The unicorn revealed plans that show that it is interested in betting on other markets in the region than the land where it was born.
Mercado Libre will implement a new distribution center in Extrema, in the State of Minas Gerais (Brazil) in 2021, with which it plans to generate 1,400 direct and indirect jobs.
As reported by the Government of Minas Gerais in a statement, the new center of the Argentine marketplace will focus on its shipping business and on Ebazar, a subsidiary that controls the company’s e-commerce operation.
Following this line, the giant published today on Twitter a video in which it reveals its plans: the Argentina will cease to be the country with the most unicorn employees in 2021. The first place will be Brazil, with 12,169 workers, followed by the Albiceleste nation (9,809), Mexico (5,722), Colombia (1,815), Uruguay (1,275) and Chile (719).
This year we are going to add 16 thousand people, doubling the size of our team throughout the region! We are very happy to announce this hiring plan that will allow thousands of young people to access their first job in Latin America. pic.twitter.com/uZ5yD8OfaX
– Free Market (@Mercadolibre) April 6, 2021
Not only that: the number of workers in Brazil will grow 145%, while in Mexico will do it four times. In Colombia and Chile will almost double. At the bottom of the table of percentage advance of new hires Argentina is located with 30% and Uruguay with 13%.
Far away and a long time ago
Gone are the times when Marcos Galperin, CEO of Mercado Libre commanded the company’s destinations from the north of Greater Buenos Aires, within a warm and friendly atmosphere.
He had become a rockstar: his name became more popular and he stopped going unnoticed. A true prophet in his land. However, everything changed a year ago.
The founder of the most valuable Latin American company was very close to Mauricio Macri and Cambiemos. He even left his residence in Uruguay, where he lived for much of the Kirchner era, as a show of support for the previous government.
Thus, he could not avoid being caught in the crack. During the macrismo some rumors arose that suggested that the friendship between the two brought Galperín some concrete benefits.
Among them, the possibility of accessing classified information that allowed him to dispose of securities for $ 1,300 million, before the “recalculation” of the payment of Treasury Bills and earned him the complaint of the prosecutor Marijuán for alleged fraud against the public administration.
Between Galperin and Macri there was a certain symbiosis. The CEO did not hide his support for the former president who, in turn, nominated the owner of the unicorn as a model of the new Argentine business community. However, with the arrival of Alberto Fernández to La Rosada, his silent departure began.
Days after the 2019 elections, Galperin met with the new president. Beyond being cordial at the meeting, the CEO did not hesitate and returned to set his home in his Montevideo mansion.
The decision was already made. The businessman had experienced certain frictions with Peronism that had led to his return to Charrúa lands:
- Crosses with the head of La Bancaria, Sergio Palazzo, who demanded to affiliate fintech workers, in addition to greater regulation of these platforms, such as Mercado Pago.
- Clashes with the Truckers union, which blocked the Mercado Libre distribution centers, demanding the representation of the workers of those facilities.
- Chicanas with the social leader Juan Grabois for the tax benefits that Mercado Libre enjoyed during the macrismo, the high commissions it charges its users and that the beneficiaries could eventually use their digital wallet to collect social plans
Closer in time, Galperin received certain signs of hostility from the Government that demonstrated how accurate his fears were:
- Kirchnerism changes in the Knowledge Economy Law, such as the reduction of the Income Tax of 60% only for SMEs and establishing 20% for large companies.
- The brand new launch of Correo Compra, the state ecommerce that seeks to connect producers and consumers, taking advantage of the logistical capacity of the public postal company.
- In the political field, conflicts were on the rise.
But, in economic terms, how does this hostile scenario impact the company?
“Mercado Libre could close its operation in Argentina without the damage being too great,” warns iProUP, Martin Sigwald, leader of Investments and Finance at Quiena. And complete: “It would lose only 15% 20% of its income, but 80% -which is represented by other markets- would still be standing.”
Mercado Libre is no longer Argentina, it is a multinational with most of its profits coming from Brazil and Mexico, “emphasizes Sigwald.
Similarly, Martín Kalos, director of EPyCA Consultores, adds: “In recent years it has invested more abroad than in Argentina, as part of its transnationalization and regionalization process.”
