video we can make an advertising for you You lower the barriers on the one side, and then you make it a better return on the other side. you lower the barriers on the one side and then you make it a better return on the other side Well, I think you already have a very booming advertising business. well i think you already have a very booming advertising business You can have one. you can have one I mean, it's not a doom scenario by itself. i mean it's not a doom scenario by itself

Speaker 2: I love this. The fact that you are the first really to talk more transparently about it. A lot of people are avoiding the subject. It has been an absolute pleasure, Leandro. Thank you so much for- I love this. i love this The fact that you are the first really to talk more transparently about it. the fact that you are the first really to talk more transparently about it A lot of people are avoiding the subject. a lot of people are avoiding the subject It has been an absolute pleasure, Leandro. it has been an absolute pleasure leandro Thank you so much for- thank you so much for-

Speaker 1: Thank you Thank you thank you

Speaker 2: joining us today. I love observing MercadoLibre. Truly fascinating business. joining us today. joining us today I love observing MercadoLibre. i love observing mercadolibre Truly fascinating business. truly fascinating business

Speaker 1: You should initiate on MercadoLibre. You should initiate on MercadoLibre. you should initiate on mercadolibre

Speaker 2: I'm always working. I'm always working. i'm always working

Speaker 1: Thank you. Thank you. thank you

Speaker 2: Thank you so much. Appreciate it. Thank you so much. thank you so much Appreciate it. appreciate it