MercadoLibre's Q4 2024: Contradictions in Credit Risk, Margin Pressures, and Macroeconomic Impacts

These are the key contradictions discussed in MercadoLibre's latest 2024Q4 earnings call, specifically including: Credit Card Risk Management Strategy, Fulfillment Center Impact on Margins, Argentina's Macroeconomic Situation and Profitability, and Growth Strategy and Risk Management in Credit and Fintech Business:



Market Growth and Expansion:
- MercadoLibre achieved $21 billion in revenue for 2024, generating over $1 billion in free cash flow.
- The company surpassed 100 million unique buyers in its marketplace and 60 million monthly active users in its FinTech platform.
- Growth was driven by improvements in value proposition, increased market share, and strategic investments in logistics and financial services.

Credit Card and Financial Services Expansion:
- MercadoLibre issued 5.9 million new credit cards in 2024, more than doubling its portfolio.
- The credit card business showed profitability improvements as older cohorts became profitable.
- This expansion is part of MercadoLibre's strategy to become the largest digital bank in Latin America, leveraging unique competitive advantages in underwriting and distribution.

Logistics and Efficiency Improvements:
- MercadoLibre achieved record levels of productivity and shipments per route in 2024.
- The company expanded its free shipping offering and opened new fulfillment centers, leading to a record number of new buyers.
- These developments were facilitated by a focus on small incremental gains and continuous improvement in route algorithms and shelving systems.

Credit Risk Management:
- MercadoLibre saw no signs of credit portfolio deterioration despite rising interest rates in Brazil.
- The company reduced issuance of micro cards and tightened payback periods to manage risk in the Brazilian market.
- This cautious approach is to ensure the sustainability of the credit portfolio and align with the company's risk-first strategy.