MERCADOLIBRE INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures Based on the evaluation of our disclosure control and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as required by Rules 13a-15(b) or 15d-15(b) under the Exchange Act, as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to Management as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Our Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our Management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework updated by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on its evaluation under the framework in Internal Control—Integrated Framework (2013), our Management concluded that our internal control over financial reporting was effective as of December 31, 2023 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of Management’s assessment with the Audit Committee of our board of directors. The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by Pistrelli, Henry Martin y Asociados S.R.L. (member of Ernst & Young Global Limited), an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K. 62 | MercadoLibre, Inc. Table of Contents Changes in Internal Control over Financial Reporting There were no changes in our internal controls over financial reporting as defined in Exchange Act Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent limitations on effectiveness of controls Our Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ITEM 9B. OTHER INFORMATION Rule 10b5-1 Trading Plans During the three months ended December 31, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K within 120 days of the Company’s fiscal year ended December 31, 2023. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item will be included under the captions “Compensation Committee Interlocks and Insider Participation” and “Executive Compensation” in the 2024 Proxy Statement, except as to information required pursuant to Item 402(v) of SEC Regulation S-K with respect to pay versus performance, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS Except for the information regarding shares authorized for issuance under equity compensation plans (which is set forth below), the information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K within 120 days of the Company’s fiscal year ended December 31, 2023. 63 | MercadoLibre, Inc. Table of Contents The following table presents information as of December 31, 2023 with respect to equity compensation plans under which shares of the Company’s common stock are authorized for issuance: Plan Category Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, Warrants and Rights Weighted-average exercise price of outstanding options, Warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (2) (a) (b) (c) Equity compensation plans approved by security holders (1) — — 989,811 Total — — 989,811 (1) Represents our Amended and Restated 2009 Equity Compensation Plan which was approved by our stockholders on June 10, 2019. (2) Pursuant to SEC guidance, this table does not reflect grants of restricted stock made pursuant to our Amended and Restated 2009 Equity Compensation Plan. As of December 31, 2023, there were 5,658 shares of unvested restricted stock outstanding under such plan. Description of our Amended and Restated 2009 Equity Compensation Plan (the “Amended and Restated 2009 Plan”) Our Amended and Restated 2009 Plan was adopted by our board of directors on April 24, 2019. The Amended and Restated 2009 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees and non-qualified stock options, restricted stock and other equity-based or equity-related awards to our employees, directors, officers and managers. Incentive stock options and non-qualified stock options are referred to as “stock options” and together with restricted stock and all other awards are referred to as “awards”. As of December 31, 2023, there were no outstanding stock options to purchase shares of common stock under the Amended and Restated 2009 Plan. No stock options were granted during the period from January 1, 2007 to December 31, 2023 and there were no stock-based compensation expenses related to stock options for the years ended December 31, 2023, 2022, 2021, 2020 and 2019. There is no stock option award outstanding under the Amended and Restated 2009 Plan. As of December 31, 2023, there were 989,811 shares of common stock available for additional awards under the Amended and Restated 2009 Plan . Number of shares of common stock available under the Amended and Restated 2009 Plan. The maximum number of shares of common stock reserved and available for delivery in connection with awards under the Amended and Restated 2009 Plan is 1,000,000 shares. Any awards previously granted under the Amended and Restated 2009 Plan that terminate without being exercised, expire, are forfeited or canceled shall be available pursuant to the Amended and Restated 2009 Plan. The shares of common stock issuable pursuant to any award granted under the Amended and Restated 2009 Plan shall be (i) authorized but unissued shares, (ii) shares of common stock held in the Corporation’s treasury, (iii) shares acquired by the Corporation on any stock exchange in which such shares are traded, or (iv) a combination of the foregoing. Administration of the Amended and Restated 2009 Plan. The Amended and Restated 2009 Plan is administered by our board of directors or a committee appointed by the board of directors (the body in charge of administering the Amended and Restated 2009 Plan is referred to as the “administrator”). If the common stock is registered under Section 12(b) or 12(g) of the Exchange Act, the board of directors shall consider in selecting the administrator and the membership of any committee acting as administrator the provisions of Rule 16b-3 under the Exchange Act regarding “non-employee directors.” The administrator determines the recipients of awards, the times at which awards are granted, the number of shares subject to each type of award, the time for vesting of each award and the duration of the exercise period for stock options. The administrator additionally has the power and authority to approve forms of award agreements and other related documents used under the Amended and Restated 2009 Plan. Price, exercise and termination of stock option awards. The exercise price for each share of common stock subject to a stock option is determined by the administrator, and in no event shall the exercise price be less than 100% of the fair market value of the shares of common stock on the date of the grant (or 110% in the case of employees who directly or indirectly own more than 10% of the total combined voting power of all classes of our stock). Stock options are exercisable on their vesting date, which is determined by the administrator and set forth in the award agreement governing any particular stock option. Vesting dates can be accelerated on the occurrence of a specified event, as provided in an award agreement, or can be accelerated at the discretion of the administrator. 64 | MercadoLibre, Inc. Table of Contents If a stock option expires or is terminated or canceled without having been exercised, it shall become null and void and of no further force and effect. The term of a stock option may not exceed beyond the tenth anniversary on which the stock option is granted (or the fifth anniversary in the case of incentive stock options granted to employees who directly or indirectly own 10% of the total combined voting power of all classes of our stock.) A stock option terminates 30 days after a participant ceases to be an officer, manager, employee or director as a result of a termination without cause, and after 10 days of termination in the case of a termination for cause. Cause includes the conviction of a crime involving fraud, theft, dishonesty or moral turpitude, the participant’s continuous disregard of or willful misconduct in carrying lawful instructions of superiors, continued use of alcohol or drugs that interfered with the performance of the participant’s duties, the conviction of participant for committing a felony or similar foreign crime, and any other cause for termination set forth in a participant’s employment agreement. A stock option terminates three months after the death or permanent disability of a participant, or, if the participant is a party to an employment agreement, the disability of such participant as defined in the employment agreement. Other reasons for