Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended December 31, 2022. Thank you for joining us. I'm Richard Cathcart, the Investor Relations Officer at MercadoLibre. Today, we will share our quarterly highlights on video, after which we'll begin our live Q&A session with our Chief Financial Officer, Pedro Arnt, and the President of our FinTech business, Osvaldo Gimenez. Before we go on to discuss our results for the fourth quarter of 2022, I remind you that management may make forward-looking statements and this presentation may contain such statements. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website and our Form 10-K for the year ended 2022. With that, let's begin with a summary of our results.

Hi, everyone. I'm happy to share the key messages about MercadoLibre's performance during the fourth quarter of 2022 and the year as a whole. We're particularly pleased to have been able to deliver an attractive combination of growth and profitability throughout the year, alongside strong operational KPIs and market share gains, all while sustaining a high level of investment in products and technologies. We've successfully navigated a challenging environment and reached new records across the business despite uncertainty around consumer spending, interest rates, and inflation. With a strong fourth quarter, we end 2022 with record results in GMV, TPV, item shipped, and net revenue, as well as EBIT. Revenues, for example, for the first time ever, surpassed the $10 billion mark, which is quite a milestone for our company. EBIT also came in at a new landmark level, surpassing $1 billion while delivering margin expansion. And perhaps even more unique is the combination of record EBIT and margin expansion while still growing revenues at roughly 50% year-on-year. During 2022, MercadoLibre strengthened its leadership of the e-commerce market in Latin America. Our data indicates that we achieved market share gains across the entire region, with Brazil and Mexico standing out. These market share gains are grounded in our consistent investment and execution around all aspects of our commerce value proposition and also an extended period of time. Our ability to offer a broad product assortment from sellers of all sizes at competitive prices and with fast deliveries continues to be a key differentiator for the company. The profitability of our commerce business also improved substantially year-on-year during the fourth quarter, helped by the expansion of Mercado Ads revenues, better management of promotional budgets, a healthier margin on 1P merchandise sales, and the continued overall scaling of our business. Development of technology for Mercado Ads has been a major focus during 2022, increasing the presence of ads and their monetization. Ads penetration, for example, grew another 10 basis points in the fourth quarter, despite strong growth of GMV while maintaining its attractive EBIT margins. We see plenty of opportunities for ads growth ahead of us as we continue to improve technology to better serve our advertisers. 2022 was also a fantastic year for Mercado Pago, with TPV growth exceeding our expectations while delivering take rate expansion on a year-over-year basis. The acquiring business maintained strong growth and margin performance, driven by QR payments and our POS business in Brazil, Mexico, and Chile. On the digital accounts side, both payments and cards TPV continued to grow at triple digits in 2022, highlighting the traction in becoming the digital account of choice for our users. Mercado Credito performed well in the fourth quarter and in the year as a whole, positively contributing to our profit growth despite tougher economic conditions. Throughout the year, we managed the performance of our book closely and adapted to the changing realities. These effective risk controls resulted in record profits. We remain optimistic about the positive ecosystemic effects of Mercado Credito going forward. 2022 has been a year of adjustments, on the other hand, for the credit card product. But with improvements to the underwriting models, we've seen much improved performance from the most recent cohorts on the credit cards. That leaves us encouraged by the performance of that product, which will remain a key element of the wider Mercado Pago value proposition and strategy going forward. All of these credit products complement our wider Mercado Pago offering, for which 2022 has been an important year in terms of broadening the scope of financial services we're able to offer. We now have a product stack sufficient to meet our core day-to-day needs, enabling us to accelerate our efforts to achieve principal status within that user base. All of these strong results have been made possible by top-notch execution from the team and discipline in leveraging our scale to deliver continued cost dilution. You have a much more detailed review of all of these fourth quarter operational and financial results made available to you both in our shareholder letter and also in the presentation, which are published on our Investor Relations website. With that, before turning to the live Q&A section, I'd like to hand it back to Richard to go through some of the latest business and product updates of the quarter and year. Thank you.

