Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the Quarter Ended December 31, 2020. I’m Federico Sandler, Investor Relations Officer for MercadoLibre. Our Senior Manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Osvaldo Giménez, CEO of Mercado Pago will be available during today’s Q&A session. I remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Our actual results may differ materially from those included in this conference call, for a variety of reasons, including those described in the forward-looking statements and risk factor sections of our Form 10-K for the year ended December 31, 2020, and any of MercadoLibre, Inc.’s other applicable filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Now, let me turn the call over to Pedro.

Hello, everyone, and welcome to our fourth quarter 2020 earnings conference call. Our strong performance during the quarter further established our leadership position throughout Latin America, which is the world's fastest growing region for e-commerce, according to eMarketer. These positive market dynamics, combined with our strong execution and focus, are reflected in our quarterly performance, where growth continued accelerating despite the gradual reopening of physical retail during the period. I'll begin by addressing our commerce business, where items sold grew by triple digits in all major markets, while transactions per buyer also hit record levels in major countries. During the fourth quarter, consolidated gross merchandise volume grew 110% year-over-year on an FX neutral basis. At the country level, Brazil was one of the highlights during the quarter with FX-neutral gross merchandise volume growth accelerating to 84% year-over-year, while items sold doubled annually. Additionally, other geographies experienced robust triple-digit growth rates. While we encountered slight sequential deceleration in growth rates as retailers began reopening, this was less pronounced than expected. We had particularly strong performance in Mexico, whose contribution in units sold surpassed Argentina, becoming our second largest geography in terms of sold items, a sign that we are consolidating market share in that country. Moreover, for the first time in our history, Mexico surpassed the $1 billion mark in quarterly gross merchandise volume. Consumer trends towards online consumption remain favorable, signaling positive prospects for future growth. The number of buyers during the quarter reached a record high, resulting in almost 37 million unique buyers during the quarter and surpassing 60 million unique buyers for full-year 2020. The product breadth and increased convenience continues to attract new buyers at an accelerated pace when compared to pre-pandemic levels. In line with this, we’ve continued broadening our assortment, resulting in over 275 million live listings this quarter, and we remain a partner of choice for local and foreign merchants throughout Latin America. Our first-party offering continues to grow, reaching almost $200 million of total gross merchandise volume on a consolidated basis and representing high single digits of penetration during certain special promotional dates throughout the quarter. Let me now provide some additional detail on Brazil’s performance on an FX-neutral basis, which resulted in sequential GMV acceleration of 10 percentage points and was a highlight for us during the quarter. Categories such as consumer electronics, where we lagged at the beginning of 2020, grew north of 15 percentage points sequentially quarter-on-quarter, driven by a renewed commercial and technological focus. During 2020, our more deliberate focus on Black Friday sales generated impressive top line results. We made a concentrated effort to increase both investments and collaboration across our business units to maximize this peak promotional season. This included rebates and marketing campaigns, which leveraged our unique ecosystem of solutions within advertising, credits, Mercado Shops and Mercado Envios. Unlike other years, we also increased our volume of promotional deals, marked by the launch of our new user interface called Promotion Central, while expanding or improving return flows capacity. As a result, we doubled Black Friday sales year-over-year, both in terms of share as well as sessions, resulting in our highest fourth quarter market share on record. As we continue strengthening our Brazilian ecosystem, we are also attracting more global brands across multiple verticals. Relating to consumer products, we’ve partnered with Heineken, Kimberly-Clark, Nestle, PepsiCo and Heinz. In electronics, we’ve partnered with brands such as Samsung, and in regards to home improvement, we are working with Black & Decker and Karcher. Significant progress in this regard yields important brand equity for MercadoLibre and deepens our product breadth, advancing our goal of becoming a one-stop destination for e-commerce across a growing number of product categories. Let's now turn our focus to Mercado Envios, which continues to be a key value driver as we enhance our cross-regional logistics capabilities. Our managed network reached a penetration of almost 80%, with Argentina, Brazil and Mexico at 88%, 79% and 76%, respectively. On a consolidated basis, fulfillment reached a penetration of over a third of all items bought on our platform, led by Mexico at 60%, while in Brazil over a quarter of all items are being fulfilled by MercadoLibre already. During the quarter, we shipped 214 million items, a growth of 131% year-on-year, and totaled almost 650 million deliveries for the full-year. We also significantly improved our average lead times per shipment, reducing fourth quarter average lead times by 30% sequentially versus the prior quarter. Consequently, deliveries in less than 48 hours improved by 12 percentage points quarter-over-quarter and by 20 percentage points year-over-year. Within that, we meaningfully improved the share of same-day and next day deliveries as well. These results are material in the context of significant volume growth during the peak quarterly period of late November and early December, where lockdowns were still in place due to the COVID-19 pandemic. Not only were we able to handle the excess volume without interruption, but we worked faster and more efficiently under extraordinary circumstances. As you can see, the Mercado Envios team has been operating at an outstanding level of pace and effectiveness, and we have continued developing logistics capabilities at a quick pace. During the quarter, we continued to open multiple cross docking stations and service centers, while doubling our Places' drop off point footprint and successfully launched Meli Air with a fleet of seven dedicated aircraft covering eight routes across Mexico and Brazil to complement the use of our commercial airline capacity to continue driving down our delivery times. We look forward to continuing to unlock value from this important and growing part of our business as we move into 2021 and beyond. With that, now let’s move on to the Fintech side of the business. Another critical building block of our value proposition in our journey to democratizing money. Consolidated Mercado Pago total payment volume reached almost $16 billion, growing 134% year-over-year on an FX-neutral basis, and totaling 659 million transactions in the fourth quarter, representing growth of 131% year-over-year. Our off-platform payments businesses reached $9.2 billion, growing at a robust 150% year-over-year on an FX-neutral basis. Additionally, during the quarter, off-platform total payments in number represented over 75% of all Mercado Pago transactions. The trends towards digitization of money continued through the quarter, and our purely offline mobile point-of-sale offering began showing signs of recovery throughout the period. Online payments grew 