MercadoLibre aims to ‘democratise finance’ with payments app
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At the entrance to a metro station in downtown Buenos Aires, musician Dylan Calag uses a laminated QR code instead of the traditional cap to collect tips. Commuters can scan the code using the MercadoPago smartphone payment app to transfer pesos to Calag’s digital wallet as he busks up and down the subway lines of the Argentine capital.
The service is provided by Latin America’s answer to Amazon: MercadoLibre — a company that, in two decades, has expanded from a second-hand marketplace in Argentina, where customers bartered for old bicycles and vintage handbags, to an ecommerce and finance platform.
MercadoPago has fast become one of the most lucrative parts of the business. The fintech unit has tapped into the millions of Latin Americans who remain poorly banked — as many as half of all adults — by offering an easy-to-use alternative. Payments totalling $77bn went through the app last year — a 55 per cent increase on 2020.
“We are democratising finance as well as commerce in Latin America,” says co-founder Marcos Galperin. “I wasn’t expecting it to happen so quickly.”
Now worth more than $50bn by market cap, having roughly doubled in value during the pandemic, MercadoLibre has become a household name from Mexico City to the southern tip of Chile.
In 2017-20, it achieved a compound annual growth rate of 41.6 per cent, according to the latest FT-Statista ranking of The Americas’ Fastest-Growing Companies. Last year, the total cost of goods sold was more than $28bn.
Although Latin America suffered greater economic damage from coronavirus than any other world region, according to the IMF, Galperin says the pandemic only accelerated what he set out to do in 1999 from the garage of his family’s leather business.
“My goal was to help small and medium-sized companies compete, moving away from the traditional urban centres and giving everyone access to the same kind of products,” he explains.
The company’s headquarters in Buenos Aires contains a central glass-walled office. Galperin, however, is rarely there. For our interview, he dials in via video link from his home on the other side of the River Plate in Montevideo, the capital of Uruguay.
His departure from Argentina in December 2019, within weeks of the leftwing Peronist government securing an election victory, made the headlines.
Argentine rules stipulate that company presidents must reside in the country. Galperin was therefore forced to step down as president of MercadoLibre’s Argentina division, thus raising questions in some circles over his future role in the business.
His reason for relocating to Uruguay was “personal”, Galperin says, and the managerial move was a mere technicality: “Argentina is a very formal and highly regulated place . . . as president, you have to be physically based in the country. I still run the day-to-day operations [from Uruguay, as chief executive]” — a country he has called home for 16 of the past 20 years, he points out.
“Many entrepreneurs have left, and that to me is the saddest part about what’s happening in Argentina,” Galperin adds, pointing to the onerous tax rules and excessive regulation that has failed to stabilise the economy. “People are tired of the rules changing.”
Stelleo Passos Tolda, the chief operating officer of MercadoLibre, replaced him as president in February last year, but Galperin remains in charge of the company across Latin America.
While critics have accused the billionaire dotcom entrepreneur of abandoning his home country in a moment of crisis, Argentina still accounted for a fifth (21 per cent) of MercadoLibre’s revenue last year, despite the challenges posed by rampant inflation. More than 4,000 new jobs were created in 2021, bringing the company’s total workforce in the country to 10,000, as many other businesses shuttered and dozens moved abroad.
Galperin had returned to Buenos Aires for four years under the previous Argentine administration of pro-market president, Mauricio Macri, in 2015-19.
Business people had high hopes for Macri, who promised in 2015 that his team of technocrats would fix Argentina’s economic woes. Instead, barely halfway through his mandate, a loss of faith in his government’s reform programme led to a recession and a record-breaking IMF bailout veering off track.
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Several unproven accusations have been brought against Galperin, who some view as a cheerleader for Macri and the Argentine opposition.
Federal prosecutor Guillermo Marijuan in 2020 denounced the company’s entire board for alleged fraud and possible access to privileged financial information. Marijuan claimed MercadoLibre executives had prior knowledge that Macri’s government was to announce that certain government bonds would enter into default. The executives, the prosecutor alleged, sold out 12 days ahead of the news. The case has since been thrown out.
Santiago Sena, professor at IEEM Business School in Montevideo, says the current Peronist administration has an “ambivalent” relationship with the private sector. It’s “like a couple that has to live together when the love is lost”, Sena says. Inevitably, such a situation creates tension with MercadoLibre, Argentina’s most valuable company. Several business executives in Buenos Aires say Galperin is being “pursued politically”.
Galperin’s focus, meanwhile, stretches far beyond any legal disputes in Argentina — he prefers to liken his company to the cross-cultural energy group Royal Dutch Shell.
“We’re headquartered in Argentina, our management is part Brazilian and our business is entirely Latin American,” Galperin says.