2022 was another important year for investments in technology at MercadoLibre. We want to share some of the key impacts these investments have delivered to our ecosystem as we continue on our mission to democratize commerce and financial services in Latin America. We're now able to offer a full stack of day-to-day financial services and products to our millions of Mercado Pago users after 18 months of intense technology deployment. We are leveraging our data to cross-sell new products and services to our users. Users of our digital account have access to debit and credit cards, along with QR code payments and online transfers, which make Mercado Pago more useful for their day-to-day needs. This is an important step in building toward achieving principal status. Mercado Pago also offers saving buckets dedicated to our users' specific objectives, and they can choose from different risk profiles with a minimum investment of just BRL 1 in Brazil. Users can also make investments in a quick and simple process through the Mercado Pago app. This includes banking deposit certificates from our financial institution with a fixed rate and, more recently, users in Brazil have access to three simple investment funds. Mercado Pago also offers different insurance options to suit our users' needs with life, personal accident, and online transactions insurance. This offers protection against uncertainties that many of our customers may face in their daily lives. Now with a complete product stack, Mercado Pago is well-positioned to become a leading financial services provider in the region, enabling us to foster financial inclusion across the region. Our commerce platform currently serves millions of sellers by offering a world-class experience, having surpassed the mark of 1.1 billion items sold in 2022. We are investing in technology to improve the online shopping experience of our users, as we believe this will drive more retail spending online, particularly in categories where e-commerce penetration is low. We deployed improvements to several categories in 2022, including home decor, fashion and beauty, and auto parts. For example, in the auto parts category, we have simplified the searches and filters in order to create a more specialized experience, while in the home and decor category, we've further developed our discovery lab navigation experience. New features have enabled sellers to promote their products in different formats. Short videos recorded by sellers to promote their products have reached millions of monthly views. Improvements in our advertising fuel have increased the presence of ads in product pages. MercadoLibre continues to have the fastest delivery times in all of our key geographies. We're also investing in technology to improve the efficiency of our logistics network. In 2022, we were able to deliver significant improvements in the productivity of our fulfillment centers, meaning that even with a higher penetration of fulfillment deliveries, our overall net shipping cost as a percentage of GMV remained broadly flat year-on-year. Our MELI Places network grew to over 7,000 locations, with over half of the returns already done through these places. These returns have a higher NPS than other actions, such as the local postal service. For buyers that choose to pick their items up from the MELI Places network, the NPS is the same as the deliveries made to the buyer's homes. We also delivered improvements in lead times, with MELI Air operations reducing lead times by over one day, as well as optimizing costs. We ended 2022 with a stronger ecosystem and great opportunities ahead of us, and we are as confident as ever that the best is yet to come.

And our first question comes from Andrew Ruben from Morgan Stanley. Your line is now open.

Hi, thanks very much for the question and detail. You made a comment in the release about operating in a fast-changing competitive landscape in Brazil. I'm curious if you could elaborate and specifically in that type of competitive environment, as you run your business, what changes and what not?

Hi, Andrew. In general, I think the area we operate in, both consumer commerce and FinTech, specifically the technology areas, are low barriers to entry, high competitive markets that generate extremely dynamic market situations and structures. One of our characteristics over the last 20 years has been speed to adapt and change course, while at the same time having a clearly defined long-term focused strategy. That's what we consistently refer to when we talk about how dynamic this is. Our long-term vision for what we're building is very consistent. The areas we focus on—our consumers, our merchants, the quality of our products, and our technology—have remained incredibly consistent over time. Tactically, we try to adapt very quickly to changing market dynamics, technological dynamics, and consumer habits. We believe that we've served our consumers and shareholders well because of that speed of adaptation that we've built into our culture and how we operate.

Great. Thank you. And if I could just follow up quickly, in terms of how you're thinking about the 1P business, I know it was an area that slowed down a bit in the past year, but you've talked about a greater opportunity over time. Any updated thoughts about how you're feeling about that business, the economics, etc? Thank you.

We've continued to see improvements, first and foremost, in capabilities—how we operate, the technology that we've built in-house to run that business in terms of pricing, buying, and promoting. A consequence of those improvements and capabilities has been improved PPMs and better economics coming out of the 1P business. That bodes well in terms of our expectations going forward for the 1P business, and we feel we are closer and closer to the point where the combination of capabilities and what those P&Ls look like will allow us to reaccelerate that business again sometime over the next few quarters.