143% year-over-year on an FX-neutral basis and continued expanding its merchant base. Within that growth, we saw sequential deceleration due to higher impact on long tail sellers amidst the easing of the COVID-19 restrictions. In Brazil, Mercado Pago was among the first players in the market to launch PIX as a means of payment. Our PIX offering is now available for sellers running Checkout Pro or any related products such as Payment Links or other branded checkout plug-ins. Our speed and adaptation reflects the agility with which we acclimate to market development. MPLS continued its recovery toward pre-COVID levels of growth, reaching almost 90% year-over-year on an FX-neutral basis, with record activation rates and device sales leading to an increase in active devices. Additionally, the scale benefits of this sustained growth are improving unit economics across the region. Devices sold once again surpassed 1 million on a consolidated basis, reaching over 6 million active merchants in the last 12 months. Our mobile wallet, the cornerstone of our digital account approach to FinTech, reached $3.3 billion in total payment volume, representing a 247% year-over-year growth on an FX-neutral basis. We've successfully focused on increasing engagement of wallet usage with positive results in frequency of usage and number of users who engage in multiple wallet use cases. We continued building our two-sided network during the quarter, resulting in over 14 million active payers and 6 million active collectors. In-store QR payments started to gain share over total wallet usage, representing 20 percentage points of wallet TPV. The majority of wallet TPV primarily resulted from utilities and peer-to-peer transactions. We've continued to enhance our wallet value proposition by continuing to distribute cards tied to Mercado Pago wallet balances and credit lines for consumers and merchants to fund their wallets across Latin America. This is in addition to our ongoing overlay of savings tech and asset management products through MercadoFundo, through which approximately 50 million users have invested funds in their wallet accounts. In Brazil, we've launched our own debit card, issuing over 3.8 million proprietary cards, replacing all of our previously issued third-party cards. Additionally, we launched a new overlay of Mercado Pago's insure tech products, theft and damage insurance. This is our first insurance product and is integrated into our digital account as a new financial services feature covering theft or damage of cell phones and Point Mini users. Before moving on to our financials, I'll provide a quick update on Mercado Credito's quarterly performance. The portfolio, which grew to $479 million more than doubled compared to the same period last year. Originations during the quarter almost quadrupled versus the fourth quarter of 2019, surpassing $500 million for the first time. Not only did we drive accelerated growth of the business unit during the period, but we also maintained healthy NPL profiles, resulting in better profitability from our newer cohorts and lower APRs. With those business comments, let me now move on to our financial progress report for the fourth quarter. Starting with a review of our P&L. Fourth quarter consolidated net revenues of $1.3 billion increased year-over-year by 97% in U.S. dollars and 149% on an FX-neutral basis, driven by record acceleration in commerce net revenues. At the country level, Brazil and Mexico revenues continue to accelerate, reaching 120% and 155% year-over-year growth on an FX-neutral basis. For the third consecutive quarter, Argentina revenue grew by over 200% year-over-year on an FX-neutral basis. Countries such as Chile and Colombia grew by almost 300% and 150% year-over-year on an FX-neutral basis. Notably, as we have previously shared, we have made significant recent investments in Mexico. The fourth quarter marked the first time that this segment surpassed Argentina while using an adjusted blue-chip swap rate in terms of the percentage of our overall revenue that Mexico represents. We believe this to be a milestone achievement. Gross profit for the quarter was $489 million, with a margin of 37%, down from 46% during the fourth quarter of 2019. The decrease in gross profit margin resulted from an increase in cost of goods sold from our 1P business with aggressive holiday season pure product margins, and from shipping operation costs as we invested in excess capacity to ensure best-in-class service levels on our managed network during the peak shopping season. Operating expenses on the other hand increased by only 36% year-over-year in U.S. dollars to $514 million. Despite the increase, this generated operational leverage with OpEx as a percentage of revenues improving by 17 percentage points year-over-year from 56% to 39% this year. Our Q4 P&L management aimed to strike a balance between continuing to deliver margin improvements from one year to the next while also igniting investment in both short and long-term growth within the context of the gradual normalization of physical commerce and a competitive peak holiday season. In the slides accompanying this presentation, we've included a more detailed breakdown of both of these items as we do every quarter. Moving down the P&L, we incurred $31.6 million in financial expenses this quarter mainly attributable to financial loans entered into 2020 primarily in Brazil and Argentina. We also incurred interest expenses from our trusts related to the factoring of our credit card receivables in Argentina. During the quarter, we also had a foreign exchange loss of $9.9 million, mainly related to the difference of the Argentine official exchange rate and the blue-chip swap rate at which we effectively exchanged retained earnings from our Argentine subsidiary. Interest income was $22.6 million, a 16% decrease year-over-year as a result of lower interest rates in our investments as a consequence of the pandemic, mainly offset by higher interest income in Argentina as our float grows. As a result of this, net loss for the quarter was $50.6 million. Building on the precedent we established in 2020, we are very proud to announce that we will release in tandem with our annual report, our second consecutive annual sustainability report. Our commitment to sustainability has a strong connection with how we envision our business serving all our stakeholders. The report includes our sustainability metrics on key initiatives that include diversity, social inclusion, labor practices, energy consumption, greenhouse gas emissions and waste management among other items. Wrapping up the fourth quarter of 2020 was another great quarter where the MELI team really put their heart and soul into executing for the benefit of our whole community of users. I'd like to reinforce on behalf of MercadoLibre our immense gratitude and appreciation towards all our employees and collaborators for their enormous effort to keep us safe during such a challenging year. We are incredibly proud of what the team has achieved and the programs it has launched during the quarter. We believe these accomplishments underscore our compelling long-term growth outlook. We are steadfast in our conviction that we are making investments which will unlock our full potential over the years to come. The milestones we achieved in 2020 in the face of adversity demonstrate our ability to execute on multiple fronts and an indisputable commitment to growing commerce and FinTech throughout Latin America. Elbow to elbow with our users and the broader community, we will continue to build our path towards financial inclusion and democratization of commerce in the continent. Thanks everyone, as always, for joining the quarterly conference call and we look forward to keeping you updated on our progress next quarter. And we can now start tabling questions. Thank you.

