Juan de la Serna says he is often asked about his relationship with Che Guevara. His father was a first cousin of someone who marked the 1960s in the area’s history. In one way or another, as the head of the most valuable company in Latin America, he represents the business world. De la Serna has been with Mercado Libre since the beginning and proudly says he was that company’s first employee born in a parking garage.
-How do you define the Mercado Libre ecosystem that includes Mercado Pago?
– Since 1999 everything has changed, in those years there were almost no Internet users. And no one bought online. You had to be convinced to use the site. One of our great achievements was launching Mercado Pago in 2004 to solve the payment problem when someone buys something from another user. Years later, a logistical solution was found that, in addition to the time someone pays, allowed the shipping method to be resolved. These two teachers began to change the dynamics within Mercado Libre a lot. Mercado Pago extended far beyond the boundaries of Mercado Libre. Today, Mercado Pago achieves five times more volume outside Mercado Libre than it does inside Mercado Libre. We started offering collection solutions to companies or merchants beyond operations within Mercado Libre, and then QRs, automatic transfers between users, and paid accounts were born in 2019, which meant tremendous innovation, because until that moment, unless a specific term was set in the bank, there was no way to get a reward for balances. Today there are 18 million people who receive some sort of return on their Mercado Pago account balances every day.
-How do you deal with the growth of this dimension?
-We were born as an online auction company and have transformed into a technology company that mainly provides solutions for e-commerce and digital finance. One of the great goals is around digital inclusion in an area where very few people have access to financial products. It is an opportunity for financial inclusion for millions of people in Latin America who today have access to a credit card, paid accounts, and who can apply for loans. The development of the logistics network was also promoted. It is its own and has simplified the whole process for those who make Mercado Libre their way of life, selling products, and for the consumer, who increasingly receives his products better packaged, in less time, at lower costs, and often at no cost, because we offer free shipping in all the countries in which we operate from a certain level of purchase.
– What is your relationship with the engineers behind technological leaps?
– Mercado Libre has 20,000 developers. Obviously, at the heart of everything we do is the technology team.
– What is the role of artificial intelligence?
-It generates an impressive revolution. It crosses all duty-free areas. We are focusing on all areas to find solutions, through artificial intelligence, that can make their lives easier, let’s say, more productive, more efficient and better in terms of costs, and we have been doing this already for years, that is, before someone introduced the term artificial intelligence, we started with what were called machine learning models. At Mercado Libre you have the opportunity to ask questions to someone who sells products. From there, our models begin to know what the questions are and what the answers are, and begin answering directly on behalf of our vendors. The buyer receives a response as if it had been given to them by the seller, within seconds, improving their purchase. In the legal department, they sort up and reassign it to people who specifically dedicate themselves to that as a ticket office, and there are online negotiators who solve problems, for example, claims, and they do it much faster, much cheaper. In the case of the technology team, more and more lines of code are being developed by AI solutions. What you have to learn is to learn how to ask the AI what you want, what’s called a prompt, it’s almost like a new function, being a prompt, that means that instead of spending hours typing an asterisk and a hieroglyph and a piezo sign and I don’t know what, you can now simply tell one of the existing solutions in the AI to generate the code for what you’re looking to do. This is evolving in a way that there are solutions that 90 days ago seemed like the last Coca-Cola in the desert, which may no longer exist today. New models emerge that improve, all models and all the efficiency and productivity that this generates. We have created teams to provide solutions to non-technology teams. At the speed at which it’s happening, I don’t remember anything quite so revolutionary.
-How are they doing in Latin America?
Brazil, Mexico and Argentina are ranked in terms of business volume, not profitability, and Brazil is perhaps the country with the most competition in the world. We’ve been competing there with Amazon since 2014, today they’re fourth, there are some local players and then Asian companies that have been investing quite heavily for some time. Something similar is happening in Mexico, we have been competing with Amazon since 2017 and there are not many local players there. Yes, there is more competition in terms of the financial aspect, but the truth is that they are both great markets and we are doing very well. We are gaining market share, we continue to be highly profitable across all operations, we continue to grow strongly but we are investing a lot and making decisions that we say are right in the long term regardless of the outcome in the short or medium term. There are also other smaller but well-developed countries: Chile, Peru and Colombia. But given that Internet penetration in retail is still very low, we are talking about 15% levels, and there is so much to gain, that you can perfectly coexist with competitors as it happens in all industries in the world.
-What is the most profitable country?
-Argentina because we are not competing with Amazon or against major local players, but we are actually competing with Asians. In Brazil and Mexico we have many resources applied to logistics, about 42,000 people while here there are 5,200. In total we have 110,000 employees. We’re investing a lot in that whole logistics network.
-In Argentina they have just expanded what they already have in the central market…
-It went into effect last week. This is great news for Argentina. The area was 65,000 m2, now 58,000 m2 have been added, for a total of more than 100,000 m2, and the following week, on October 16, we opened a 30,000 m2 center in the municipality of Tres de Febrero, where Diego Valenzuela is located. But while here it took us 7 years to open a second storage center, today in Brazil there are 20. In Mexico, there are 14 centers.
-Why this difference?
– Country conditions, number one, competition, number two, which forces us in the case of Brazil and Mexico to be more efficient, to be faster, and to reduce costs. All it does is that logistics is not a business in itself, it is actually a facilitator so that you can buy, have a good experience and want to buy again.
-Merchants complain about the commissions they charge…
-At first we didn’t charge anything, but of course nothing was sold either. Then they started charging 3% fees, but you didn’t have the logistics solution, you didn’t have the payment solution, the buyers didn’t have financing, they didn’t have fees. You can’t use it while it’s completely opinable. If we set excessively high commissions, our sellers will stop using them and buyers will have fewer alternatives when making a purchase. We seek a balance that serves buyers, serves sellers, and serves the free market to continue to generate demand so that these merchants can continue to sell.
-Why move from digital finance to becoming a bank?
-We carry out this process in Mexico, which was the first country where we applied for a banking license, and in Argentina. We can extend credit, a month ago we issued the first credit cards for the first time, something we’ve been doing in Brazil and Mexico for 3, 4 years or something like that, very successfully, with great growth, with great expectations. But what we cannot do is lending and so-called financial intermediation. That’s why we ask to act as a bank.
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