Thank you. And one moment for our next question. And our next question comes from Irma Sgarz from Goldman Sachs. Your line is now open.

Yeah, thanks for the opportunity. The CapEx for the year came in just a bit lower—actually quite a bit lower—than we had maybe imagined at the outset of the year. And obviously, no negative impact to the overall results there. But I was just trying to think a little bit how you would characterize maybe the path for CapEx going forward, just what you still have to deploy specifically on the fulfillment of the technology side within those fulfillment centers and automation equipment, etc., as you take your logistics network to the next level? And then shifting to payments in the release, you point to share gains that you've been driving in the MPOS business in Brazil as you've been shifting a little bit more upmarket. Can you talk about what—how your offering is different from the competitors and how crowded you see that space? And as a function of that, sort of how you're seeing—how you're thinking about room for pricing adjustments? And how you expect churn to develop?

So let me take the CapEx one first. If you look at the cash profile we delivered both in the fourth quarter and full year 2022, I think '22 was a stellar year in many aspects. Cash generation was one of them, both from an operational cash flow perspective and the disclosures we offer around available cash and change in free cash generation. Part of that cash generation was because we are operating close to peak utilization in some of our geographies in terms of our logistics and CapEx—logistics fulfillment centers and sortation centers. We do anticipate some incremental investments when we look at '23 versus '22 in terms of CapEx, primarily on the logistics front as we build incremental capacity needed in some markets, primarily in Mexico. In terms of the other big CapEx item, which is developers and capitalized product development, I think what you're seeing going forward is a bit of a slowdown in the pace of net new adds of developers. I think we're still hiring, but probably at a somewhat more measured pace than we have been in the past. So that will also generate a lower cadence of capitalized R&D in the future. But net-net, '23 should come in higher than '22 did in terms of CapEx, at least as we see it right now.

With regards to the payment question regarding our POS and our move up market in Brazil, in Brazil and in all regions, it's something we are very excited about. When we look at how we have been able to grow TPV, it's not because we are selling a whole lot more devices than we were a year ago, but rather because we have been able to significantly increase the TPV per device. This has been driven by rolling out and deploying larger products that we believe are more robust, with better connectivity, better approval rates, and better NPS than we had in the past, which is recognized by some of our users. We are also deploying a larger sales force than we did in the past, most of it being a third-party sales force, but nonetheless, enabling us to scale in the SMB segment.

Thank you.

Thank you. And one moment for our next question. And our next question comes from Marcelo Santos from JPMorgan. Your line is now open.

Hi, good evening. Thanks for taking my question. Hope you can hear me. The question is about the provisioning on the credit business. I think in the presentation you mentioned that the provisioning went down partially because of better credit quality. Does this mean that you reduce the amount that you provision for late past payments? I think in the previous quarter, you showed a range of how much you provision per cohort. Did that change because you improved the quality, or did it not change? Thank you.

Hi, Marcelo. Let me describe in more detail what has happened over the last few quarters. As you recall, during the second quarter, as we saw that market conditions were worsening, we decided to be more restrictive and lower our exposure to higher-risk segments. That has been the case for the third and fourth quarters, as we've lowered our exposure to those higher-risk segments in each of the countries and each of the businesses. As a consequence, we had lower NPLs, and that reduction in NPLs drove a reduction in provisions. Nonetheless, as we are originating loans that are less risky, the new provisions have slowed down proportionally. Nonetheless, they accurately reflect our best estimate of what the risk is. So we are comfortable with the level of provisions we have. It's just reflecting an improvement in the risk we are taking.

Thank you. And one moment for our next question. And our next question comes from Robert Ford from Bank of America. Your line is now open.

Thank you very much. Hey, Pedro, Osvaldo, Richard. Congratulations on the quarter. Thanks for taking my question. Pedro, how are you thinking about the disruption to your relative competitive advantage and near-term market share opportunities? Is that dislocation having any impact on the promotional support from suppliers in key categories?

Hey, Bob, thanks. In a way, it's a continuation of the answer to Andrew's question at the beginning. Our strategy has never been driven by what competitors are doing or not doing, but much more focused on what we're doing and our consumers. On a tactical level, if there are market share opportunities that become available, then without changing strategy, we will see how we can lean into those and try to take advantage. We are seeing the market being disrupted in some ways positive, in some ways negative. We do have short-term tactical plans to see how we can potentially take advantage of that. From a strategy perspective, we aim to maintain focus on our long-term goals.