Thank you. Our first question is from Irma Sgarz with Goldman Sachs. Your question, please.

Yes, hi. Thank you very much for taking my question. Pedro, as you think about the rest of the year and you think about how you're coming up against tougher comps probably inevitably at some point after the fantastic year you've had in 2020, what are some of the KPIs that you're most focused on in that journey that you had where GMV and TPV to a lesser extent of course may take a toll from the tougher comps and where do you encourage for us to look? And then secondly, on the digital wallet, as you mentioned, you're focused on the increase in use cases to drive relevance and stickiness with wallet customers. Yet at the same time, I think you also mentioned that peer-to-peer and utilities payments are still a very relevant portion of the transactions within the wallet. What are some of the examples of what you launched more recently in terms of use cases that you're most excited about? Thank you.

Hi, Irma, thanks for the questions. So I don't believe you should alter the KPIs set you look at to follow our business. I think we continue to focus on units sold, on merchandise volume, on total payment volume and the strategy remains unchanged regardless of what happens with the comps. There is a strong focus on continuing to deliver more free shipping with faster delivery and more reliable delivery. And then in terms of year-on-year comps, albeit it's true that obviously the comps become more difficult. I think also we've been looking at sequential growth and that to a certain degree helps us understand what potentially happens once the year-over-year data changes, right? We've been sequentially, I think, continue to show good week-on-week evolution and that is a way to look at something without the impact of pre and post-COVID results. So continue to track the same KPIs we've always tracked, the strategy remains unchanged. And in terms of Pago, I'll leave that to Osvaldo.

Hi, Irma. So I'll say, we did add some use cases, for example, transportation, probably transportation in some of the cities where we operate or tolls in Buenos Aires, for example, the highway tolls that is. But mostly, I would say, the increased use we have seen is more related to user using different flows are doing them more frequently. So when you look at engagement, for example, over the last year, in Q last year, used to have on average eight transactions per quarter per user and now we are at 14. So we have seen a significant increase in the number of transactions, this is what we decided to do, not because we have added a lot of payments in the menu, but just because we have been better at cross-selling them.

That's right. Thank you.

Thank you. Our next question comes from Bob Ford with Merrill Lynch. Your question, please.

Hey, good evening, everybody. Congratulations on the quarter and thank you for taking my question. Pedro, what's the split between new and reactivation and your unique active user growth? And given all the improvements you've made in the marketplace across the region, how are you thinking about reactivating your buyers? And when it comes to the mobile wallet, the growth rates you posted are fantastic. But relative to the size of the ecosystem, they still seem small. How are you thinking about activating new mobile wallets?

Hi, Bob, let me start with the wallet part. So some of the metrics in terms of, you mentioned the size of the ecosystem. So one of the metrics we track is how it does a number of downloads for MercadoLibre and Mercado Pago compare the installed base for MercadoLibre and Mercado Pago compare. And so what we have seen recently is that, for example, in Argentina, those are evening out. If you remember a couple of years ago, probably the ratio was close 20 to 1, and in the fourth quarter the number of downloads of MercadoLibre and Mercado Pago in Argentina were roughly the same. We're still in close to 2-to-1 in Brazil and 2.5-1 in Mexico. But in all of the cases, we see that we are increasing the number, the installed base of Mercado Pago faster than the installed base of MercadoLibre. But I think that to see what we can do, but we have been getting better and making sure that most of our users use both of our platforms.

