MercadoLibre: The Latin “Amazon” that breaks records in the region

MercadoLibre has been able to surpass the oil and banking companies that live in the region in terms of value, this growth was much faster than the company had premeditated for 2020 and this is mainly due to the economic phenomenon that was generated by the COVID-19 pandemic, in which electronic commerce increased dramatically in the attempt of people to acquire products without leaving their home to expose themselves and the prohibition of opening to the public that retailers have had. In this way, the e-commerce company, which in many cases is classified as the Latin American “Amazon” or “eBay”, becomes one of the most important companies in the region.

How did the pandemic benefit MercadoLibre?

Latin America is considered the most economically affected region by the coronavirus, as reported by VOA Noticias, the Economic Commission for Latin America and the Caribbean (ECLAC) has predicted a more serious economic impact than the 2009 financial crisis, this is due to the fact that the foreign trade will fall 23% due to the decrease in imports and exports. Likewise, tourism, a fundamental sector for Latin America, will also contract by 50%, however, ECLAC also adds that this crisis is an opportunity for growth for the region's internal trade, where MercadoLibre can be included.

Therefore MercadoLibre has grown significantly, in fact it entered the Financial Times list of the 100 companies worldwide that earned the most during the pandemic, ranking 37 according to Cronista. MercadoLibre's increase goes hand in hand with the increase in demand for electronic commerce due to the quarantine. During the second quarter of 2020, the platform reached the following numbers: active users increased by 45.2%, its interannual net income also increased by 61.1%, on the other hand, the number of interannual transactions increased by 122.9 % as reported by iProUp.

In addition, Forbes reports that MercadoLibre registered a general growth of 50% in the second quarter of this year , reaching a value of 60,700 million dollars within the stock market, thus surpassing Latin American energy companies such as Vale and Petrobas, as well as global firms such as Dell, General Motors and even Twitter. In fact, it also exceeded the value of the reserves of the Central Bank of Argentina (43,208 million dollars), the country where MercadoLibre started. The only Latin American company still above MercadoLibre is the multinational bottler Coca Cola FEMSA de México.

Born in crisis

The pandemic has not been the first crisis that MercadoLibre has gone through, in fact the company was born in Argentina in a serious financial crisis that the South American country went through between 1998 and 2002 where the poverty rate reached 52.8% and inflation reached 35.2%. The idea of MercadoLibre was born with the intention of bringing an American business model like eBay to Latin America, which Marcos Galperin, founder and current CEO of the company had known during his studies at Stanford University, for which he and his colleagues They accumulated 1000 products to be able to publish the sales page, a fact that occurred on August 2, 1999, according to the newspaper El Tiempo.

At first the growth of MercadoLibre was full of difficulties and achievements that were celebrated with cheap wine, since according to El Tiempo, Galperin assured that by then finances did not yet allow them to celebrate with champagne. On one occasion, MercadoLibre's founders had to beg investors to trust the model and not abandon it, as the company came close to closing in a shareholder vote. In 2001 eBay -the largest electronic commerce company in the world at that date- acquired 20% of MercadoLibre and signed an alliance for the development of the Latin American model, in 2006 the alliance ended and in 2016 they sold their stake for a little more than 1,000 million dollars, at that time the value of MercadoLibre stood at 8,100 million dollars according to El Financiero.

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Currently MercadoLibre works in 18 countries in Latin America, sold 175.8 million items during the second quarter of 2020, moving up to 13 purchases per second, has other functions of its own such as MercadoPago, MercadoEnvios, MercadoCrédito, MercadoShops and advertising, as well as 11,000 employees in the region plus 5,000 employees incorporated in 2020. This makes it the largest e-commerce company in Latin America and the seventh in the world.