Q4 2024 Earnings Call Transcript

Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the Quarter Ended December 31, 2024. Thank you for joining us. I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management team. Before we go on to discuss our results of the fourth quarter of 2024, I remind you that management may make or refer to and this presentation may contain forward-looking statements and non-GAAP measures.

So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded and a replay will also be available on our Investor Relations website. Before passing on to Martin, I would like to highlight that our new Investor Relations website is now live. Investors can find new content, including a deep dive on our ecosystem, our institutional presentation, and our management podcasts.

Investors can also walk through the user experience of our apps through a series of animations. Plus, you'll find our events calendar, our results archive, and our impact documents. For those of you that aren't signed up to receive our alerts, please do so by going to the site at investor.mercadolibre.com. With that, let's begin with a short message from our CFO.

Hello, everyone. 2024 was another remarkable year for MercadoLibre. Our key top line metrics, GMV, acquiring TPV, credit portfolio, and assets under management outpaced the market in Brazil, Mexico, and Argentina, driving significant market share gains and highlighting our position as a leading e-commerce and fintech payer in Latin America. Improvements in our value proposition enabled us to surpass 100 million unique buyers in our marketplace and 60 million monthly active users in our fintech platform for the first-time. This milestone reflects the trust and loyalty of our users and our ecosystem and it also highlights the success of investments in growth we have been making over the past few years.

During 2024, we continued investing in our logistics infrastructure, which is a critical enabler that reduces friction and attracts more users to online commerce. We opened new fulfillment centers and expanded our free shipping offering. This resulted in a record breaking number of new buyers coming to our marketplace. Another important area of investment was our credit cards.

In 2024, we issued 5.9 million new cards and more than doubled our portfolio. Having a solid credit card offering is critical to our ambition of becoming the largest digital bank in Latin America and leveraging our unique competitive advantages in underwriting and distribution. So we'll continue investing in our platform to capture these opportunities, even if sometimes they put short-term pressure on margins. As we see all the cohorts of credit cards becoming profitable, as the accuracy of our risk models improves, we are confident we are in the right track.

These investments are central to our ability to continue delivering outstanding results and building a business with much greater scale in the long run. Even after 25 years of growth, we continue to see a large opportunity ahead of us. The pillars of our long-term growth strategy are based on the relatively low penetration of e-commerce in our region, a huge opportunity to offer better financial products to large segments of the population that have been underserved by traditional banks, and the digitalization of cash for merchants and individuals. We are pleased with this year's financial results, achieving $21 billion revenue and generating over $1 billion in free cash flow.

This demonstrates our ability to drive profitable growth while continuing to invest in our long-term strategic objectives. As we enter 2025, we are more optimistic than ever about the opportunities that lie ahead. Now, I'll hand it back to Richard to share more details on some of the innovations that made these results possible.

As we conclude MercadoLibre's 25th anniversary year, we reflect on another year characterized by innovation throughout our ecosystem, as we develop technology to build the best commerce and fintech user experience in Latin America, all within a unique ecosystem. One of our top focus areas is developing a world-class purchasing experience for each of our verticals. We are removing specific frictions in each category. This goes from virtual try on for makeup to enabling users to schedule a change of tires within the buying flow and have those tires ship directly to the mechanic, and enabling sellers to offer both discounts to buyers.

In fashion, we standardized filters and sizes, and enabled a better returns experience whereby users can exchange their purchase for a different size at one of the thousands of MELI places across the region. In supermarkets, we launched Full Super, a new storefront page that allows better navigation on subcategories within groceries. Users can more easily put multiple items of the same product in their baskets directly from their search results. They can also easily add items purchased in their previous shops to their carts and they can see the progress that they're making to reaching the free shipping threshold for the grocery category.

We are also deploying technology to improve efficiency in our logistics operations. In 2024, we reached record levels of productivity in all geographies and a record number of shipments per route. Gains of scale on the back of a 29% year-on-year increase in items shipped also helped cost per package in local currency to either decline year-on-year or rise below inflation in our major geographies. There are no silver bullets when it comes to driving logistics efficiency.