That's helpful. Thank you.

Bob, I think we don't typically disclose the breakout between reactivated buyers and new buyers or existing buyers. I think what we see in the fourth quarter is it was the record quarter historically a number of buyers on the marketplace. So obviously, the installed base is very large. But we've also continued to add and reactivate buyers at a good pace and never before had we had as many buyers during a quarter as we did in the fourth quarter of 2020. So MercadoLibre continues to increasingly be more and more ubiquitous and almost 37 million unique buyers in the quarter.

That's great. Thank you.

Thank you. Our next question comes from Marcelo Santos with JP Morgan. Your question, please.

Hello. Thanks for taking the question. I have two. One is, if you could comment any potential initiative you could be probably doing on the food e-commerce. So we saw some news in Brazil and just wanted to know what you're thinking on that. And the second, on the credit product I see you were advancing very quickly now. Could you say something about new products in credit? There are also some news regarding automotive credit, regarding insurance. So maybe you would be – you would start offering other types of insurance, the news are not very clear. You would be the underwriter or not. So I think if you could throw some light on what in each initiatives you have on credit would be great as well?

Great. So for now, the focus is still on consumer packaged goods, not involved in fresh or chilled or perishables. I do think we've said that we see that category as an important category in terms of frequency and it's a category that we're doing a lot of work with. We think our combination of logistics capability plus top of mind and share of wallet potentially allows us to be an important player there. So I would say stay tuned. And eventually, if we launch something, obviously, we'll communicate it. But for now, the focus in CPG continues to be around dry and that business is performing quite well and is a good stepping stone for any other forays we might choose to make in the general supermarket area.

And with regards to credit, I would say, let me start with what we have already done and then what we are starting to do now. But we have already done and we're – which shows us a go faster last year was related to offering credit, not only on the MercadoLibre platform but on the Mercado Pago platform. For example, the ability to pay utilities using a small loan or to take personal loans. Those have been probably two of the large drivers behind that – the new products we launch. And in terms of what's coming, we are already in a pilot to offer a credit card in Brazil. So it's small pilot now, but we plan to scale that during this year. And in terms of insurance, what we started offering is theft and damage insurance. Now here we are not the underwriter, we work with underwriters. So we are the channel, but we will do – we have the channel to sell and also we will help users and our clients.

Perfect, thank you very much.

Thank you. Our next question comes from Stephen Ju with Credit Suisse, your question, please.

Okay, thank you so much. Pedro, can you talk about the set of circumstances that got Mexico to 60% pro forma penetration, and hence what more work needs to be done in Brazil and other regions to get from 25% to 30% fulfillment to theoretically 60% to 70%. And then, Osvaldo, a follow-up question on the wallet, if I may. So can you talk about the users and the growth rate there? It doesn't seem like you grew users sequentially from the third quarter, which I believe was also at 14 million or so. So is this a matter of expanding the use cases like you talked about just now and then subsequently going out there to drive awareness? Thanks.

Sure. So I think first of all, Stephen, just to put that in context. The overriding objective is to deliver fast predictable and hopefully as much free shipping as possible and we can accomplish that as we do more and more deliveries on our own managed network. Within that network, fulfillment obviously has a series of benefits. But even when we look at our cross-docking initiatives, which in Brazil have made tremendous advances over the past year, the speed at which we've migrated the overwhelming majority of volume to our own managed network and away from drop ship I think is one of the highlights of 2020. And we feel extremely well positioned in terms of our logistics capabilities there with the combination of cross-docking plus fulfillment. And now moving sellers from cross docking towards fulfillment, we believe is a matter of time. And just as the sellers mature and grow more accustomed with our services, move them from cross docking where we're doing pickups at their locations to getting them to send us more inventory upfront. So I think that's something that should continue to evolve as we open more and more distribution centers closer to more merchants that should also help. And we believe that with time, we will get there.

And, Stephen, let me address the – part of your question. I would say that when you look at the numbers sequentially, and it's true there was a growth but not as steep as you have seen in the past. I would say you have a huge acceleration between the second and third quarter driven in some part by Auxilio Emergencial in Brazil and now that that was fading out in the fourth quarter, we maintain numbers in Brazil, but we didn't continue to accelerate. Nonetheless, when you look at year-on-year numbers, we were last year at 8 million maps in or quarterly payers in Q4 and we had 14 million payers in Q4 this year. So it's significant growth, but it's correct to point, it was 13.7 in Q3, and 14.2 in Q4. The main reason for that is Auxilio Emergencial.

Thank you.

Thank you. Our next question comes from Ravi Jain with HSBC. Your question, please.