termination may be set out in the award agreement. A stock option will not be considered an incentive stock option to the extent that the aggregate fair market value (on the date of the grant of the incentive stock option) of all stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year is greater than $100,000. No stock option shall be affected by a change of duties or position of a participant (including a transfer to our subsidiaries) as long as the participant continues to be our employee or an employee of our subsidiaries. Adjustments upon the occurrence of material transactions. In the event we undergo dissolution or liquidation, a reorganization, merger or consolidation in which we are not the surviving entity, or a sale of all or substantially all of our assets (each, a “Material Transaction”), holders of stock options will be given 10-day prior written notice and will decide within those 10 days whether to exercise their respective stock options. Any stock option that is not so exercised will terminate. However, such notice and exercise mechanism would not apply if provision is made in connection with a Material Transaction for assumption of outstanding stock options, or substitution of stock options for new stock options or equity securities, with any appropriate adjustments as to the number, kind and prices of shares subject to stock options. Transferability. Unless the prior written consent of the administrator is obtained, no stock option can be assigned or otherwise transferred by any participant except by will or by the laws of descent and distribution. Except in the case of an approved transfer, a stock option may be exercised during the lifetime of a participant only by the participant or his/her legal representative if the participant is legally disabled. Restricted stock. Restricted stock awards are awards of shares of common stock that vest according to the terms and conditions established by the administrator. The administrator may impose whatever restrictions on transferability, risk of forfeiture and other restrictions as it determines. A holder of restricted stock has the rights of a stockholder, including the right to vote the restricted stock. During the restricted period applicable to the restricted stock, it may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered. Except as otherwise determined by the administrator, restricted stock that is subject to restrictions is subject to forfeiture upon termination of a participant’s employment. Other awards. The administrator of the Amended and Restated 2009 Plan may grant additional equity-based or equity-related awards in such amounts and on such terms as it shall determine, subject to the terms and conditions set forth in the Amended and Restated 2009 Plan. Each such award shall be denominated in, or shall have a value determined by reference to, a number of shares that is specified at the time of the grant of the award. Amendment. Our board of directors may modify the Amended and Restated 2009 Plan at any time. The approval by a majority of our stockholders is necessary if required by law or necessary to comply with any applicable laws and regulations. No amendment will affect the terms of any award granted prior to the effectiveness of such amendment, except with the consent of the holder of the award. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information presented under the heading “Certain Relationships and Related Transactions” and “Information on Our board of directors and Corporate Governance” in our 2024 Proxy Statement to be filed with the SEC is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item will be included in our 2024 Proxy Statement to be filed with the SEC and is incorporated herein by reference. 65 | MercadoLibre, Inc. Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements. The following financial statements are included in this report: Page Consolidated Financial Statements Reports of Independent Registered Public Accounting Firms 71 Consolidated balance sheets as of December 31, 2023 and 2022 75 Consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 76 Consolidated statements of comprehensive income for the years ended December 31, 2023, 2022 and 2021 77 Consolidated statements of equity for the years ended December 31, 2023, 2022 and 2021 78 Consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021 79 Notes to consolidated financial statements 81 (b) Exhibits. The exhibits required by Item 601 of Regulation S-K are set forth under “Exhibit index” and is incorporated herein by reference. ITEM 16. FORM 10-K SUMMARY None. 66 | MercadoLibre, Inc. Table of Contents EXHIBIT INDEX Exhibit Number Exhibit Description Filed (*) or Furnished (**) Herewith Incorporated by Reference Form Filing Date 3.01 Registrant’s Amended and Restated Certificate of Incorporation. S-1 May 11, 2007 3.02 Registrant’s Amended and Restated Bylaws. S-1 May 11, 2007 4.01 Form of Specimen Certificate for the Registrant’s Common Stock. 10-K February 27, 2009 4.02 Indenture, dated January 14, 2021, between MercadoLibre, Inc., MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., MercadoPago.com Representações Ltda., MercadoLibre Chile Ltda., MercadoLibre, S. de R.L. de C.V., DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. and The Bank of New York Mellon, as trustee. 8-K January 14, 2021 4.03 First Supplemental Indenture, dated January 14, 2021, between MercadoLibre, Inc., MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., MercadoPago.com Representações Ltda., MercadoLibre Chile Ltda., MercadoLibre, S. de R.L. de C.V., DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. and The Bank of New York Mellon, as trustee. 8-K January 14, 2021 4.04 Form of Global Note representing the Registrant’s 2.375% Sustainability Notes due 2026. 8-K January 14, 2021 4.05 Form of Global Note representing the Registrant’s 3.125% Notes due 2031. 8-K January 14, 2021 4.06 Description of Securities. 10-K February 23, 2022 4.07 Second Supplemental Indenture, dated October 27, 2021 among MP Agregador, S. de R.L. de C.V., MercadoLibre, Inc. and The Bank of New York Mellon, as Trustee. 10-K February 23, 2022 10.01 Form of Indemnity Agreement entered into by the Registrant with each of its directors and executive officers. 10-K February 14, 2020 10.02 Management Incentive Bonus Plan of the Registrant. S-1/A July 13, 2007 10.03 Amended and Restated 2019 Long-Term Retention Program. 10-Q May 6, 2021 10.04 Amended and Restated 2020 Long-Term Retention Program. 10-Q May 6, 2021 10.05 2021 Long-Term Retention Program. 8-K May 5, 2021 10.06 MercadoLibre, Inc. 2022 Long Term Retention Program. 8-K May 9, 2022 10.07 MercadoLibre, Inc. 2023 Long Term Retention Program. 8-K May 8, 2023 10.08 Amended and Restated 2009 Equity Compensation Plan. DEF 14A April 26, 2019 10.09 Form of Independent Director Restricted Stock Award Agreement. 10-Q November 4, 2022 10.10 Revolving Credit Agreement dated March 31, 2022. 8-K March 31, 2022 10.11 Advisory Services Agreement, dated April 8, 2022, between MercadoLibre, Inc and Stelleo Pasos Tolda, the advisor. 10-Q May 6, 2022 10.12 Restricted Stock Agreement, dated April 8, 2022, between MercadoLibre, Inc and Stelleo Pasos Tolda. 10-Q May 6, 2022 21.01 List of Subsidiaries. * 22.01 List of Subsidiary Guarantors for the Registrant’s 2.375% Sustainability Notes due 2026 and 3.125% Notes due 2031. 10-K February 24, 2023 23.01 Consent of Pistrelli, Henry Martin y Asociados S.R.L., Independent Registered Public Accounting Firm on Form S-8. * 23.02 Consent of Deloitte & Co. S.A., Independent Registered Public Accounting Firm on Form S-8. * 31.01 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.02 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.01 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 32.02 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 97 Policy for the Recovery of Erroneously Awarded Compensation. * 67 | MercadoLibre, Inc. Table of Contents Exhibit Number Exhibit Description Filed (*) or Furnished (**) Herewith Incorporated by Reference Form Filing Date 101 The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. * 104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL and contained in Exhibit 101. * 68 | MercadoLibre, Inc. Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MERCADOLIBRE, INC. By: /s/ Marcos Galperin Marcos Galperin President and Chief Executive Officer By: /s/ Martín de los Santos Martín de los Santos Sr. Vice President and Chief Financial Officer Date: February 23, 2024 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. 