That makes sense. And in terms of the Ad business, can you provide a little bit more color on the incremental functionality on the ad server and the demand-side platform, as well as any expected timing of improvements?

I think over the last probably two or three quarters, we've been very consistent about discussing new product deployment and how we've accelerated our focus and investments in the technology and ad tech business. We've doubled the engineering headcount there over probably half a year. We have also been consistent in saying that between product launches and technology improvements, and when we actually see the results coming in, there is a lag, and it's hard for us to predict how long that lag might take. We'll need to see how that plays out throughout most of this year. We have continued to push significant product enhancements in the advertising business in Q4 and into the beginning of '23. We remain optimistic about eventually being able to reap the returns of those improved investments in the ad stack and hopefully be able to report something over the next few quarters. Constant penetration gains from advertising revenues as a percentage of GMV continue to be one of the most attractive revenue streams when we look at the margin structure there. We are very focused on this, and we'll keep you posted as we go forward into the year.

Yeah, we'll look forward to that. Thank you very much.

Thank you. And one moment for our next question. Our next question comes from Thiago Macruz from Itau. Your line is now open.

Hi, guys. First, congratulations on the quarter. Two questions from us. First, regarding the Mercado Credito business, I think that achieving a lower cost of funding is key here. I want to understand if that is entirely dependent on the e-wallet reaching further users and principal status, or if there's another avenue to that end? And a follow-up on the ads question just a few minutes ago. Is it fair to say that technology is not a restriction for the marginal growth of the business and rather generating further demand by eventually showcasing the economics of what you guys are offering from the seller standpoint?

Hi, Tiago. I would say we have started to grow the CDBs we offer to users—we, in the past, used to do this through third parties, but since we launched it in the fourth quarter, we're doing more and more ourselves now. I don't think we've had a relevant impact on overall cost of funding yet because we're paying—for promoting the growth of CDBs at Mercado Pago, the cost we have is similar to what we are getting from third parties. As we expand this, it could be relevant, but so far, I think it's still early days of our funding with CDB. Sorry, one second. There was a second part to the previous question. On the ads piece, Tiago, if I understood correctly, we do think that technology is not just a nice to have or an additional benefit. It is a core necessity for being able to scale out the advertising business and help it reach the long-term size that we’d like to achieve. The improvements we've made in terms of incremental positions and inventory for advertising—the improvements in ad server technology that delivers display advertising throughout the platform—are significant steps. The launch of a self-service DSP platform for ad displays and improvements in self-service reporting for advertisers to view their results in near real time allow for quick reaction to that data. It is equally important to be able to better target audiences. All of the focus on technology over the last few quarters puts us on equal footing with some of the largest and most successful technology platforms.

Fantastic. Thanks, guys.

Thank you. And one moment for our next question. Our next question comes from Geoffrey Elliott from Autonomous. Your line is now open.

Hello, thanks very much for taking the question. The release talks about a sequential increase in fulfillment penetration in Brazil, Mexico, and Chile, kind of across the board. Can you give us a bit more detail on that and an update on charging for fulfillment?

In terms of the model, we charge for both rental space and inventory that doesn't rotate quickly enough, generating inefficiencies in terms of floor space. What we've been saying over the last few quarters is that we have two objectives: to introduce monetization behind fulfillment and at the same time, still push adoption and usage of that service primarily outside of Mexico to achieve Mexico-like levels. Those two levers are opposing. We introduced the full model but kept pricing relatively low. In the fourth quarter results, the monetization overall in the logistics operation in Mercado Envios was actually higher. We have gradually been dialing up monetization around the cost side of logistics services to offset cost increases and better reflect the services we're offering. This still occurs at a very gradual pace. We need to drive significant penetration growth in fulfillment, primarily in Brazil, Chile, Colombia, and Argentina, which remain about 20 or more percentage points behind Mexico in adoption. Overall, it will be a steady process over the next many years.

Great. Thank you.

Thank you. And one moment for our next question. And our next question comes from Jamie Friedman from Susquehanna International Group. Your line is now open.