Hi, thank you for taking my question. So, Pedro, on the e-commerce, could you give us an update on your thoughts around the first-party business? You mentioned it was $200 million for the fourth quarter, how do you see that in the near or medium term, any thoughts on that? And also on the marketing spend for the year 2021 as things reopen. And Osvaldo, on FinTech, you've clearly shown a meaningful acceleration in the credit business. Maybe give us some color on what is driving your confidence in turning the taps on and how do you plan to manage the credit risk as you grow this portfolio even higher than this? Thank you.

So the 1P business continues to be a business that we see as a tactical way to help when there is certain inventory breakage within our marketplace seller base when we think that there are certain banker products that we can sell more efficiently than merchants. And if you look at our Q4 market share results and the relative strength we had in Black Friday when compared to our own performance in other years, it goes to show how 1P can be very useful for these peak promotional seasons. So I think that business should continue to grow share and volume. It's also very helpful when we're launching new categories to get us up and running very fast. So it's also instrumental in growing CPG, which has been a success story so far for ourselves. So it's not the core, it continues to be tactical, but should grow and help us across those key tactical areas I just mentioned. Marketing spend, I think what we've said is as physical retail has begun to reopen as competitors have begun to spend again in marketing, obviously there has been a ramp up in spend when compared to the second quarter and the third quarter, which were sort of anomalies in that you had significant demand surge with very little spending. And so we're once again investing in acquiring new customers and bringing customers onto our platform as we see improved net promoter scores and improved performance. I also think that over time, we also aim to drive a certain amount of operational leverage from marketing spend. Our marketing budgets in absolute terms are very large given the pace that revenues have grown, and so it will be about finding that right equilibrium between continuing to invest in growth and at the same time making sure that we are also beginning to manage those investments efficiently from a bottom line perspective.

And, Ravi, regarding credit, I'd say that the reason we decided to be more aggressive on the origination front it's a combination of two things. On the one hand, I think we got more confidence on our scoring models and experience after the last quarters already we'd call it around and we were able to originate with healthy spreads. And then also, we have been working a lot on improving and automating our collection tools. So I think that that also has us being more aggressive originating because we know we are better off at collecting.

Thank you. That's helpful.

Thank you. Our next question comes from Gustavo Oliveira with UBS, your question, please.

Hello everyone, thank you for taking my question. Still, I would like to follow up on the 1P impact on your business, Pedro. We see the 6.3% impact on margins, but obviously we don't know the magnitude of the margin and the level that the margin is running now. Do you think you are already running at an optimal level and what are the lessons learned from the profitability standpoint that you're seeing in the 1P business? I know you're using it tactically, but if as you said, it will also grow and will become more sustainable in some of the categories. So if you could share some of your thoughts on the profitability of that business going forward. The second question is also on the gross margin, when you talk about the excess capacity you have invested in logistics for the managed network, is there an expectation that you could see some cost dilution going forward or more pressure in the very short-term on that excess capacity? And one last question if I may, on your Mercado credit business as you accelerate growth, what are the implications for your funding strategy? Anything that needs to be adjusted there?

Great thanks, Gustavo. So I would say that we are definitely not yet at what we think the long-term steady state margin structure for 1P can be. We are still building out scale, we are – there is a category mix that is tilted to some lower margin categories like CPG. As we build out more 1P capabilities in higher margin categories, that will also help. But even if you look at our PPMs, our product margins, they are still we believe lower than they will be as we gain more purchasing scale, we optimize processes, et cetera. So this is a business that we're investing in to build it out, and like most businesses in the early stages we invest aggressively because we trust going forward we will be able to optimize the economics around that. So certainly the longer-term story for 1P should be of margin improvements versus where it is today at a relatively low scale still. On shipping, very quickly. I think what we intended to mean by excess capacity is leading into the peak holiday season, I think we tend to err on the side of making sure that we are – we have enough excess capacity so that people don't receive their holiday purchases after Christmas. And I think that drives up the unit cost per shipping a little bit when we overshoot perhaps more than ideally, once things normalize back in Q1 and Q2 and also as the business gets more and more efficient at both predicting volumes, but also more flexible in being able to upsize and downsize capacity utilization, we should be able to better manage that going forward. And I think we're already beginning to see improvements there.

And with regards to credit as we continue to increase our accelerations. What we have been doing is within the funding available on banks we work with to upload part of those loans today, roughly we keep on our books 70% of those loans and we offload the 30% and probably medium-term we'll plan to go more towards the 50%, so that's – in that way that shouldn't require a lot of additional funding on our balance sheet.

Thank you. Thank you very much.

Thank you. Our next question comes from Edward Yruma with KeyBanc Capital, your question, please.

Hey, good evening. Thanks for taking the questions. I guess first, good to see you guys close some of the pricing gaps in places like Brazil, particularly in consumer electronics. Is this just a move to be more price-competitive during the holiday season, or do you think that you're going to continue to keep the pricing gaps tight? And then as a follow-up, interesting commentary on the growth in Mexico. It seems like other retailers are making big moves there as well. Do you expect to be able to maintain or grow share in that market, given what looks like an increasingly competitive environment? Thank you.