Instead, our focus is on dozens of small incremental gains that compound over time. Examples of this include grouping initiatives that increase the number of items per delivery, a new shelving system in our fulfillment centers that improves productivity whilst reducing CapEx, and continuous improvements in all of our routing algorithms. We are also investing to improve our value proposition for sellers. In 2024, we implemented several key tools, which include MyPage, where sellers can customize their space on MercadoLibre, group publications, and create their own product carousels.

They could also engage directly with potential buyers who are now able to follow their favorite stores. Sellers can generate coupons and create ads to specifically target this audience. The dynamic pricing tool is a feature that automates price adjustments for listings based on internal and external competitiveness within established limits, thereby enhancing sellers' market positioning. The growing size, frequency, and engagement of our marketplace user base also enables us to improve the value proposition of Mercado Pago.

It enables us to better understand those users, which helps us to offer them credit lines and cross sell other fintech services. In 2024, we were able to ramp up our credit card offering by better selecting users and increasing credit limits after years of tests. We also made it easier for pre-approved users to pick up a card whilst making a purchase on the marketplace. And we also offered special buying conditions for cardholders during peak season with 18 installments for high ASP items available only to Mercado Pago cardholders.

To complement the great value prop of the credit card, users can also access attractive returns on deposits in Brazil, Mexico, Argentina, and Chile, as well as new investment options. We recently launched the MELI dollar, a stablecoin that users can buy, hold, and sell in our app, and specific tax-free investment products called LCI and LCA in Brazil with investments starting from just BRL100. Improvements in UX and value proposition have also been key in our acquiring business. This year, we focused on improving the processing time for payments on our POS devices through technology. As a result, we have seen higher NPS.

Our value prop is complemented by an ecosystemic offer that includes credit cards and loans to merchants where we're able to use open finance to better score and increase limits. Both of these help to increase merchant retention. At the heart of our innovation is a dedicated team of more than 18,000 engineers and a tech-centric culture. This allows us to enhance productivity, to quickly respond to market opportunities, and to remain ahead of our competitors.

By innovating, we strengthen our leadership in the region. This will continue to be our focus in 2025 and beyond, and it underpins our confidence that the best is yet to come.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Andrew Ruben with Morgan Stanley. Please go ahead.

Hi. Thanks very much for the question. If I could ask around the credit portfolio. So you mentioned the risk first approach and the ability to scale back as needed.

I guess, if I could with two related questions. The first would be, amid the rising interest rate backdrop in Brazil, how would you describe your comfort or risk appetite around credit in the country? And then related to that, as credit becomes more penetrated in your GMV and seller base, how do you think about the impacts to the overall ecosystem in a scenario where you do take a more cautious issuance approach? Thank you.

Hi, Andrew. With regards to the first part of the question, so far, we have seen no signs of deterioration in our credit portfolio. And in fact, in Brazil, the credit card had the lowest first payment default on record in December. And that said, we have taken some measures to reduce risk at the margin, given the weaker macro backdrop you mentioned and also the rise in interest rates.

As of now, we are no longer issuing micro cards which -- well, we have reduced significant -- I haven't said one more reason, but we have reduced significantly the amount of micro cards we're issuing and also we have tightened the payback periods on new issuance. So essentially, we're being a little more cautious. Nonetheless, we are very comfortable with the level of risk we are taking. And the second part of the question, if I got it right, was regarded to penetration of GMV, if that is a concern, I'd say, it's not a concern at this point.

We believe we have plenty of room to continue growing penetrations. On the consumer side, what we have seen happen lately is particularly, in Mexico, some cannibalization from transactions paid on the marketplace with credit cards instead of consumer loans, that was expected and we expect that to continue happening. But what we're seeing is increased penetration of archive products in the marketplace.