Hi, thank you for taking my question. For Pedro or Osvaldo, two questions upfront. How should we be thinking about the journey in the TPV between on and off platform? Obviously, the off-platform number was great. What would it take to get even more ubiquitous acceptance off? That's the first one. And then in terms of what is the current messaging and strategy of the company? Previously for Credito, I thought that the goal was to syndicate more and more of the credit. Is that still the approach? Or would you be comfortable if credit quality improved and profitability was great today, taking some more on balance sheet? Those are my two questions. Thank you.

Hi, Jamie. Let me start with the first one regarding TPV. We are really happy with how TPV off-platform has been evolving. TPV on-platform tracks the gross merchandise volume we do in the marketplace and has been at 100% for a long time. With regards to TPV off-platform, several avenues for growth are significant. The one we have seen growth in the last few years in Mexico and Brazil is the POS volume, which is growing nicely, while in Argentina, it has more related to the wallet, which is also growing very strongly. Online payments are growing at a lower pace than in-store transactions because we already have a larger share online than in-store. In Latin America, e-commerce is still a relatively small fraction of total retail.

So my understanding for eura totes—as a dollar of origination goes through the syndication of the—50/50 first 100, you own the next 100 gets syndicated out. My understanding was you were trying to push more through the fatigues when credit was deteriorating, but now credit looks like it's improving. So I'm just trying to figure out if you would balance sheet more of Credito.

The strategy remains unchanged. We continue to increase the amount of the gigs so that we can off-balance sheet the incremental growth while still retaining a subordinate tranche, which has been very profitable for us so far. The additional funding source that is becoming potentially more relevant are the CDBs that Osvaldo mentioned previously. When we think of the capital structure around the credit business, there will be our own equity investments. The gigs or the warehouses should grow in relation to the equity piece, and the third piece involves using CDBs that we can now distribute ourselves in our own digital wallets in addition to banking partnerships as we had been in the past.

Perfect. Thank you, both.

Thank you. One moment for our next question. And our next question comes from Marvin Fong from BTIG. Your line is now open.

Hi, good evening. Thanks for taking my questions, and congratulations also on the quarter. Two questions from me. First one on Credito. At a high level, obviously, the profitability has become very strong, and you've gotten more conservative with your underwriting. Just curious on how you're thinking about the extension of credit and returning to growing the book a little bit more aggressively? In other words, are you waiting for the macro environment to get a little more favorable? Or do you believe that Credito is in such a strong position that maybe you can start leveraging that strength to extend credit a little more aggressively? And then second question, I saw that you partnered with Carrefour for delivering groceries. Just curious if you could expand a little bit more on your strategy with grocery. Should we take this as a sign that you made a definitive decision to proceed with grocery and partnerships and you're not interested in handling that on a 1P basis? Thank you.

Hi, Marvin. Let me start with the first one. Regarding the outlook for credit, as you mentioned, we decided to be more cautious on the risk we're willing to take. We decided to price our lines more expensively to ensure we had a better spread to remain on the safe side. What ended up happening was that collections were better than we expected, and we ended up with very healthy spreads. We will see when we deem that market conditions are improving and, when that is the case, we'll likely be more aggressive. We will remain dynamic regarding how we see the market evolving.

I believe you guys had entered into a distribution partnership on grocery with Carrefour in Brazil. I was just wondering if you could expand on that and your thoughts on grocery right now?

We have a 3P partnership with Carrefour, meaning that they will be a merchant on our platform. They can bring necessary and welcome assortment to the CPG and supermarket category for us. Ideally, they are a key partner as we experiment with that subcategory, which is always one of the most challenging ones. Their inventory will be sent to our fulfillment centers, and we will be able to deliver that through a fulfilled by MELI, which from a consumer perspective, provides the best user experience where we maintain control over logistics and the entire purchasing process. It's within the context of our continuous experimentation in the supermarket category. We have seen improving economics within that subcategory, but it remains a challenging one for profitability. It has huge potential for repeat purchase behavior and user loyalty. Therefore, there is a lot of experimentation and innovation going on as we try to figure out the most appropriate model for our region.

Great. Thanks so much, guys.

Thank you. And one moment for our next question. Our next question comes from Joao Soares from Citi. Your line is now open.