69 | MercadoLibre, Inc. Table of Contents Signature Title Date /s/ Marcos Galperin President, Chief Executive Officer (Principal Executive Officer) and Director February 23, 2024 Marcos Galperin /s/ Martín de los Santos Sr. Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 23, 2024 Martín de los Santos /s/ Mario Vazquez Director February 23, 2024 Mario Vazquez /s/ Susan Segal Director February 23, 2024 Susan Segal /s/ Nicolás Aguzin Director February 23, 2024 Nicolás Aguzin /s/ Nicolás Galperin Director February 23, 2024 Nicolás Galperin /s/ Emiliano Calemzuk Director February 23, 2024 Emiliano Calemzuk /s/ Henrique Dubugras Director February 23, 2024 Henrique Dubugras /s/ Andrea Mayumi Petroni Merhy Director February 23, 2024 Andrea Mayumi Petroni Merhy /s/ Richard Sanders Director February 23, 2024 Richard Sanders 70 | MercadoLibre, Inc. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of MercadoLibre, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MercadoLibre, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2024, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opini on. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for doubtful accounts on loans receivable Description of the matter As more fully described in Note 2 to the consolidated financial statements, the Company maintains an allowance for doubtful accounts, related to loans receivable, based on Management’s estimate of the current expected credit losses (CECL estimate). This allowance as of December 31, 2023 , amounts to $1,102 million U.S. dollars as disclosed in Note 7, which represents a probability-weighted amount, determined by evaluating a range of possible outcomes and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. The Company’s CECL estimate is determined based on probability-weighed scenarios of default over the life of the loans receivable. Probability of default models are estimated using a complex statistical model, which estimates the future default rate. The Company estimates monthly default probabilities for each delinquency bucket, type of product and country. These probabilities of default are combined with a set of Loss Given Default parameters, which depend on days past due, type of product and country, and are estimated by measuring an average of historical recovery rates from defaulted credits. Auditing the CECL estimate was complex and required the application of significant judgment due to the inherent complexity of the models, assumptions and the interrelationship of the variables used in measuring the CECL estimate that could have a material effect on its measurement. Significant assumptions and judgments with respect to the CECL estimate include definition of default, portfolio segmentation that considers its credit quality and key inputs used for loss given default. 71 | MercadoLibre, Inc. Table of Contents How we addressed the matter in our audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls related to the CECL estimate. The controls we tested included, among others, controls over the development of the model, as well as controls over the and key inputs and assumptions used to calculate the CECL estimate. We also tested the controls over the completeness and accuracy of the data used in the calculation. To test the CECL estimate, our audit procedures included, among others, involving our credit risk modelling specialists to assist us in assessing the methodology and significant assumptions used by management, including definition of default, portfolio segmentation and the key inputs identified above that were used for loss given default. We have also performed independent recalculations to test the mathematical accuracy of management’s model and assessed the adequacy of the CECL estimate financial statement disclosures. /s/ PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L. Member of Ernst & Young Global Limited We have served as the Company’s auditor since 2021. City of Buenos Aires, Argentina February 23, 2024 72 | MercadoLibre, Inc. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of MercadoLibre, Inc. Opinion on Internal Control Over Financial Reporting We have audited MercadoLibre, Inc. internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, MercadoLibre, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”), and our report dated February 23, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable b asis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L. Member of Ernst & Young Global Limited City of Buenos Aires, Argentina February 23, 2024 73 | MercadoLibre, Inc. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of MercadoLibre, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of income, comprehensive income, equity, and cash flows, for the year ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting princi ples generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United Stat es) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United State s of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ DELOITTE & Co. S.A. Buenos Aires, Argentina February 23, 2022 We began serving as the Company's auditor in 2010. In 2022 we became the predecessor auditor. 74 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Balance Sheets As of December 31, 2023 and 2022 (In millions of U.S. dollars, except par value) December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 2,556 $ 1,910 Restricted cash and cash equivalents 1,292 1,453 Short-term investments 3,480 2,339 Accounts receivable, net 156 130 Credit card receivables and other means of payments, net 3,632 2,946 Loans receivable, net of allowances of $ 1,042 and $ 1,074 (Note 7) 2,629 1,704 Inventories 238 152 Customer crypto-assets safeguarding assets 34 15 Other assets 277 304 Total current assets 14,294 10,953 Non-current assets: Long-term investments 162 322 Loans receivable, net of allowances of $ 42 and $ 30 (Note 7) 65 32 Property and equipment, net 1,250 993 Operating lease right-of-use assets 899 656 Goodwill 163 153 Intangible assets, net 11 25 Intangible assets at fair value (Note 2) 24 — Deferred tax assets 710 346 Other assets 68 256 Total non-current assets 3,352 2,783 Total assets $ 17,646 $ 13,736 Liabilities Current liabilities: Accounts payable and accrued expenses $ 2,117 $ 1,393 Funds payable to customers 4,475 3,454 Amounts payable due to credit and debit card transactions 1,072 483 Salaries and social security payable 545 401 Taxes payable 477 414 Loans payable and other financial liabilities 2,292 2,131 Operating lease liabilities 166 142 Customer crypto-assets safeguarding liabilities 34 15 Other liabilities 119 129 Total current liabilities 11,297 8,562 Non-current liabilities: Amounts payable due to credit and debit card transactions 20 5 Loans payable and other financial liabilities 2,203 2,627 Operating lease liabilities 672 514 Deferred tax liabilities 183 106 Other liabilities 200 95 Total non-current liabilities 3,278 3,347 Total liabilities $ 14,575 $ 11,909 Commitments and contingencies (Note 15) Equity Common stock, 0.001 par value, 110,000,000 shares authorized, 50,697,442 and 50,257,751 shares issued and outstanding $ — $ — Additional paid-in capital 1,770 2,309 Treasury stock ( 310 ) ( 931 ) Retained earnings 1,901 913 Accumulated other comprehensive loss ( 290 ) ( 464 ) Total equity 3,071 1,827 Total liabilities and equity $ 17,646 $ 13,736 The accompanying notes are an integral part of these audited consolidated financial statements. 