Just to complement, Andrew, as we have talked to you in the past, and we are seeing, as Osvaldo mentioned, very healthy books in terms of profitability and NPLs. This is the reason why we accelerated our credit portfolio by 74% year-on-year this quarter, but we are alert to what happens in Brazil. And in the past, you've seen us a slowdown two years -- three years ago when something that we didn't like we saw in the market, we saw a slowdown. So we're willing to do that.

And keep in mind that also the duration of our credit portfolio is very short. So that gives us a lot of flexibility to adjust to anything that we see on the market that requires us to adjust in terms of risk exposure.

And the next question comes from Irma Sgarz with Goldman Sachs. Please go ahead.

Yes. Hi. Thanks. Very strong results in Argentina in terms of item growth, but also direct contribution margin.

So with a positive outlook for economic growth in that country, this could be of some support to the overall margin in 2025. So I was just curious to hear from you how you think or encourage us to think about tailwinds and headwinds for margin in this geography in 2025, any areas of investment or cost increases that we should just be aware of? And separately in Brazil, the contribution margin was down a bit year-over-year, if my quick glance was okay. But was this simply a reflection of year-over-year higher provisions for the credit card build-out or anything else that played out here? Thank you.

Hi, everyone. It's Martin here. Yeah. We are very optimistic about what's going on in Argentina.

We saw a recovery on the second half of the year. And if you remember, we had a tough first and second quarter. Items sold in Argentina grew by 18% in Q4, increasing from 10% the previous quarter. So very strong recovery on the commerce side of the business.

And on fintechs as well, on fintech, we quadrupled our book -- our credit book in Argentina. We grew it by 4x from last year. The book that is very profitable, NPLs under control, obviously with lower interest rates, people are taking on more risk. So we're very optimistic on the macro signals that we're seeing on our platform.

And obviously, Argentina is a relatively higher margin country compared to Brazil and Mexico so that explains. [Technical Difficulty] Because they might put some margin pressures sometimes on our business, but we don't manage the business for a particular margin target on a quarter-by-quarter basis. We are very satisfied with the growth that we're delivering both on commerce and fintech. And in the long term as we continue growing and capturing share, we should be able to look to dilute our fixed cost and continue to improve margins in the long term. So I would not see it as a straight-line in margin trajectory, but I would look at it in the longer term, which is the race that we're playing.

We're playing a long-term battle here.

Okay. Thank you very much.

And the next question comes from Neha Agarwala with HSBC. Please go ahead.

Hi. Thank you for taking my question. Can you hear me fine?

Yes, we can.

Okay. Perfect. Two quick questions. First, we talked last year about investments in opening new warehouses.

Where are we in the process? How many more warehouses do you expect to open this G&A trajectory that we can expect front loaded or towards the end of the year? And second question is, now you made a lot of improvements on the commerce platform. What are the initiatives that you're taking for the lowest ASP items?

How are you finding of competition from some of your peers who focus more on the lower ticket-size items? Thank you so much.

Hey, Neha. How are you? This is Ariel. So to your first question, we opened a few warehouses during this year, two, particularly during Q4, which expanded us the capacity that we needed as to go through our peak season.

Generally speaking, I'm taking a step back as demand grows, and thinking about the long-term opportunity we have in the region, we think that incremental capacity will not only be necessary but also crucial to drive the shift from online to online commerce in Latin America. It is not something new or it is not a change in direction in terms of capacity build-up from what we have been doing, but we think that we will continue supporting what we think the business will need as to serve the customers in the proper manner, right? To the second point of your question regarding low ASP, let me first bring the point that if you were to look at the growth rate across ASP ranges, you would see that both in Brazil and Mexico and also in the rest of Latin America, our low ticket item sales are actually growing at par or even faster than the average of our marketplace.

And that's basically a consequence of many things. On the one hand, we continue evolving our UI, our platform with a better experience, more features like some of the ones that we were highlighting in the video for apparel and beauty. We continue scaling Melimise and with Melimise delivery day, so offering more free shipping in that price range. We also have CVT, which gives us the right supply for those items.