“Mexico, Brazil or Chile are the most relevant markets in the region and with great opportunities. It is logical that the bulk of investment is concentrated in other countries. It is not just a question of putting less chips into the local operation, but of earning chips elsewhere, “he completes.
According to his vision, although the unicorn has a great marketplace dominance and continues to expand to new businesses, such as Supermercado Libre, “the crisis generated by the pandemic and the lethargy of almost a decade in which the local economy is found requires more time and effort to grow “.
“That is why it makes sense to bet on diversifying the business. Having your foot in other places also helps to stabilize the entire operation when one of them, in this case Argentina, enters a crisis, “he says.
Putting chips in Brazil
Brazil became essential for Mercado Libre. In the pandemic, it added 2.6 million buyers and its balance sheet for the second quarter showed a year-on-year growth of its operations of 30%.
For now, its third distribution and logistics center is already operating in San Salvador de Bahía and, so far this year, it has disbursed close to US $ 710 million. Fernando Yunes, manager of the firm in that territory, warns that they have plans to increase that figure in 2021.
The goal is to strengthen its distribution network and depend less and less on the Brazilian state postal service, which today accounts for about 50% of its total deliveries.
But it goes for more: the unicorn maintains its interest in participating in the privatization process of the public mail together with the US companies Federal Express and Amazon, and the local e-commerce Magazine Luiza.
Although during the quarantine he managed to take Amazon to a second place, there is another compelling rival: the Brazilian Magazine Luiza boasts 1,000 physical stores and nine distribution centers. It is also competing in the fintech arena with MagaluPay, from Magalu Payments. On the other hand, in Argentina it seems to have no rivals.
Sigwald cites an allegory by Warren Buffett to illustrate Mercado Libre’s strategy in the region: he is digging a grave around his “castle”, which is ecommerce.
“Thus, it manages to keep competitors away from its businesses and to keep its customers captive. By integrating more features linked to the initial service, users increasingly need to leave their ecosystem less.”
And he adds: “The strategy is to continue developing the payments business and strengthen distribution and logistics to stop outsourcing this service.”
Chile, the new spoiled child
In the midst of the bleak outlook generated by the pandemic, both economically and socially, investments are a light at the end of the road for any country.
In this scenario, Mercado Libre inaugurated its first distribution center in Chilean lands. Hand in hand with an outlay of US $ 100 million and the promise of generating 5,000 jobs, it plans by the end of the year to take over the delivery of the merchandise sold through its platform by hiring carriers.
In August, ecommerce received almost 100 million visits (120% growth), sold six times more and increased the number of new buyers by 250% compared to the same period in 2019. One in five Chileans currently buys through Mercado Free.
Pedro Huichalaf, a lawyer specialized in ICT and former Chilean Telecommunications Undersecretary, tells iProUP that the trans-Andean nation offers him something that is scarce in Argentina: clearer rules of the game and a friendly political climate to promote business.
In addition, international companies see a significant degree of infrastructure development and good connectivity for the development of innovation projects.
According to the expert, Chile made a very large technological leap and promoted, among other things, the development of electronic government and the digitization of procedures. Added to that is the 5G tender that is ongoing and will allow more connected devices.
Mercado Libre invested millions in Chile to improve logistics in the neighboring country
“There was an evolution in payment methods, a lot of user experience and a greater willingness to make digital transactions and purchases, with more confidence,” says Huichalaf.
And he adds: “On the other hand, there are platforms such as Falabella, whose online sales represent almost the same percentage as the face-to-face ones, Ripley and even Amazon that are planning to enter the country.”
Falabella is investing in its digital development, he adds, because “with the pandemic they realized that their physical stores no longer represent their highest level of income.”
“In addition, they have logistics problems and their business model does not allow more intermediaries to generate sales, except for their own companies and a few associated suppliers,” he remarks.
In this sense, the expert highlights that Mercado libre is a very relevant actor, is well positioned, “manages distribution better and is a more open platform.”
“One of the criticisms made of national companies is that they did not incorporate technology for innovation, but as a reaction. They timidly bet on digital channels at first, unlike Mercado Libre whose strength is precisely digital,” he says .
Thus, Galperín’s company made significant cash disbursements in neighboring countries, while in Argentina it placed debt for $ 1 billion to finance its Mercado Pago operations. That is to say that his homeland today is far from the center of priorities of the Argentine unicorn.