Great. So part of the 1P business when we talk about tactical and I talked about banker product is the ability to, especially for the banker product, be able to be more price-competitive and that's very relevant in categories like consumer electronics. So this isn't exclusively a fourth quarter strategy, I think going forward we intend to use the 1P business in part to be able to continue to close some of those pricing gaps and that's a part of our ongoing strategy. We also need to find the right equilibrium between 1P rebates and coupons and managing the overall P&L. But no, this is not just a Q4 initiative. I think part of our ability to reignite growth in Brazil when we look at the three quarters of 2020 has been driven by our ability to identify those pricing gaps and close them and so this is something that we intend to continue to do going forward because it's been a part of our growth story. Look, our Mexico business continues to perform incredibly well. That business has sustained very, very high levels of growth now over multiple quarters. And if you look at year-on-year evolution of bottom line and margin structure, although we continue to lose money in Mexico, I think we're carrying out the stated plan of as we gain scale improving those margins. And eventually through more scale and sustained growth have that business be profitable as our other businesses are. So, so far, Mexico I think has been an extremely positive part of our story, and we're very pleased with the way that business has continued to grow top line and the share it's been able to hold in Mexico.

Thank you.

Thank you. Our next question comes from Andrew Ruben with Morgan Stanley, your question please.

Hi, thanks very much for the question. Have a couple of questions on take rate. First on the category level pricing, is there any update here? Should we be thinking about this as an ongoing initiative or was that more of a one-time adjustment? And then second on some incremental drivers, any update you could provide on how you're thinking about monetizing either the advertising offering or fulfillment fees. Thank you.

So category pricing was I think, a structural rejigging of how we price. We used to have single prices for all categories, and now we determine fees and take rates on a per category basis and even a sub-category basis. So in general, that gives us greater flexibility going forward to be – to extract more or less monetization from different product categories over time. I don't think we're going to be tinkering with take rates on a constant basis. You want to give sellers predictability over time, but certainly it's a system that now has been rolled out to a growing number of markets and gives us greater flexibility and also aligns our pricing much better with the economics of merchants. And we've been able to carry that out in most geos, which was the intention in either a take rate neutral or even slightly accretive fashion. So we've pulled that off so far successfully. In terms of incremental drivers of monetization of the two, you mentioned, advertising certainly is one that we think is a more immediate driver of increased overall take rate. There's a lot of innovation going on there and I think we're investing more in terms of technology on the advertising platform. On the fulfillment front, we do have fees to incentivize merchants to send us the right type of inventory and to rotate inventory in an efficient manner. I don't think we're at a stage yet where monetizing fulfillment is an overriding objective. It's still more about onboarding more and more inventory and continue to just have the fastest and most widely available free or cheap shipping for our consumers. So monetization of fulfillment is probably something that's not on the cards anytime over the next few quarters, advertising should drive incremental take rate.

Very helpful. Thank you.

Thank you. Our next question comes from Kunal Madhukar with Deutsche Bank. Please go ahead.

Hi. Thanks for taking the question. A couple if I could, one on the 37 million unique buyers you mentioned during the quarter. When you look across the serviceable opportunity for all households within the key geographies, what percentage of those households do you think you reach during the fourth quarter? And then on the advertising side, in terms of like the scope for like take rate improvement and what have you. To what extent, do you think would that be more like promoted listings? Or would that be maybe getting CPGs and the brands to kind of come in and advertise along with the product. Thank you.

Yes. The first question, I don't know the answer off the top of my head, percentage of households that we've reached. As we continue to grow number of unique buyers. Obviously, that number continues to expand. And I think equally importantly, we still think this is a region that is in the early stages of e-commerce not only because there are still significantly more users that we can bring onto the platform, but much more importantly, when you look at the average frequency and the average recency of our consumer base, we think that there is still significant room for growth there. So e-commerce as a whole in the region continues to be in the single digits of retail, even post-pandemic. And overall frequency of usage measured by cohorts or items per buyer continues to improve consistently Q-on-Q, fourth quarter cohorts were once again, better than Q3 across a lot of the frequency metrics and return metrics and equally important when compared to more developed e-commerce markets or even some of the key Asian markets, there's ample room to get our consumers to buy more from us and to use more and more of our services. And that should drive significant growth going forward. In terms of advertising, it's a bit of both things. There's still room for us to drive more investments in our promoted listings or our Mercado Clicks platform from the existing merchant base. So pay for placement or pay for conversion, which has a very good fit with mid tail and long tail merchants. But also a lot of the investments we're making is in working closer with not just CPG, but brands and branded retailers in general, for them to be able to advertise more on our platforms, obviously categories like CPG, as we get stronger there, begins to allow for advertising partnerships with some of the largest advertisers globally. And that's one of the reasons that we're optimistic about the growth possibilities for the ad business, but it's across both types of products, advertising, and also product placements and conversion – advertising products on the platform.

Does that answer your question, Kunal?

Yes. Thank you so much.

Thank you. Our next question comes from Jamie Friedman with Susquehanna. Your question, please.