So in all, there is no one particular silver bullet as to tackle that range, but we are very happy and pleased with the support we've had so far.

And the next question comes from Rodrigo Gastim with Itau BBA. Please go ahead.

Yeah. Good evening, guys. Two questions here from my side. The first one, I would just like to go back, Martin, to the point that you mentioned about initial measures to reduce risk in Brazil in the credit book.

This is one of the most discussed topics with investors. You mentioned the micro cards, but if you could just go a little bit deeper here and share -- in addition to the micro cards, what else you're -- you guys doing to kind of prevent or to reduce the risk given the macro outlook? That's the first question. And the second one, specifically on the card book.

Last quarter, you guys shared very interesting information on profitability, both on the NIMAL and also on the EBIT side. Not going after the numbers here, but if you could just share on a qualitative basis the trend both of the NIMAL and the EBIT of the credit card book would also be very interesting to hear from you guys. This is all. Thank you, guys.

Hi, Rodrigo. This is Osvaldo. I'll take the first part of the question. I'll let Martin take the second part.

But going back to credit risk, particularly in our credit card book in Brazil, as I said, one of the things we're doing is significantly reducing the issuing of micro cards. But beyond that, what we're doing is, I mentioned tightening the payback period of the cards we issue. And basically what this means is, we segment cards by a credit score risk and what we do is, we are -- we limit to some degree the amount of cards were issue to the lower -- to the riskier segment, so to speak. In that way, we ensure that the paybacks are in line with what we expect, even if somehow the economy is stressed.

So we have been more cautious in issuing cards to the riskier segment. And on top of that, as you know, we have been improving our scoring models and we are very comfortable with how they are working.

Yeah. In terms of NIMAL, I think we explained in the past, there is further numbers and then the trends that you can see within the numbers, right? We have a NIMALs of 27.6% this quarter what we reported compared to 39.8% a year ago. So it's below a year ago, but slightly better than last quarter and what's going on there, a couple of things.

First of all, the share of credit cards as part of our total portfolio continues to increase. And as you know, the credit card is a lower NIMAL product. Having said that, the NIMAL of the credit card continues to improve. As we continue to have older cohorts that mature and become profitable and we have a larger share of profitable cohorts, the NIMAL continues to improve.

So you have a larger share of low NIMAL product with improving NIMAL within it. And then when you look at the other products, which are positive NIMAL actually very good spread, those improved sequentially quarter-on-quarter. So when you put all that together, you see a deterioration of NIMAL year-on-year, which is by design because of mix shift towards credit card, an improvement on NIMAL quarter-on-quarter because of improvements that we have seen on the other credit products, including the credit card as well. So I hope that helps you to get a picture of where we stand.

And you can, with that get a sense of where we're going since the credit card will continue to be a faster growing portfolio within credits. Credit card this quarter grew by 118% compared to the overall portfolio that grew at 57%. I hope that helps.

And the next question comes from Robert Ford with Bank of America. Please go ahead.

Hey. Thank you so much. Congratulations on the quarter and forgive me for asking a question about credit. But what do you expect your quarterly net credit card investments to Osvaldo be or did that just happen in the fourth quarter of '24?

And can you comment on any acceleration in the two year maturation period for younger cohorts? It sounds like you've got some flexibility there to accelerate that in terms of who you choose to underwrite. And then I was curious, how much of the wallet funding on the marketplace is now coming from resources within the ecosystem and how are you thinking about that penetration rate as we move forward? Thank you.

Hey, Robert. Sorry, let me take the first part of the question. So I would say, both in the case of Brazil and in the case of Mexico, we are being slightly more restrictive in the number of cards we issue and what we're doing is being more restrictive towards the more -- the riskier segments. And so nonetheless, we have been aggressive in expanding limits and so on.

