MercadoLibre: CFO Pedro Arnt Steps Away in Surprise Move but Leaves Company in Excellent Shape

In big news for the largest online commerce marketplace in Latin America, Pedro Arnt, the CFO and the most visible figure on the senior leadership team at MercadoLibre MELI, is stepping down to pursue other opportunities. He will be replaced by Martin de los Santos, the head of the Mercado Credito segment. Arnt spent 24 years with wide-moat MercadoLibre, overseeing key periods as the firm grew from a predominately peer-to-peer marketplace into a model analogous to that of wide-moat Amazon in the United States, with a sprawling fulfillment network, large base of professional merchants, and nearly $35 billion in 2022 gross merchandise volume. We expect to maintain our Exemplary capital allocation rating during the transition period, and we expect to closely monitor how the firm’s strategy evolves under new leadership.

MercadoLibre’s sprawling fintech business has become an increasingly important profit center for the firm, generating 43% of consolidated revenues during the firm’s most recent quarter, often at better margins than the core commerce segment. The nascent credit business has been a large contributor to strong segment results, incubating for the past seven years under de los Santos’ leadership and representing 17% of consolidated revenues in the second quarter. Perhaps more importantly, the firm has been able to grow that business profitably, with 37% net interest margins after losses during the most-recent quarter (a figure that we do expect to compress as the firm moves into lower-yield auto and housing lending and as credit access improves across the region). It isn’t implausible that the Mercado Pago half of the business is re-emphasized under new management, particularly with the firm’s recent investments in its fintech operations in Mexico.

Ultimately, the firm’s road map looks cogent; its sprawling suite of services is designed to secure financial preeminence with regional customers and introduce Latin American consumers to digital banking and commerce.