75 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Statements of Income For the years ended December 31, 2023, 2022 and 2021 (In millions of U.S. dollars, except for share data) Year Ended December 31, 2023 2022 2021 Net service revenues $ 12,983 $ 9,442 $ 6,149 Net product revenues 1,490 1,095 920 Net revenues 14,473 10,537 7,069 Cost of net revenues ( 7,267 ) ( 5,374 ) ( 4,064 ) Gross profit 7,206 5,163 3,005 Operating expenses: Product and technology development ( 1,831 ) ( 1,099 ) ( 590 ) Sales and marketing ( 1,736 ) ( 1,296 ) ( 1,074 ) Provision for doubtful accounts ( 1,050 ) ( 1,073 ) ( 435 ) General and administrative ( 766 ) ( 661 ) ( 465 ) Total operating expenses ( 5,383 ) ( 4,129 ) ( 2,564 ) Income from operations 1,823 1,034 441 Other income (expenses): Interest income and other financial gains 723 265 138 Interest expense and other financial losses (1) ( 378 ) ( 321 ) ( 229 ) Foreign currency losses, net ( 615 ) ( 198 ) ( 109 ) Net income before income tax expense and equity in earnings of unconsolidated entity 1,553 780 241 Income tax expense ( 569 ) ( 298 ) ( 149 ) Equity in earnings of unconsolidated entity 3 — ( 9 ) Net income $ 987 $ 482 $ 83 (1) Includes $ 49 million of loss on debt extinguishment and premium related to the 2028 Notes repurchase recognized in January 2021. See Note 17 – Loans payable and other financial liabilities to these audited consolidated financial statements for further detail. Year Ended December 31, 2023 2022 2021 Basic earning per share Basic net income available to shareholders per common share $ 19.64 $ 9.57 $ 1.67 Weighted average of outstanding common shares 50,262,302 50,345,353 49,802,993 Diluted earning per share Diluted net income available to shareholders per common share $ 19.46 $ 9.53 $ 1.67 Weighted average of outstanding common shares 51,006,860 51,335,621 49,802,993 The accompanying notes are an integral part of these audited consolidated financial statements. 76 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Statements of Comprehensive Income For the years ended December 31, 2023, 2022 and 2021 (In millions of U.S. dollars) Year Ended December 31, 2023 2022 2021 Net income $ 987 $ 482 $ 83 Other comprehensive income (loss), net of income tax: Currency translation adjustment 178 61 ( 56 ) Unrealized (losses) gains on hedging activities ( 13 ) ( 33 ) 8 Tax benefit on unrealized (losses) gains on hedging activities 2 9 — Less: Reclassification adjustment for losses on hedging activities included in cost of net revenues, interest expense and foreign currency losses ( 11 ) ( 20 ) ( 2 ) Less: Reclassification adjustment for estimated tax benefit on unrealized gains 4 6 1 Total other comprehensive income (loss), net of income tax 174 51 ( 47 ) Total comprehensive income $ 1,161 $ 533 $ 36 The accompanying notes are an integral part of these audited consolidated financial statements. 77 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Statements of Equity For the years ended December 31, 2023, 2022 and 2021 (In millions of U.S. dollars) Common stock Additional paid-in capital Treasury Stock (1) Retained Earnings Accumulated other comprehensive loss Total Equity Shares Amount Balance as of December 31, 2020 50 $ — $ 1,860 $ ( 55 ) $ 314 $ ( 468 ) $ 1,651 Stock-based compensation — restricted shares issued — — 1 — — — 1 Common Stock issued 1 — 1,520 — — — 1,520 Common Stock repurchased ( 1 ) — — ( 486 ) — — ( 486 ) Unwind Capped Call — — 646 ( 249 ) — — 397 Capped Call — — ( 101 ) — — — ( 101 ) Repurchase of 2028 Notes Conversion Option — — ( 1,484 ) — — — ( 1,484 ) Exercise of Convertible Notes — — ( 3 ) — — — ( 3 ) Net income — — — — 83 — 83 Other comprehensive loss — — — — — ( 47 ) ( 47 ) Balance as of December 31, 2021 50 $ — $ 2,439 $ ( 790 ) $ 397 $ ( 515 ) $ 1,531 Changes in accounting standards — — ( 131 ) — 34 — ( 97 ) Balance as of December 31, 2021 Restated 50 $ — $ 2,308 $ ( 790 ) $ 431 $ ( 515 ) $ 1,434 Common Stock repurchased — — — ( 147 ) — — ( 147 ) Stock-based compensation — restricted shares issued — — 1 ( 1 ) — — — Shares granted (Note 18) — — — 7 — — 7 Net income — — — — 482 — 482 Other comprehensive Income — — — — — 51 51 Balance as of December 31, 2022 50 $ — $ 2,309 $ ( 931 ) $ 913 $ ( 464 ) $ 1,827 Changes in accounting standards (Note 2) — — — — 1 — 1 Balance as of December 31, 2022 Restated 50 $ — $ 2,309 $ ( 931 ) $ 914 $ ( 464 ) $ 1,828 Capped call settlement — — 412 ( 412 ) — — — Stock-based compensation — restricted shares issued — — 1 — — — 1 Conversion of 2028 Convertible Notes — — ( 952 ) 1,389 — — 437 Common Stock repurchased — — — ( 356 ) — — ( 356 ) Net income — — — — 987 — 987 Other comprehensive Income — — — — — 174 174 Balance as of December 31, 2023 50 $ — $ 1,770 $ ( 310 ) $ 1,901 $ ( 290 ) $ 3,071 (1) As of December 31, 2023 the Company he ld 224,945 shares as treasury stock. The accompanying notes are an integral part of these audited consolidated financial statements. 78 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 (In millions of U.S. dollars) Year Ended December 31, 2023 2022 2021 Cash flows from operations: Net income $ 987 $ 482 $ 83 Adjustments to reconcile net income to net cash provided by operating activities: Equity in earnings of unconsolidated entity ( 3 ) — 9 Unrealized foreign currency losses, net 487 411 91 Impairment of digital assets — 12 9 Depreciation and amortization 524 403 204 Accrued interest income ( 311 ) ( 166 ) ( 36 ) Non cash interest expense and amortization of debt issuance costs and other charges 124 138 76 Provision for doubtful accounts 1,050 1,073 435 Brazilian withholding income tax contingency 324 — — Results on derivative instruments 39 66 — Results on digital assets at fair value ( 14 ) — — Long term retention program (“LTRP”) accrued compensation 167 84 89 Deferred income taxes ( 284 ) ( 97 ) ( 29 ) Changes in assets and liabilities: Accounts receivable ( 92 ) ( 71 ) ( 26 ) Credit card receivables and other means of payments ( 1,321 ) ( 1,084 ) ( 1,063 ) Inventories ( 69 ) 114 ( 142 ) Other assets ( 55 ) ( 87 ) ( 188 ) Payables and accrued expenses 1,225 449 380 Funds payable to customers 1,502 1,044 808 Amounts payable due to credit and debit card transactions 693 128 309 Other liabilities ( 88 ) ( 82 ) ( 79 ) Interest received from investments 255 123 35 Net cash provided by operating activities 5,140 2,940 965 Cash flows from investing activities: Purchases of investments ( 18,936 ) ( 12,694 ) ( 7,371 ) Proceeds from sale and maturity of investments 18,100 11,023 7,801 Payments for acquired businesses, net of cash acquired — — ( 51 ) Capital contributions in joint ventures — — ( 5 ) Receipts from settlements of derivative instruments — 1 6 Payments from settlements of derivative instruments ( 58 ) ( 45 ) ( 20 ) Purchases of intangibles assets — ( 1 ) ( 36 ) Changes in loans receivable, net ( 2,047 ) ( 1,701 ) ( 1,348 ) Investments of property and equipment ( 509 ) ( 454 ) ( 573 ) Net cash used in investing activities ( 3,450 ) ( 3,871 ) ( 1,597 ) Cash flows from financing activities: Proceeds from loans payable and other financial liabilities 24,963 17,017 9,262 Payments on loans payable and other financing liabilities ( 24,841 ) ( 15,933 ) ( 6,782 ) Payments of finance lease liabilities ( 33 ) ( 20 ) ( 17 ) Common Stock repurchased ( 356 ) ( 148 ) ( 486 ) Proceeds from issuance of common stock, net — — 1,520 Purchase of convertible note capped calls — — ( 101 ) Exercise of Convertible Notes — — ( 3 ) Payments on repurchase of the 2028 Notes — — ( 1,865 ) Unwind of convertible note capped calls — — 397 Net cash (used in) provided by financing activities ( 267 ) 916 1,925 Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents ( 938 ) ( 270 ) ( 153 ) Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents 485 ( 285 ) 1,140 Cash, cash equivalents, restricted cash and cash equivalents, beginning of the year 3,363 3,648 2,508 Cash, cash equivalents, restricted cash and cash equivalents, end of the year $ 3,848 $ 3,363 $ 3,648 The accompanying notes are an integral part of these audited consolidated financial statements. 79 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2023, 2022 and 2021 (In millions of U.S. dollars) Year Ended December 31, 2023 2022 2021 Supplemental cash flow information: Cash paid for interest $ 608 $ 247 $ 58 Cash paid for income tax 651 437 282 Non-cash financing activities: Finance lease liabilities $ 99 $ 18 $ 20 Convertible Senior Notes Due 2028 437 — — Non-cash investing activities: Contingent considerations and escrows from acquired business $ — $ — $ 12 Right-of-use assets obtained under operating leases 314 317 229 Right-of-use assets obtained under finance leases 99 18 37 Acquired businesses, through call option — — 11 Acquisition of businesses 2023 2022 2021 (1) Cash and cash equivalents $ — $ — $ 4 Accounts receivable — — 6 Other current assets — — 18 Other non current assets — — 1 Fixed Assets — — 1 Total assets acquired — — 30 Accounts payable and accrued expenses — — 19 Other liabilities — — 7 Total liabilities assumed — — 26 Net assets acquired — — 4 Goodwill and deferred tax liabilities — — 68 Hubs network — — 3 Platform — — 1 Customer lists — — 1 Total purchase price — — 77 Cash and cash equivalents acquired — — 4 Total purchase price, net of cash acquired $ — $ — $ 73 (1) Related to the acquisition of a shipping company and payment services company - See Note 8 – Business combinations, goodwill, and intangible assets. The accompanying notes are an integral part of these audited consolidated financial statements. 