MercadoLibre aims to “democratize finance” with a payment application

At the entrance to a subway station in downtown Buenos Aires, musician Dylan Calag uses a plastic 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 navigates the Argentinian capital’s metro lines.

The service is provided by Latin America’s answer to Amazon: MercadoLibre – a company that in two decades has grown from a second-hand market in Argentina, where customers bartered old bikes and vintage handbags , an e-commerce and finance platform.

MercadoPago quickly became one of the most lucrative parts of the business. The fintech unit has tapped into the millions of Latin Americans who remain underbanked – up to half of all adults – by offering an easy-to-use alternative. Payments totaling $77 billion passed through the app last year, a 55% increase from 2020.

“We are democratizing finance as well as commerce in Latin America,” says co-founder Marcos Galperin. “I didn’t expect it to happen so quickly.”

“A lot of entrepreneurs have left. This is the saddest part of what is happening in Argentina’ – Marcos Galperin © Sarah Pabst/Bloomberg

Now worth more than $50 billion in 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%, according to the latest FT-Statista ranking of the fastest growing companies in the Americas. Last year, the total cost of goods sold was over $28 billion.

Although Latin America has suffered greater economic damage from the coronavirus than any other region in the world, according to the IMF, Galperin says the pandemic has only accelerated what he set out to do in 1999. from the garage of the family leather business.

“My goal was to help small and medium-sized businesses to be competitive, moving away from traditional urban centers and giving everyone access to the same type of products,” he explains.

The company’s headquarters in Buenos Aires contains a glass-walled central office. Galperin, however, is rarely around. For our interview, he tunes in via video link from his home across the River Plate in Montevideo, the capital of Uruguay.

His departure from Argentina in December 2019, weeks after the election victory of the leftist Peronist government, made headlines.

Argentine rules state that company presidents must reside in the country. Galperin was therefore forced to step down as president of MercadoLibre’s Argentina division, raising questions in some circles about his future role in the company.

His reason for moving to Uruguay was “personal,” says Galperin, and the change in management was a mere technicality: “Argentina is a very formal and highly regulated place. . . as president, you must 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 last 20 years, he points out.

“Many entrepreneurs have left, and for me that is the saddest part of what is happening in Argentina,” adds Galperin, pointing to onerous tax rules and excessive regulation that have failed to stabilize the economy. . “People are fed up with the rules changing.”

Stelleo Passos Tolda, MercadoLibre’s chief operating officer, replaced him as chairman 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 amid crisis, Argentina still accounted for a fifth (21%) of MercadoLibre’s revenue last year, despite challenges posed by galloping 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 closed and dozens moved overseas.

Galperin had returned to Buenos Aires for four years under Argentina’s previous administration of pro-market president Mauricio Macri in 2015-19.

Businessmen had high hopes for Macri, who in 2015 promised his team of technocrats would fix Argentina’s economic problems. Instead, barely halfway through his term, a loss of faith in his government’s reform agenda led to a recession and a record IMF bailout that swerved.

Several unproven charges have been leveled against Galperin, who some see as a cheerleader for Macri and the Argentine opposition.

Federal prosecutor Guillermo Marijuan in 2020 denounced the company’s entire board of directors for alleged fraud and possible access to privileged financial information. Marijuan claimed MercadoLibre executives knew in advance that Macri’s government was to announce that some government bonds would go into default. The leaders, according to the prosecutor, sold out 12 days before the news. The case has since been dismissed.

Santiago Sena, a 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 love is lost,” says Sena. Inevitably, such a situation creates tension with MercadoLibre, Argentina’s most valuable company. Several business leaders in Buenos Aires say Galperin is “politically pursued.”

Galperin’s focus, meanwhile, extends far beyond any legal dispute in Argentina – he prefers to compare his company to cross-cultural energy group Royal Dutch Shell.

“Our headquarters are in Argentina, our management is partly Brazilian, and our operations are entirely Latin American,” says Galperin.

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