So total payment volume is growing aggressively on a year-on-year basis. And with regards to cohorts, I would say that as we mentioned, all cohorts that are two years old are profitable on a NIMAL basis. And then what we're seeing is that the repayment of the newer cohorts are in general better than that of the other ones and in line to what we expected when we issued them. So as long as we are able to continue issuing new cohorts with repayments that behave as we expect, we will continue expanding the book.

And I think, Bob, you are referring to the share of payments, let's say, in the marketplace that is done with what we call blue money, including the Mercado Pago credit card, account money plus consumer credit and that's a number that has been increasing over time as we deploy better credit lines and more credit cards to our users. We don't disclose the exact number, but roughly, just to give you a sense, depending on the country, it goes from 18% to 25% or so of the payments are done with our own payment methods.

And the next question comes from Caio De Pratto with UBS. Please go-ahead. And the next question comes from Joao Soares with Citigroup. Please go ahead.

Hi. Thank you. Just a quick one on my side. I just wanted to understand the relevance of these high risk products in the micro cards and if this -- by taking down the risk or reducing the risk, do you think there could be any repercussions in the pace of growth of GMV?

Hi, Joao. No, we don't expect any significant impact of the reduction in the durations of micro cards. Initially, when we started issuing those cards, we wanted to give a way to un-ramp people who did not have a credit card into obtaining a credit card. And I would say that it was successful in some cases and -- but typically in cases where they were already using another one of our credit products.

So in a specific segment, we will continue to issue those micro cards, but it will be a significantly lower part of our share -- the share of mix in the total issuance that we had last year. But it will not have any significant impact in any of the other metrics.

I see. So thinking about the broader credit cards, we should expect, I mean, in terms of the pace of growth, we shouldn't expect a major change, right?

Yeah. I gave you already all the color I could. As you know, we don't give any guidance. So I think that we have been cautious and as we continue to see opportunities to continue issuing with the paybacks that we plan, we will do so.

I would complement it continues to be a very strategic product for us, for our fintech platform. So long as we have good cohorts, good models, improving collections as we have seen so far, we will continue to grow it.

[Operator Instructions] Our next question comes from Craig Maurer with FT Partners. Please go ahead.

Hey, there. This is Zach Gunn on for Craig. Thanks for taking the question. I just wanted to ask on advertising.

In the letter, you gave some commentary that still an area you're looking to invest in and a lot of room to scale long-term there. Can you just talk about what those areas are and how we should think about a target as a percentage of GMV going forward just given the lack of maybe progress a little bit this year on that metric as a percentage of GMV? Thanks.

Hey, Craig. Sorry I was on-mute. So we think that we performed really well in ads during this quarter, particularly in peak season, our team executed pretty well and we managed to build the right relationships with brands and sellers and that led to 50 basis points of expansion year-over-year in revenues as a percentage of GMV. But linking this to your question, in the long run, we still have two or three key development areas.

On the one hand, we need to build relationships with brands and agencies in the region. We continue to interact with them to gather feedback to iterate our product as we build success cases, as to foster engagement and get more advertisers. We have a very dense product roadmap as our offering continues to evolve from product adds only to a full funnel strategy with display, brand, video ads, etc., we continue to improve the tech solution and the tech stack that we are providing to our users. And then we also think that expanding our inventory beyond the MELI ecosystem could be an important lever as to become more attractive for brands and agencies who are looking to run full campaigns across different platforms.

With that in mind, I would say we don't guide. So it's not that I can share with you our targets, but I do feel very, very comfortable in saying that we are in the early stages of advertising as a percentage of GMV. We are very far up in terms of penetration with some of our international competitors and we believe that there is no reason why MercadoLibre will not get to similar levels in the long run. So I guess you will just to be patient and we'll get there by iterating our product and getting the right commercial relationships.

The next question comes from Josh Beck with Raymond James. Please go ahead.

Yeah. Thank you for taking the question. I wanted to ask about some of the fulfillment centers that recently went online, did you risk -- were you able to achieve the types of utilization levels that you would like to during the 2024 holiday season or is that something that you would maybe more likely see in the 2025 holiday season kind of with respect to peak utilization? And then just a little bit of a follow-up on a different topic.