80 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 1. NATURE OF BUSINESS MercadoLibre, Inc. (“MercadoLibre”, and together with its consolidated entities, the “Company”) was incorporated in the state of Delaware, in the United States of America, in October 1999. MercadoLibre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of necessary digital and technology tools that allow businesses and individuals to trade products and services in the region. The Company enables commerce through its marketplace platform, which allows users to buy and sell in most of Latin America. Through Mercado Pago, the fintech solution, MercadoLibre enables individuals and businesses to send and receive digital payments; through Mercado Envios, MercadoLibre facilitates the shipping of goods from the Company and sellers to buyers; through the advertising products, MercadoLibre facilitates advertising services for large retailers and brands to promote their products and services on the web; through Mercado Shops, MercadoLibre allows users to set-up, manage, and promote their own on-line web-stores under a subscription-based business model; through Mercado Credito, MercadoLibre extends loans to certain merchants and consumers; and through Mercado Fondo, MercadoLibre allows users to invest funds deposited in their Mercado Pago accounts. As of December 31, 2023, MercadoLibre, through its wholly-owned subsidiaries, operated online e-commerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Peru, Mexico, Panama, Honduras, Nicaragua, El Salvador, Uruguay, Bolivia, Guatemala, Paraguay and Venezuela. Additionally, MercadoLibre operates its fintech solution in Argentina, Brazil, Mexico, Colombia, Chile, Peru, Uruguay and Ecuador, and extends loans through Mercado Credito in Argentina, Brazil, Mexico and Chile. It also offers a shipping solution directed towards Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying audited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company, its wholly-owned subsidiaries and consolidated Variable Interest Entities (“VIE”). Investments in entities where the Company holds joint control, but not control, over the investee are accounted for using the equity method of accounting. These audited consolidated financial statements are stated in U.S. dollars, except for where otherwise indicated. Intercompany transactions and balances have been eliminated for consolidation purposes. Substantially all net revenues, cost of net revenues and operating expenses, are generated in the Company’s foreign operations. Long-lived assets, intangible assets and goodwill and operating lease right-of-use a ssets located in the foreign jurisdictions totaled $ 2,321 million and $ 1,817 million as of December 31, 2023 and 2022, respectively. Certain comparative figures of these audited consolidated financial statements were modified to provide more detailed disclosures. This change has not impacted the total amount of net income and total equity. Since the quarter ended June 30, 2022, the Company discloses the provision for doubtful accounts as a separate line item of its operating expenses in the consolidated statements of income. The provision for doubtful accounts amounts to $ 1,050 million, $ 1,073 million and $ 435 million for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, since December 31, 2023, the Company presents its prepaid expenses balance within “Other assets” in the consolidated balance sheets. Prepaid expenses amount to $ 27 million and $ 38 million as of December 31, 2023 and 2022, respectively. Variable Interest Entities (VIEs) A VIE is an entity (i) that has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, (ii) that has equity investors who lack the characteristics of a controlling financial interest or (iii) in which the voting rights of some equity investors are disproportionate to their obligation to absorb losses or their right to receive returns and substantially all of the entity’s activities are conducted on behalf of the equity investors with disproportionately few voting rights. The Company consolidates VIEs of which it is the primary beneficiary. The Company is considered to be the primary beneficiary of a VIE when it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. See Note 21 – Securitization transactions of these audited consolidated financial statements for additional detail on the VIEs used for securitization purposes. 81 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, accounting for allowance for doubtful accounts and chargeback provisions, inventories valuation reserves, recoverability of goodwill, intangible assets with indefinite useful lives and deferred tax assets, impairment of short-term and long-term investments, impairment of long-lived assets, separation of lease and non lease components for aircraft leases, asset retirement obligation, compensation costs relating to the Company’s long term retention program, fair value of digital assets, fair value of certain loans payable and other financial liabilities, fair value of investments, fair value of loans receivable, fair value of derivative instruments, income taxes, contingencies and determination of the incremental borrowing rate at commencement date of lease operating agreements. Actual results could differ from those estimates. Cash and cash equivalents The Company considers all highly liquid investments with an original maturity of three months or less since holding the investment, consisting primarily of money market funds, time deposits and U.S. and foreign government debt securities, to be cash equivalents. The Company’s Management assesses balances for credit losses included in cash and cash equivalents and restricted cash and cash equivalents, except for those recorded at fair value with impact on the consolidated statements of income, based on a review of the average period for which the financial asset is held, credit ratings of the financial institutions and probability of default and loss given default models. The Company did not recognize any material credit loss on the cash and cash equivalents and restricted cash and cash equivalents for the years ended December 31, 2023, 2022 and 2021. Time deposits are valued at amortized cost plus accrued interest. Money market funds, U.S. and foreign government debt securities (including Central Bank of Brazil and Central Bank of Uruguay mandatory guarantees) are valued at fair value. See Note 10 – Fair value measurement of assets and liabilities of these audited consolidated financial statements for further details. Investments Time deposits are valued at amortized cost plus accrued interest. Corporate debt securities classified as available-for-sale are recorded at fair value. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated other comprehensive loss, net of the related tax provisions or benefits. Investments in equity securities without a readily determinable fair value are held at cost less impairment. U.S. and foreign government debt securities (including Central Bank of Brazil mandatory guarantee) are valued at fair value. See Note 10 – Fair value measurement of assets and liabilities of these audited consolidated financial statements for further details. Investments are classified as current or non-current depending on their maturity dates or when it is expected to be converted into cash, depending on the investment. The Company’s Management assesses balances for credit losses included in short and long-term investments, except for those recorded at fair value with impact on the consolidated statements of income, based on a review of the average period for which the financial asset is held, credit ratings of the financial institutions and probability of default and loss given default models. The Company did not recognize any material credit loss on the short and long-term investments for the years ended December 31, 2023, 2022 and 2021. Fair value option applied to certain financial instruments Under Accounting Standards Codification (“ASC”) 825, U.S. GAAP provides an option to elect fair value with impact on the statement of income as an alternative measurement for certain financial instruments and other items on the balance sheet. The Company has elected to measure certain financial assets at fair value with impact on the consolidated statements of income for several reasons including to avoid the mismatch generated by the recognition of certain linked instruments / transactions, separately, in the consolidated statements of income and consolidated statements of comprehensive income and to better reflect the financial model applied for selected instruments. The Company’s election of the fair value option applies to the: i) Foreign government debt securities, and ii) U.S. government debt securities. Credit card receivables and other means of payments, net Credit card receivables and other means of payments mainly relate to the Company’s payments solution and arise due to the time taken to clear transactions through external payment networks either during the time required to collect the installments (which may be one or more than one installment) or during the period of time until those credit card receivables are sold to financial institutions. Credit card receivables and other means of payments are presented net of the related allowance for chargebacks and doubtful accounts. 