Thank you. Just a very quick one on my side. I was hoping to get Pedro on margins overall. 2022 was clearly a very strong year. So as you go into 2023, with a lot of moving parts, we're advancing on the ad business, which has robust margins. However, reaccelerating the 1P business, even though it has better economics, it has previously detracted margins. I was hoping to get your overall view on how we should think about margins for 2023.

We don't guide, but I think it's a valid question. Directionally, we remain consistent in saying that we try to manage the financial model for consistent central annual increases in EBIT dollars, ideally also modest, but consistent margin expansion. That depends a little bit on what happens in terms of mix shift, but we try to manage the different businesses to deliver margin expansion year-on-year going forward. Still, we see ourselves as a company that wants to deliver market share gains while consolidating its leadership position. We have many bets on growth engines that we see today have negative EBIT, but we are committed to. Therefore, we aim for a consistent sequential increase in EBIT dollars, ideally margin expansion. However, don't necessarily assume that the kind of leverage we deliver in one year can be extrapolated linearly to the next. If we deliver on this consistency, when we look out over three to five years, we expect to have a very healthy P&L, especially if some of these bets that today lose money can become profitable through scale and operational efficiencies.

That's clear. Thank you.

Thank you. And one moment for our next question. Our next question comes from Kaio Prato from UBS. Your line is now open.

Good morning, everyone. Thank you for taking my question. I have one question about profitability, specifically on the FinTech business. I know that you don't close exact numbers, but if you could share with us how the segment is moving today, what is driving this? If you think the payments business was flat? And finally, your expectations going forward and any updates in regard to the merchant figure?

On a consolidated basis, and again, these are not reporting segments, so this is to give you a directional understanding. The credit portion within FinTech, as we've disclosed, has interest margins after losses. The operational expenses there are relatively low given that there is low spend in acquisition. A lot of the distribution is done to our existing Mercado Pago or MercadoLibre users. The credit business is a very profitable business. The online payments business—merchants acquisition—is also profitable with expanding and attractive margins. The MPOS business is profitable with slightly lower margins than online payments, but still positive and contributing to overall EBIT. In terms of the franchise being built within the consumer financial services business—the digital wallet, core digital bank, some savings products, and consumer credit cards—these areas do not have positive EBIT yet but are significant bets for the future and have shown improvements in economics over the last few years. The insurtech business, while still small, is very attractive from a margin perspective and is already on pace to deliver tens of millions of dollars of annualized EBIT.

Thank you.

Thank you. And one moment for our next question. Our next question comes from Neha Agarwala from HSBC. Your line is now open.

Hi, thanks for taking my question. First question on your e-commerce business, which showed strong trends during 2022 with market share gains in some of the markets. What should we directionally expect in 2023? Any headwinds in the e-commerce business that we should be aware of or mindful of? My second question is on the credit book. The credit book growth has essentially stagnated over the last two quarters. Are you seeing improved or stable asset quality at the beginning of 2023, which could encourage a pick-up in originations in the first or second quarter of this year? Or will you maintain a conservative mode? Are there any new products being considered to propel growth in the current environment?

In terms of significant headwinds for the commerce business, with the exception of whatever happens at a macro level, I don't think we're honing in on anything. We've seen consistent take rate improvements in the fourth quarter, driven largely by advertising revenues and incremental monetization on shipping and logistics. These are levers that, with proper execution, should continue to be present. We observed some drag on the take rate from reduced 1P sales compared to last year. If anything, we've reached a tipping point in the 1P business where we can cautiously reaccelerate that again, which should help incrementally in terms of take rates. On the credit book, while we've seen good results in the past quarters, we will wait until we see market conditions improving before we decide to be more aggressive with risk taking and portfolio growth. We don't provide guidance, and it's difficult to foresee when it will happen, but we will be more aggressive at that point. Regarding new products, we are pilot testing car loans in Brazil, which has potential synergies with our marketplace. The one thing I would highlight is that when we entered the credit business, there were understandable concerns regarding managing risk while pursuing growth. Looking back at '22, we've repurposed ourselves constantly in terms of risk management capabilities. In an environment of negative impacts, we've effectively managed timing to slow down originations and focused on higher-quality segments, resulting in strong credit performance and healthy credit spreads, demonstrating our strength in risk management.