How should we think about provision growth? It certainly seems like there is a bit of a maturing of the cohorts that you brought on the last two years. Any colors or pointers on how we should think about modeling provisions? Thank you.

Hey, Josh, Ariel here. So to the first point of your question, yes, we are extremely satisfied with the performance of our logistics network in Q4. I think we balanced the expansions that we required to deal with the demand that we knew was going to come to MercadoLibre with lots of productivity improvements and efficiencies. For sure, the extra capacity that we built over the last few quarters helped us cope with that demand while also improve that productivity. A typical warehouse will get to its peak utilization in a few years.

So it's not that you open a warehouse and from one day to the other, you do reach 100% utilization. But given that we really needed that capacity, I would say we are a bit more advanced in that learning process, but everything aligned with what we were planning. And as I was saying before, we continue to think that investing in logistics capacity is strategic to enable MercadoLibre to continue growing in the long run. I think I'll let Martin and Osvaldo answer the second part of the question.

Yes. I think regarding provisions, there are two forces that you need to consider, we're trying to modeling the provisions going forward. On the one hand, the historical portfolios are performing better. And as they -- particularly in the credit card, as you clean those portfolios, they become profitable, just like Osvaldo was mentioning.

We already see portfolios two years older are already profitable and continue to improve as we move ahead. On the other hand, you need to look at sequential growth portfolio. Let me give you an example of last quarter. Last quarter, we grew our portfolio sequentially by 23% compared to only 9% this quarter.

And when that happens, as you know, with provision losses upfront, so when you have an increment -- sequential incremental portfolio, that generates some pressure on bad debt. So those are two things that you need to consider when trying to model bad debt or provisions for the future.

And the next question comes from Deepak Mathivanan from Cantor Fitzgerald. Please go ahead.

Hey, guys. Thanks for taking the question. Let me ask one on e-commerce and then one on fintech. On the e-commerce side, you're seeing a very good acceleration in buyers and also frequency is going up very nicely.

Can you provide some color on the drivers maybe in terms of how user behavior is changing or any certain categories that's incrementally contributing in the last few quarters? Are you seeing maybe perhaps a mix of categories like essentials becoming a bigger part? So the consumer behavior is driving towards that? Any additional color you can share that would be helpful?

And then I have a follow-up.

Sure. Hi, Deepak. Ariel here. So indeed, we are very pleased with the acceleration in buyers coming into the platform and their behavior as well.

I think there is no silver bullet as to explain what's happening. Like, this is a compounding of 25 years investing in adjusting and improving our value proposition, improving our product, the experience more and more we have adding features that do verticalize the experience in MercadoLibre, we consistently see more and more users buying staff in more than three categories, which is a key retention driver and given our data. New categories are growing very nicely like essentials, everyday essentials coming from dry groceries is doing super well. But at the same time, consumer electronics and common industries, which are our biggest categories and more historical ones do perform really well.

Apparel is another category that is doing very well as well. Beauty is doing amazing. So no one thing that can explain the behavior and frequency. I think it's a compounded effect of all the offerings that we are putting out there.

And particularly, of course, fresh shipping is a key enabler for us as to boost demand, right? So I believe that, that together with all the technology that we've put in demand acquisition are showing the results.

Got it. And if I can ask one on the credit. And I apologize if this is already asked, I've been jumping around a couple of calls. So on NIMAL improvements that we're seeing quarter-to-quarter, can you expand on that a little bit maybe between products?

And then in response to kind of the maturity of the cohort curves and then also the improvements that you're seeing in terms of your underwriting algorithms? How should we think about kind of like the rank order of what is driving it basically as to think about the sustainability of this over the next few quarters? Thank you very much.

Sure, Deepak. I would say that today, if you look at our higher product spreads explain almost all of the sequential expansion. Having said that, today, we have higher spread that have been driven primarily by bad debt, which has decreased as a percentage of portfolio on a consolidated basis. That was due to better collections across all books, in part due to seasonality as people in Latin America usually get an extra salary or half an extra salary in December, and that many times is used to pay back debt.