82 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The Company is exposed to losses due to credit card fraud and other payment misuse. Provisions for these items represent the Company’s estimate of actual losses based on its historical experience, as well as economic conditions. The Company may sell credit card receivables to financial institutions, included within “Credit card receivables and other means of payments, net”. These transactions are accounted for as a true sale. Accounting guidance on transfer of financial assets establishes that the transferor has surrendered control over transferred assets if and only if all of the following conditions are met: (1) the transferred assets have been isolated from the transferor, (2) each transferee has the right to pledge or exchange the assets it received and (3) the transferor does not maintain effective control over the transferred assets. When all the conditions are met, the Company derecognizes the corresponding financial asset from its consolidated balance sheets. Based on historical experience to date the Company assessed that it does not hold a significant credit risk exposure in relation to transfer of financial assets with recourse. Loans receivable, net Loans receivable represents loans granted to certain merchants and consumers through the Company’s Mercado Credito solution. Loans receivable are reported at amortized cost, which includes outstanding principal balances plus estimated collectible interest, net of allowance for doubtful accounts. Past due are those loans where customers have failed to make payments in accordance with the contractual terms of their loans. The Company places loans on non-accrual status at 90 days past due. Interests related to loans on non-accrual status are recognized on cash-basis. Through the Company’s Mercado Credito solution, merchants can borrow a certain percentage of their monthly sales volume and are charged with a fixed interest rate based on the overall credit assessment of the merchant. Merchant and consumers credits are repaid in a period ranging between 7 days and 48 months. Allowances for doubtful accounts on loans receivable, accounts receivable and credit card receivables and other means of payments The Company maintains allowances for doubtful accounts for Management’s estimate of current expected credit losses (“CECL”) that may result if customers do not make the required payments. Measurement of current expected credit losses The Company estimates its allowance for credit losses as the lifetime expected credit losses of the loans receivable, accounts receivable and credit card receivables and other means of payments. The Company makes use of available information as of each period in which this estimate is developed and uses estimation methods according to the information available and the level of precision needed as certain balances and transactions become more significant over time following the Company’s strategy in connection of the launch and maturing of certain services offerings to its customers. In 2021 and before, for example, the credit business was in a development stage, with limited historical information. The future collection estimates involved the use of complex algorithms, and a high degree of subjectivity and estimation capability by Management, including assessing whether the economic used model reflected the changing economic conditions, among others. This estimate required a complex and high degree of Management’s judgment. Specifically in regards to the CECL estimate, including year 2022 information provided a wider series of historical data and the credit business showed a growth in related balances and transactions which led Management to continue enhancing the models used to develop this estimate. CECL represents the present value of the uncollectible portion of the principal, interest, late fees, and other allowable charges. The allowance for doubtful accounts is recorded as a charge to provision for doubtful accounts. Loans receivable Loans receivable in this portfolio include the products that the Company offers to: 1) on-line merchant, 2) in-store merchant, 3) consumers and 4) credit card users. For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent and other relevant factors, the Company estimates the lifetime expected credit loss allowance based on a collective assessment. The same methodology is applied for the measurement of CECL for its exposure to off-balance sheet unused agreed loan commitment on credit cards portfolio. The lifetime expected credit losses is determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio’s loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform the portfolio segment. 83 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. Probability of default models (“PD”) are estimated using a survival methodology; these PD are constructed using individual default information through time, taking into account the expected future delinquency rate (forward-looking models) using, since 2022, three probability-weighted macroeconomic scenarios (base, optimistic and pessimistic) following the increased complexity and possible outcomes of the global, regional and domestic macroeconomic performance, so that the models include macroeconomic outlook or projections and recent performance, instead of using one scenario as prior years. With this model, the Company estimates marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default. The exposure at default is equal to the receivables’ expected outstanding principal, interest and other allowable balances. The Company estimates the exposure at default that the portfolio of loans would have in each possible moment of default, meaning for each possible scenario mentioned above. For credit cards loans the Company estimates an amortization scheme based on historical information. Also, for credit cards, since 2022, the Company has used, as applicable, credit conversion factor (“CCF”) estimated according to terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using Work-out and Chainladder approaches. This percentage depends on days past due, type of product and country, and is estimated by measuring an average of historical recovery rates from defaulted credits. The measurement of CECL is based on probability-weighted scenarios (probability of default for each month), in view of past events, current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions. The Company writes off loans receivable when the customer balance becomes 360 days past due. Accounts receivable To measure the CECL, accounts receivable have been grouped based on shared credit risk characteristics and the number of days past due. The Company has therefore concluded historical loss rates are a reasonable approximation of the expected loss rates for those assets. Accounts receivable are recovered over a period of 0-180 days, therefore, forecasted changes to economic conditions are not expected to have a significant effect on the estimate of the allowance for doubtful accounts. The Company writes off accounts receivable when the customer balance becomes 180 days past due. Credit card receivables and other means of payments Management assesses balances for credit losses included in credit card receivables and other means of payments, based on a review of the average period