Hi. Congratulations on the great results. Let me just ask a couple up front. So Pedro, when you said that Mexico is now second biggest ahead of Argentina. Were you referring to the e-commerce business or the payments business or both? That's one question, I know it's not that easy to break them out, but that's the first question. The second question is any update on the PayPal agreement and how you're thinking about the framework for product rollout in 2021. And then the last one is Tatsuro and some others are moving around between moving like up-market, mid-market, SMB market, out of the long tail. I'm just wondering for you guys, is the long tail still the focus as well though, or is there any adjustment to how you define the market? So those are three questions, Mexico, and then PayPal, and then SMB. Thank you.

Yes. So just Mexico, clear answer there, I think we were referring to in terms of units sold. So that's clearly a commerce metric, and then also looking at sales volumes on an FX adjusted basis using the blue chip swap rate in Argentina. So it was a comment on the commerce business, I think on payments, and I'll use that to transition over to Osvaldo. Mexico has a significant opportunity, but it is certainly still smaller than Argentina.

And with regards to the two questions, first one was regarding the PayPal agreement, and what are we doing next? And remember there were three tracks we are working on, track one or two are live. There's still work to do that, but they are live already, and those are paper merchants received payments from Mercado Pago payers and vice versa. Mercado Pago merchants or MercadoLibre itself receive payments from PayPal users, social lag. And the third one we're working on is remittances would some from the U.S. into Mexico. And that is what we're working on right now. And then with regards to SMBs, I would say, it depends a lot on the vertical, probably the one area where we're working more towards SMBs is in MPOS. In the MPOS business, we started with a long tail, and now we are addressing this market. Significantly in Argentina, already 50% of the PPV we're receiving for SMB. So we are very excited with that number. And that is driven by the two new products we have launched in recent quarters, such as our point plus and smart MPOS, both of them. And that's on the point front. And then on the online payment, I'd say, there, our core has been SMBs, and we are starting to work now more with small merchants and individuals that so far, our core has been SMB.

Got it. Thank you both so much.

Our next question comes from Marvin Fong with BTIG. Your question, please.

Great. Thank you for taking my questions. Just two for me. First, if you could just – you referenced PIX a little bit in the prepared statements. I was just wondering if there was any significant impact that PIX had on your TPV in Brazil in the fourth quarter? And if so, if you could give us some way to quantify that? But also, if you could just talk about any trends you're seeing in the market and so far in the first quarter? And then my second question, you guys obviously made tremendous going forward improvement in your managed network. Just wondering if you could give us an idea of improvement in demand that you see when a product is available, in two days shipping or less versus a longer time period, that might be helpful for us to know. Thank you.

Marvin, let me start with PIX. I would say that so far, we have seen a significant shift in transfers toward PIX, but these are mostly DOC and TED transfers and also some boletos, which are good. It's good that it's happening because those PIX transactions are online real-time, and they work 24/7. So it makes it easier for us on the marketplace to structure shipping because we receive payments throughout the weekend. And before with boleto, it was only working during weekdays. And also, these transactions are faster and cheaper. Now, when it comes to – those are transfers mostly. When it comes to payments, so far, the impact has been marginal. We've only seen some of our users paying in PIX merchants and vice versa, third parties paying on our network. But so far, those have been marginal.

Great. Look, on shipping, we don't disclose lift on improved times. We continue to have as one of our most important objectives to increase the percentage of shipments we do next day, to increase the percentage of shipments we do same day even as we push more and more same day. So clearly, we believe that that helps conversions. It helps stickiness, and it's one of the most important drivers of incremental volume. But we don't disclose any specific elasticities around improvements in delivery time and lift in GMV. But it is one of our important objectives, and we've continued to consistently, over the last few quarters, increase both the percentage of items delivered next day and also same day.

That's very helpful. Thanks Pedro and Osvaldo. Thank you.

Thank you. Our next question comes from Gabriel Simoes with Itau BBA. Your question, please.

Hi guys, thanks for taking my question. So a couple of months ago, you disclosed a few initiatives you believe could unlock significant value here for Brazil, such as the take rate verticalization, the 1P, the Buybox, optimizing the installment policy, and lowering the cost of shipping. So could you provide details on the status of these initiatives here and which you believe have contributed the most to the acceleration we've seen this year in the Brazilian operation? Then the second, I know we've gone over several questions on your 1P operation, but it would be interesting to understand, if you could provide some detail on how the $200 million from this strong were spread out between the countries in which you operate. And do you think that this operation is more strategic in any of the regions? And if so, if you could provide some color on why, that would be interesting as well.

