- Mercado Libre will invest a record US$3.6 billion in Brazil and US$1.5 billion in Mexico by 2023, earmarked for sectors such as infrastructure, technology, digital marketing and logistics, as well as its virtual bank.
- Brazil is Mercado Libre’s most important market, while Mexico is the company’s second most important market and presents an optimistic outlook for its operations development.
- Argentina is left out of this investment round.
Mercado Libre has decided to undertake an unprecedented investment in two of the most important markets in Latin America: Brazil and Mexico. The project leaves out the country where the company was born, Argentina.
The online sales service has announced investments of 19 billion reais (equivalent to about 3.65 billion dollars) for its 2023 business in Brazil.
The multinational company said in a statement issued in Sao Paulo that the money invested will be allocated to infrastructure, technology, digital marketing, logistics and, specifically, to the virtual bank Mercado Pago, which will be extended to more countries.
This investment is 11.6 percent higher than last year’s investment in the same market.
Not only the classic business units of Mercado Libre, but also will benefit from the investment project its loyalty plan in the shopping app and the development of Mercado Ads, the company’s online advertising sector.
Fernando Yunes, vice president of Global Commerce of the company and head of Mercado Libre in Brazil, said in the statement that they remain confident in the excellence of the offer of its ecosystem.
Brazil and Mercado Libre
The reasons why Mercado Libre is investing in Brazil and not in Argentina is simple. Brazil is, at the moment, Mercado Libre’s most important market.
The country governed by Lula Da Silva accounts for 55 percent of the region’s total turnover and is a very competitive environment worldwide, Yunes added.
For the firm’s operations, Brazil received a total of 3.5 billion reais (approximately 675 million dollars) in taxes last year, 30 percent more than the previous year.
During 2022, the company dedicated to online sales added more than 170 thousand new sellers in its e-commerce support and the increase of customers was 16 percent compared to 2021.
An important fact is that Mercado Libre wants to be part of the market sector that is being vacated by a major competitor in that country: the retail chain Lojas Americanas.
This company collapsed and Mercado Libre seeks to occupy that market share.
Mexico, Mercado Libre’s big bet
In addition, the company founded by Marcos Galperín has confirmed the disbursement in another key market, Mexico.
It is an investment never seen before in the company, of more than 1.5 billion.
David Geisen, CEO of Mercado Libre in that country, informed in a press release that this investment is far superior to the one made last year and constitutes a record figure, in what is a bet on the Mexican market, the second most important within the company.
According to Mercado Libre, in Mexico there is an optimistic outlook for the development of its operations, due to the fact that in the last three months of 2022 the company had registered a year-on-year increase in revenues in dollars of more than 54 percent.
In the last quarter, Mexico accounted for 30 percent of the firm’s total revenue.
Amazon, Mercado Libre’s rival in Latin America
Mercado Libre is betting on the region because it has important data: Galperin knows that online commerce in Latin America has experienced remarkable growth in recent years, and that the pandemic further accelerated this trend.
In this context, several companies have emerged as key players in the region’s online commerce sector, each with its own strengths and market strategies.
The platform founded in Buenos Aires in 1999 operates in 18 countries and has a market capitalization of over 100 billion.
In 2022, Mercado Libre’s revenue in Brazil alone was US$2.9 billion, representing 55 percent of the company’s total revenue in the region.
Another major player in Latin America’s online commerce sector is Amazon.
The company’s presence in the region has grown rapidly in recent years and it now operates in several countries, including Brazil, Mexico and Chile (not Argentina).
In 2021, Amazon’s revenue in Latin America amounted to $9.3 billion, representing a 55 percent increase compared to the previous year.
The company has also made significant investments in the region, including the construction of a new distribution center in Brazil, with plans to build other centers in Mexico.
Smaller players in Latin America
In addition to Mercado Libre and Amazon, other companies are also looking to gain a foothold in the Latin American online retail sector.
One example is Colombia’s Rappi, which offers a variety of services, including food delivery, e-commerce and payment solutions.
Rappi raised $500 million in funding last year, bringing its valuation to $7.7 billion.
Another case is the Chilean platform Cornershop, which specializes in grocery delivery and was acquired by Uber in 2020.
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