All categories in Mexico are showing good year-over-year GMB growth. While we see some of the Asian players focused on apparel and home and mostly focused on low ASP items, we see our growth in those segments extremely healthy. So in the end, we are confident that our competitive advantages, particularly logistics and payment, remain strong. We have a unique logistics network. We have a unique buy-now-pay-later and credit card offering in Brazil, Mexico, etcetera which we think will continue helping us drive our business and our market share gains in those markets. So to wrap up, in the past several years, we have been successful in competing against Asian players who were executing strategies similar to the ones that current players are executing.
So we expect to continue doing so in the future, building on our strengths and successfully competing against whoever is operating in each of the markets where we are.
Martin de los Santos: Just on your question on CapEx, obviously we don’t guide future expenditures, but this year, 2023, was roughly $500 million invested on CapEx, which was fully funded with our own cash flow generation.
Deepak Mathivanan: Okay, thank you so much.
Operator: Thank you. One moment, please. Our next question comes from the line of Marcelo Santos of JPMorgan. Your line is open. Pardon me, Marcelo Santos, your line is open.
Marcelo Santos: Thank you. Sorry for having a bad line. Thanks for taking my question. My first question is about MELI Mas. Is MELI Mas net negative in terms of P&L? I understand it has recurring benefits and has a lot of loyalty benefits, but when you think about the P&L impact, is it negative now and should it remain negative in the future? That’s the first question. The second question is, did you also see this seasonal, this peak cost last year, or was something that you had stronger this year because you were running at fewer capacities? Thank you.
Operator: Thank you. One moment, please.
Ariel Szarfsztejn: Thank you for your question. The first part of the question was related to MELI Mas. Okay, sorry. We don’t look at MELI Mas as an individual P&L. We look at this as a way to generate incrementality in our marketplace. You break it down between content. Content is basically cost neutral because we pass on the benefits that we get. Basically, the cost that we pay for the content, we pass it on to our consumers. And then the shipping, obviously, we provide more free shipping, but that generates incremental volume that then in turn should finance that operation. In the short term, we are investing behind this initiative because we’re also investing in advertising, but it shouldn’t be looked at as an individual P&L and more so as part of the critical part of our strategy for commerce.
Martin de los Santos: And then regarding the peak season, if we saw a particular peak, a special peak in terms of cost, probably this quarter, the incrementality of cost due to peak season was a little bit higher than we saw last year. But again, as Ari mentioned, this is something that we’ll revert in the following quarters. And I was expected to have a peak in incremental cost during peak season.
Marcelo Santos: Thank you very much.
Operator: Thank you. One moment, please. Our next question comes from the line of Soomit Datta of New Street Research. Your line is open.
Soomit Datta: Hi there. Yes, thanks very much for taking the question. Just one at this stage, please. On Argentina and the Fintech business, as we kind of contemplate entering a recessionary environment in Argentina, how should we think about the Fintech business? The e-commerce business is a bit more kind of logical to me in that sort of environment in terms of thinking about consumer demand, et cetera, units sold. But just on the Fintech side, it’s not clear to me kind of what the drivers will be exactly under that scenario. If you could kind of help me with that, that would be great. Thanks.
Ariel Szarfsztejn: I would say, let me try to split the question between the different businesses we have. With regards to acquiring, I would say it’s a business that also is very much independent of there being a recession. No, obviously, the volumes are impacted, but we are growing so much by gaining share, and the impact tends to be, could be smaller. Let us not get into what will happen in the future, but it’s a business that people still continue to sell and process payments. So it will come by a little bit, is basically the growth rate, but no more than that. Where we’ve been more cautious is on the Fintech services side of the business on issuing credit. We don’t have yet a credit card in Argentina, and we have been more cautious throughout the fourth quarter, even before the elections, knowing that there could be an evaluation and there could be increased NPLs. And that’s why we were already more cautious towards the end of last year, and most of the volume growth you saw is coming from Mexico and Brazil and not from Argentina.
And then we’ll see what happens with the other Fintech service products. What we’re seeing today is an inflation that in Q4 and even today has peaked and is higher than it was, and that is a further incentive, and we have seen that for people to bring money from their bank into the Mercado Pago account, which is currently remunerating 80% year-on-year, and it’s a huge advantage versus zero at most banks. So we saw throughout the fourth quarter an increase in asset under management. You don’t see that in total numbers because the evaluation at the end of the year, but in local currency, we grew assets in our account by 6x year-over-year. So I would say that I’m comfortable with the impact we saw towards the end of last year. We cannot predict what we don’t forecast what will happen in the future.