Thank you. And one moment for our next question. And our next question comes from Deepak Mathivanan from Wolfe Research. Your line is now open.

Great. Thanks for taking the questions. Pedro, many companies here in the U.S. are very focused on improving efficiencies this year. How do you feel about the productivity at the company level at MercadoLibre? And how should we think about headcount additions for this year in your plans? Secondly, on the competitive landscape in Brazil currently with all the recent developments, should we think about any strategy shifts on your side, particularly with the 1P business?

Our strategy does not change based on competitors' activities. While tactics may adapt at the margin to seize opportunities, our strategic focus remains steadfast. Regarding productivity, we've had substantial internal conversations about this, and MELI is somewhat unique in the tech world—we haven't gone through layoffs. If anything, we plan to increase our engineering teams, which we see as a key competitive advantage. We didn't overhire during the pandemic, positioning us to continue hiring. Nevertheless, the pace of hiring will slow relative to previous years. In terms of headcount across other business and staff positions, we see no need for downsizing, maintaining discipline over the past few years. The pace of incremental hiring for logistics and customer service will reflect transaction growth and GMV, serving as key performance indicators in that assessment.

Thanks, Pedro.

Thank you. And one moment for our next question. Our next question comes from Stephen Ju from Credit Suisse. Your line is now open.

Thank you so much. Pedro, can you talk about the adoption levels for your fulfillment services in Mexico? Why has it surged there compared to other markets? Is the seller profile different, or are there other factors at play? Are there impediments for Brazil and other markets to reach Mexico's levels?

Mexico, for the fourth quarter, crossed the 70% mark for the first time in terms of service mix within the different shipping types we offer, with 70% of shipments initiating in one of our fulfillment centers. I think a combination of market dynamics, merchant profiles, and execution has led Mexico to be so far ahead of the other markets. Brazil just recently hit the 40% mark, growing over the past four quarters but at a slower pace. Chile is over 30%, and Argentina and Colombia continue to grow as well. There are no structural impediments to reaching Mexico levels; the pace of growth in fulfillment services varies by geography. Chile was launched significantly later than Brazil and is catching up to it, indicating that there are no structural barriers. We aim to drive adoption of fulfillment services because it provides faster delivery times, greater control over the user experience, and higher Net Promoter Scores.

Thank you.

Thank you. And one moment for our next question. Our next question comes from John Colantuoni from Jefferies. Your line is now open.

Great. Thanks for taking my questions. As you get closer to clean comparison periods, can you provide your perspective on the runway for e-commerce adoption across your key geographies? The pandemic helped close the gap to other regions, so I'm curious if recent trends in customer adoption still point to a long runway for adoption? Secondly, can you discuss how engagement and repeat rates of cohorts acquired in recent quarters compare to pre-pandemic cohorts?

Latin America has been interesting in that it doesn't seem to have experienced a return to physical retail with physical retail reopening. The market has continued to grow, although it has significantly slowed from pandemic-type growth. If you look at Mexico or Brazil, the most advanced markets, we expect market growth to be in the mid to high teens. We strive to gain share on top of that. It still feels early days in the shift from offline to online retail, which the pandemic accelerated, with consumers finding compelling value propositions in online purchasing that sustain their consumption. We are optimistic about long-term e-commerce prospects throughout the region. Retention cohorts are much better than pre-pandemic, and frequency has remained in line with pandemic growth levels. We have not continued growing unit usage since the pandemic but have maintained strong retention per user and higher engagement.

Very helpful. Thanks very much.

Thank you. And I would now like to turn the call back over to Pedro, MercadoLibre's Chief Financial Officer, for closing remarks.

Great. Thank you, everyone. I think we've concluded a phenomenal 2022 with a very strong fourth quarter. It was a year where we processed over $100 billion in payments, exceeded $10 billion in revenue, and surpassed $1 billion in EBIT. Congratulations to all the MercadoLibre team for the phenomenal work, and to our shareholders and stakeholders, rest assured that we're back at work to deliver another successful 2023 on behalf of our consumers and shareholders. Thank you, and we look forward to updating you as the first quarter concludes.

This concludes today's conference call. Thank you for participating. You may now disconnect.