Great. So look, let me take the first one first. Our e-commerce platform obviously is the more the overall experience improves, the more people buy, the more people return. It's not always easy to parse out these different initiatives quantitatively to measure the specific impact of each one. I think if you look at the rate Brazil was growing in the first quarter and you look at the rate Brazil is growing and even if you adjust for the pandemic by looking at market share within Brazil, we've made significant strides over 2020. And we exit 2020, I would say, in a very strong position with very, very strong market share. And we had started the year, I think, in a position of relative weakness. So very pleased with Brazilian results. We believe shipping has been a very, very important part of that story, both the ability to manage the surge in demand that occurred without sacrificing service levels but actually improving service levels over the year and also a free shipping program that is increasingly more and more widespread and obviously resonates well with consumers. 1P has contributed. I would say there are other geographies where 1P is ahead of Brazil. So it's a part of the story but it's not a key part of the story. And then category take rate obviously has allowed us to improve supply and to bring more and more branded merchants on to the platform, which has been very helpful in categories like consumer electronics, which is one of the focus areas in terms of acceleration of growth in Brazil. The one that maybe we haven't made as many advances is on the optimization of the credit and promotional credit on the platform. Not to say that the credit books and the availability of credit haven't increased significantly, but we haven't rolled out too many initiatives to have greater intelligence and greater targeted credit offerings. That's something that we still have in the books. But I would say shipping probably first and then Buybox, category-specific take rate, and 1P. Difficult to parse those out, but those have also been helpful. And then we don't disclose the 1P business yet by geography. It's a business that we're executing across most geos and should continue to grow and perform well there across many different markets.

All right. Thank you.

Thank you. Our next question comes from John Colantuoni with Jefferies. Your question, please.

Thanks for taking my questions. MercadoLibre continues to generate impressive growth outside of the three largest geographies. Maybe you can help us better understand how nascent the opportunity is in those markets through the lens of how they compare to your largest markets in terms of strategic priorities, stage of building out capabilities like logistics, and any notable competitive dynamics we should be aware of. And then my second question is on the credit business. Can you help disaggregate how much of the growth in your portfolio during Q4 was driven by expanding within existing users versus loaning to new users? Thank you.

Great. So both Chile and Colombia have been highlights of the year. Chile right now is, by far, the fastest-growing market, and Colombia is second in terms of rate of growth. And despite the fact that we still don't have the full platforms rolled out in those markets in terms of the offering of our fulfillment centers, penetration of Envios in general and the same goes for Pago and many of the Pago offerings, both on platform but more importantly, off-platform. So as we continue to roll out more and more of the features that are already existent in the big three markets, we believe that those solid growth rates, we potentially could maintain those, and those should be incremental contributors to our overall metrics going forward. When you look at the relative size of the Chilean or the Colombian economies, we as a company have typically under-indexed that somewhat. And I think with these rapid growth rates, these countries, in a way, are beginning to grow more into fair share. So it's been good to see Chile and Colombia accelerate the way they have accelerated over the past few quarters.

And, John, we don't usually – we don't disclose how many of the exact credit loans were to new users versus old users doing more credit. I think what we usually provide is the growth in number of users who originated the credit, and those grew by 118% year-on-year. We originated 4.2 million credits during the quarter – 4.2 million users were granted at least one credit during the quarter.

Thank you.

Thank you. And our last question is from Trevor Young with Barclays. Your question, please.

Hi. Thanks for letting me sneak some in here. Just touching on Mexico again. Can you like rank order, help us understand what's really helping you consolidate share, and whether you can apply those learnings to some of the other regions? Is it the strong fulfillment mix that's driving like better and faster delivery for consumers? And then the second one, just on that insurance product that you mentioned, covering like theft and damage for phones and other electronics, how have attach rates been? And do customers get offered that product at checkout when buying certain electronics? And is this just table stakes, or is that a differentiator for you? Thanks.

Great. So look, obviously, we port learnings across our different geographies, and the things that have worked for us in Mexico, we've already been deploying in other markets. Mexico was the first market where we saw the power of fast and free shipping. It's led the way in terms of fulfillment adoption. And all those on the logistics network are things that we have already been replicating to the other markets for quite some time now. And Brazil, I would say, in 2020, has been a market where we made tremendous advances in terms of our network capabilities. Mexico is one of the largest markets in terms of cross-border trade, and that's something that we're beginning to focus on rolling out to Brazil as well and how we can make that work more effectively in Brazil. So that's another Mexican learning that's been ported over. But in general, I would say our strategies are similar across markets, and we try to cross-pollinate whatever is working in one market into other markets, and I think that's part of the reason. It's been more about do we have the resources to be able to deploy what we've learned in one market across others. And going back a little bit to Chile and Colombia, part of what's happening as a consequence of our scale is that also we have more and more engineers and we're able to have more resources available not only for some of the smaller business units like advertising but also for some of the newer geographies to be able to put them on equal footing over time with the platforms that we have in Brazil and Mexico.

With regards to insurance, up until recently, the only product we used to offer were external guarantees, and those were only offered on the MercadoLibre app at the time of the checkout. Now, we launched theft and damage, and we offer those too on the Mercado Pago app. And those can be done at any point and not only during the checkout but afterwards. And also, as opposed to extended warranty, these are subscriptions-based. So once we get a user to buy them, we keep charging them as long as they want to continue having the protection. We have not disclosed, so far, attachment rates. But I think that – we believe that we have plenty of opportunity to increase those.

Great. Thank you.

Thank you. And, sir, I'm not showing any further questions in the queue. You may continue with your final remarks.

Great. So thank you, everyone, for your interest. Thanks for the questions. We get back to work, plenty to build, plenty to continue to deploy, and we will look forward to giving you updates on Q1 in a few months. Thank you very much.

And with that, ladies and gentlemen, we thank you for your participation in today's program. You may now disconnect.