Martin de los Santos: And if I may complement, the credit business in Argentina continues to have the lowest NPL compared to all other markets, and it continues to be extremely profitable.
Soomit Datta: Great, thank you.
Operator: Thank you. One moment, please. Our next question comes in line of Neha Agarwala of HSBC. Your line is open.
Neha Agarwala: Hi, thank you for taking my question. A quick one. I noticed that the ticket size for your credit card loans across the segment have been coming off. Is this a conscious decision, or is this a trend based on the demand that you’re seeing from your client? And any color on the credit uptake in Mexico, what kind of products are working in Mexico? How is the response on the credit card? That would be very helpful. Thank you so much.
Ariel Szarfsztejn: Let me start with the first part of the question, and then take on the second one. The first one, I would say, with regard to the credit card loans, they have been falling. It has been totally been a conscious decision. What we have been doing is reaching out to more consumers who did not have a credit card in the past with micro lines, what we say that is typically 100 or 200 [Indiscernible] lines. So it’s really small lines. And also with what we call warranted cards, where we ask people to deposit 100 or 200 or 300 reais in their account and offer a card that is warranted by that amount. So definitely, that has been part of our strategy in order to be, for many of these people, the first time they get a credit card.
And with regards to, you mentioned credit uptake in Mexico. I would say that basically, we have been growing a lot. First, the credit card, which is the latest product we launched, and has been a quite successful launch. And when you look at the combined volume we are loaning to consumers, adding the consumer loans to the credit cards that business has also been growing nicely.
Neha Agarwala: Just in terms of the asset quality trends that you are seeing in Mexico.
Ariel Szarfsztejn: Sorry, could you repeat the question, please?
Neha Agarwala: Asset quality trends for both the consumer lending and the credit card book in Mexico. Is it better than Brazil? Has it been improving? Or are you cautious there? Thank you.
Ariel Szarfsztejn: It has been, remained fairly stable. The profitability has continued to be good.
Neha Agarwala: Thank you so much.
Operator: Thank you. One moment, please. Our next question comes from the line of Marvin Fong of BTIG. Your line is open.
Marvin Fong: Excuse me, did you say Martin Fong? I thought you cut out there. But thanks for taking my question. Two, if I may. First, I think maybe you touched on this earlier, but the Fintech take rate, I think there was some compression there, part of which was related to financing costs. And I think in prior quarters, we had thought that perhaps the take rate would fall kind of in step with funding costs. You see some spread compression there. Any thought about how you should think about that going forward? And then second question, just to touch again on the credit portfolio, the consumer loan balance fell a little bit quarter-by-quarter. So was that a function of what you were saying about Argentina and pausing there? Or was it some currency issues or any kind of highlight there? Is it sort of you’re focusing more on credit card and maybe the consumer book won’t have as much growth for the time being?
Ariel Szarfsztejn: I would say on the Fintech take rate, part of the impact is larger portion of our credit book coming from credit cards, which have the portion of those loans that are interest bearing are lower than in the other kind of loans. That has some impact to that. Also, on the other part of the Fintech business, when you look at our acquiring business, as we move into SMBs, they typically have slightly lower take rate, albeit with significantly larger volume. I would say those have an impact on the overall take rate. The second one you mentioned, if I got it right, was there was an impact in the credit portfolio because of the Argentina devaluation, right?
Marvin Fong: It’s sort of a part of the question. I was just noticing the consumer loan kind of fell very, very slightly quarter-by-quarter. I was hypothesizing that perhaps there might be some currency impact or just or there’s something else behind that.
Ariel Szarfsztejn: Yes, there was some impact for two reasons. The first one is in the fourth quarter before the elections, we were more conservative in issuing credit in Argentina. The second one is more direct, which is the currency devaluation. Since we take the portfolios at the end of the quarter, the devaluation happened throughout December and the forwarded loans portfolio we’re showing in Argentina is devalued already.
Marvin Fong: Okay, understood. Thanks so much.
Operator: Thank you. I’m showing no further questions at this time. Let’s turn the call back over to Martin de los Santos, CFO, for any closing remarks.
Martin de los Santos: Well, thank you, everybody. As we mentioned, we are super excited with the result of the quarter that we’re closing a great 2023. And we look forward to seeing you when we present results of Q1 of 2024. Thank you very much.
Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.