That's on the consumer side and credit card side. And then on the merchant side, they do get extra sales because of the holiday season and that is also used to pay back debt. But it's important to remember that provisioning policies per cohort remain unchanged and so does the asset quality. So I would say that all in, in terms of NIMAL, we are seeing improvements in the NIMAL of the credit card books.

And then we have seen already very high NIMALs on the consumer book and the merchant book. And as we move upmarket in those two segments, probably we will see some compression in NIMAL because we're giving loans to segments that are less risky and therefore, we expect a lower spread from them. And then you have to combine all of the effects of each segment. And the other thing that is happening is that the credit card book is gaining share within all of our books.

So even though credit card is improving its NIMAL, when you look at all of it put together, it will stress to some degree the overall NIMAL of the book because of the higher penetration of the credit card.

[Operator Instructions] Our next question comes from Kaio Da Prato with UBS. Please go ahead.

Hello, everyone. Good evening. Thanks for the opportunity. I have just one follow-up question on Argentina, please.

Given the improvements that we have been seeing there, I just would like to understand what's your expectations for the fintech business and more specifically on quality because what we are seeing there is basically traditional banks shifting from trading to lending, suggesting a solid real growth of at least 50% there. So just wondering if we can expect even faster growth on your side given the low market share that you still have there and the underpenetrated credit marks? And if you have any kind of restriction because you're not a bank there and if getting a banking license is within your plans for the short term?

Thank you.

Hi, Kaio. So I would say, we have grown a lot our portfolio in the last year, nearly 4x year-on-year. And remember, at this point, what we have is a consumer book and a merchant book, but we do not issue at this point credit cards in Argentina. We are very excited about the opportunity and excited because what we see is that if you look at the credits to the private sector in Argentina, it is a small fraction of what it is in other countries in Latin America.

So there is less credit and also so -- and there is significant demand, particularly in a country where the Central Bank rates have come down in the last year from 140% to 29%. So as credit gets cheaper, there's also more demand for it. And we also on top of everything, given that the low penetration of credit, what we see is the lower ratios of bad debt that we have in any country. Having said all that, we continue to be cautious.

Argentina is a country where in the past, we have seen volatility in every macro measure. So we want to be cautious. And therefore, if you look at our loans, the duration in Argentina happens to be lower than in other countries. And as we see more time of macro stability, we feel more comfortable expanding that.

And going to the second part of the question, we do not need to be a bank to be able to expand our book. And obviously, we could have deposits if we were a bank and use those deposits to expand that book, but we have been able to do that by securitizing receivables and securitizing coupons from the loans and we expect to be able to continue growing without the need to become a bank. Nonetheless, it's something that we analyze regularly and at any point, we could change the decision. But at this point, this is not a restriction for growth on the credit side of the business.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks.

Well, thanks, everybody. We are pleased with MercadoLibre's performance in 2024, which was a very special year for us since we celebrated our 25th anniversary and was probably one of the best years in our history with strong top-line growth to deliver solid profits and generated $1.3 billion in adjusted free cash flow, even after investing about $900 million in CapEx and investing $3 billion in our fintech business, mostly to fund our credit book. And to recap what I mentioned before because I think it was cut off while I was answering the question from Irma, we will continue to invest with discipline in order to capture this enormous growth opportunities that we have ahead of us.

As we have seen in the past, this might sometimes lead to short-term margin volatility, but we are focused on long-term sustainable growth and we are very optimistic on that front as we see some of the results of our investment, in particular, the milestones that we achieved during 2024. This year, we surpassed the 100 million buyers in our e-commerce platform, more than 61 million monthly active users on Mercado Pago. So we're very, very excited about the growth opportunities that we have ahead of us and then eventually the margin potential that will continue to increase as we continue to scale our business and dilute fixed costs going forward.

So thanks everybody for joining. Good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.