for which the financial asset is held, credit ratings of the financial institutions and probability of default and loss given default models. The Company has arrangements with some unaffiliated entities under which MercadoLibre users are able to fund their Mercado Pago accounts by depositing an equivalent amount with the unaffiliated entity. In some of these arrangements, MercadoLibre credits the Mercado Pago account before the unaffiliated entity transfers the funds to MercadoLibre to settle the transaction. The amounts pending settlement are recognized in the consolidated balance sheets as credit card receivables and other means of payments. Concentration of credit risk Cash and cash equivalents, restricted cash and cash equivalents, short-term and long-term investments, credit card receivables and other means of payments, accounts receivable and loans receivable are potentially subject to credit risk. However, there are not significant concentrations of credit risk arising from these financial instruments. Cash and cash equivalents, restricted cash and cash equivalents and investments are placed with several financial institutions and financial instruments from different countries that are highly liquid and highly rated. Accounts receivable are derived from revenue earned from customers located internationally and are settled through customer credit cards, debit cards and Mercado Pago accounts, with the majority of accounts receivable collected upon processing of credit card transactions. Due to the relatively small dollar amount of individual accounts receivable and loans receivable, the Company generally does not require collateral on these balances. During the years ended December 31, 2023 and 2022, no single customer accounted for more than 5% of net revenues. As of December 31, 2023 and 2022, no single customer, except for credit card processing companies, accounted for more than 5% of accounts receivable and loans receivable. Credit card receivables and other means of payments, net line of the consolidated balance sheets shows the Company’s credit exposure to not more than 10 entities in each of the countries where the Company offers its payments solution. USD Coin USD Coin (“USDC”) is accounted for as a financial instrument measured at fair value; one USDC can be redeemed for one U.S. dollar on demand from the issuer. USDC balance is included in current other assets of the consolidated balance sheets. 84 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Inventories Inventories, consisting of products and mobile point of sale (“MPOS”) devices available for sale, are accounted for using the weighted average price method, and are valued at the lower of cost or net realizable value. The Company accounts for an allowance for recoverability of inventories based on Management’s analysis of the inventories, aging, consumption patterns, as well as the lower of cost or net realizable value. Third-party sellers whose products are stored at the Company’s fulfillment centers, maintain the ownership of their inventories hence these products are not included in Company’s inventories balances. Customer crypto-assets safeguarding assets and liabilities Staff Accounting Bulletin (“SAB”) No. 121 expresses views of the SEC’s staff regarding the accounting for entities that have obligations to safeguard crypto-assets held for their platform users as well as any agent acting on its behalf in safeguarding the users’ crypto-assets. As long as an entity is responsible for safeguarding the crypto-assets held for its platform users, including maintaining the cryptographic key information necessary to access the crypto-assets, the SEC’s staff view is that the entity should present a liability on its balance sheet to reflect its obligation to safeguard the crypto-assets held for its platform users. The entity’s safeguarding liability is measured at initial recognition and each reporting date at the fair value of crypto-assets held for its platform users. The staff also believes it would be appropriate for the entity to recognize an asset at the same time that it recognizes the safeguarding liability, measured at initial recognition and each reporting date at the fair value of the crypto-assets held for its platform users. The Company operates a platform that allows its customers to access digital asset exchange and custody services provided by third-party Service Providers (“SPs”) to buy, sell and hold crypto-assets in an account in the customer’s name at the SPs. The Company does not provide execution, custody or safeguarding services for the customers’ crypto-assets and does not maintain (or ever have access to) the cryptographic key information and wallets necessary to access the crypto-assets, nor does the Company have any legal title or claim to those crypto-assets. The SPs are responsible for maintaining the internal record-keeping of the customers’ crypto-assets, and for securing and protecting them from loss or theft. Even though the Company is not responsible for the custody or safeguarding of crypto-assets, the Company has concluded that it is in scope of SAB 121 as: (i) the Company designed the manner in which the crypto-assets are custodied and the manner in which Mercado Pago Platform (“MP Platform”) users are able to access their crypto-assets through the MP Platform, as well as through its agents; (ii) the MP Platform users must use the SPs designated by the Company in order to have the crypto-assets reflected in their Mercado Pago wallets; (iii) MP Platform users that have crypto-assets reflected in their Mercado Pago wallets must access their crypto-assets through the MP Platform; (iv) while MP Platform users do have a contractual relationship directly with the SPs, they are not able to provide transaction instructions directly to the SPs outside the MP Platform; and (v) the Company expects that it will be involved in resolving complaints from customers about their crypto-assets holding. As of December 31, 2023 and 2022, the fair value of the crypto-assets held in the customers’ names at the SPs that the Company recognized on its consolidated balance sheets for both the crypto-asset safeguarding liability and the corresponding safeguarding asset, which are included in “Customer crypto-assets safeguarding liabilities” and “Customer crypto-assets safeguarding assets,” respectively, was $ 34 million and $ 15 million, respectively, which consisted of $ 18 million and $ 6 million of Bitcoin, $ 7 million and $ 5 million of Ether, and $ 9 million and $ 4 million of other crypto-assets, respectively. Custody services of customers’ crypto-assets is provided by not more than 2 entities in each of the countries where the Company offers its digital assets feature as part of the Mercado Pago wallet. Property and equipment, net Property and equipment are recorded at their acquisition cost and depreciated over their estimated useful lives using the straight-line method. Repair and maintenance costs are expensed as incurred. Costs related to the planning and post implementation phases of website development are recorded as an operating expense. Direct costs incurred in the development phase of website are capitalized and amortized using the straight-line method over an estimated useful life of three years . During 2023 and 2022, the Company capitalized $ 240 million and $ 202 million , respectively. 85 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Operating lease right-of-use assets and operating lease liabilities The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, which is a non-monetary asset, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease, which is a monetary liability. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company uses incremental borrowing rates based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease prepaid payments made. In addition, the Company elected to not separate lease components, except for aircraft for which the Company allocates payments to the lease and other services components based on estimated stand-alone prices. The Company also elected to keep leases with an initial term of 12 months or less off of the balance sheet. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that the Company will exercise the option, the Company considers the option in determining the classification and measurement of the lease. The Company’s leases may include variable payments based on measures that include changes in price indices, market interest rates, or the level of sales at a physical store, which are expensed as incurred. The Company establishes assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are amortized over the lease period into cost of net revenues and operating expenses, and the recorded liabilities are accreted to the future value of the estimated retirement costs. Goodwill and intangible assets Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Intangible assets consist of customer lists, trademarks, licenses and others, non-solicitation, non-compete agreements and hubs network acquired in business combinations and valued at fair value at the acquisition date. Intangible assets with definite useful life are amortized over the period of estimated benefit to be generated by those assets and using the straight-line method; their estimated useful lives range from three to twelve years . Trademarks with indefinite useful life are not subject to amortization, but are subject to an annual impairment test, by comparing their carrying amount with their corresponding fair value. For any given intangible asset with indefinite useful life, if its fair value exceeds its carrying amount no impairment loss shall be recognized. Intangible assets at fair value The Company accounts for its digital assets, except for the USDC, as indefinite-lived intangible assets, in accordance with ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets. The Company has ownership of and control over its digital assets and uses third-party custodial services to store its digital assets. The Company’s digital assets are initially recorded at cost. Subsequently, they are measured at fair value with changes recognized in the consolidated statements of income, within the “General and administrative” line item. The Company determines the fair value of its digital assets in accordance with ASC 820, Fair Value Measurement. Please refer to Note 2 – Summary of significant accounting policies – Recently Adopted Accounting Standards for further detail on the adoption of Accounting Standard Update (“ASU”) 2023-08, pursuant to which the Company transitioned from a cost less impairment measurement for its digital assets to a fair value measurement. Impairment of long-lived assets The Company reviews long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The impairment evaluation is performed at the lowest level of identifiable cash flows independent of other assets. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such asset is considered to be impaired on this basis, the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of such asset. As of December 31, 2023 there were no events or changes in circumstances that indicate that the carrying value of an asset may not be recoverable. Impairment of goodwill and intangible assets with indefinite useful life Goodwill and intangible assets with indefinite useful life are reviewed at the end of the year for impairment or more frequently, if events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level (considering each segment of the Company as a reporting unit) by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of such reporting unit. As of December 31, 2023 and 2022, the Company elected to perform the quantitative impairment test for both goodwill and intangible assets with indefinite useful life. 86 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2023, the fair values of the reporting units were estimated using the income approach. Cash flow projections used were based on financial budgets approved by the board of directors. The Company uses weighted average cost of capital for each reporting unit in the range of 11.5 % to 21.1 %. Key drivers in the analysis include Average Selling Price (“ASP”), Take Rate defined as marketplace revenues as a percentage of Gross Merchandise Volume (“GMV”), Total Payment Volume Off Platform (“TPV Off”), Off Platform Take Rate defined as off platform revenues as a percentage of TPV Off, Wallet and Point TPV per Payer, Wallet Users over Total Population and Active Point devices. In addition, the analysis includes a business to e-commerce rate, which represents growth of e-commerce as a percentage of Gross Domestic Product, Internet penetration rates as well as trends in the Company’s market share. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired. No impairment loss has been recognized in the years ended December 31, 2023, 2022 and 2021 as Management’s assessment of the fair value of each reporting unit exceeds its carrying value. Income taxes The Company is subject to U.S. and foreign income taxes. The Company accounts for income taxes following the liability method of accounting which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s income tax expense consists of taxes currently payable, if any, plus the change during the period in the Company’s deferred tax assets and liabilities. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized. Accordingly, Management periodically assesses the need to establish a valuation allowance for deferred tax assets considering positive and negative objective evidence related to the realization of the deferred tax assets. In connection with this assessment, Management considers, among other factors, the nature, frequency, and magnitude of current and cumulative losses on an individual subsidiary basis, projections of future taxable income, the duration of statutory carryforward periods, as well as feasible tax planning strategies that would be employed by the Company to prevent tax loss carryforwards from expiring unutilized. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to global intangible low-taxed income (“GILTI”) as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company selected the period cost method. Accordingly, the Company was not required to record any impact in connection with the potential GILTI tax as of December 31, 2023 and 2022, respectively. Uncertainty in income taxes The Company recognizes, if any, uncertainty in income taxes by applying the accounting prescribed by U.S. GAAP, for which a more likely than not recognition threshold and measurement attribute for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return should be considered. It also provides guidance on derecognition, classification of a liability for unrecognized tax benefits, accounting for interest and penalties, accounting in interim periods and expanded income tax disclosures. The Company classifies interest and penalties, if any, within income tax expense, in the consolidated statements of income. The Company is subject to taxation in the U.S. and various foreign jurisdictions. The material jurisdictions that are subject to examination by tax authorities primarily include Argentina (for tax year 2017 onwards), the U.S. (for tax year 2020 onwards), and Brazil and Mexico (for tax year 2018 onwards). Tax incentives ICMS tax benefits eBazar.com.br Ltda., a Brazilian wholly-owned subsidiary of the Company, has ICMS (Imposto sobre Circulação de Mercadorias, Serviços de Transporte Interestadual, Intermunicipal e Comunicação) tax incentives granted by the State of Minas Gerais in the form of tax credits, through a special regime signed with the State by means of a term of agreement, which are aimed at implementing and expanding business in that State. The Company accounted for the tax benefit netting against cost of net revenues for $ 69 million, $ 36 million and $ 15 million for the years ended December 31, 2023, 2022 and 2021, respectively. Social Contribution on Gross Revenues Meli Developers Brasil Ltda., a Brazilian wholly-owned subsidiary of the Company which provides IT services, has been granted access to the Social Contribution on Gross Revenues (“CPRB” according to its Portuguese acronym) Regime, in accordance with Sections 7 to 9 of Law 12,546/2011, up to December 31, 2023. The CPRB Regime comprises the payment of social security contributions at a 4.5% rate over the gross revenues, as opposed to 20% over the compensation paid to employees. The Company accounted for the tax benefit netting against product and development technology expenses for $ 24 million and $ 9 million for the years ended December 31, 2023 and 2022, respectively ( no benefit accounted for during the year ended December 31, 2021). 87 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Derivative financial instruments The Company’s operations are in various foreign currencies and consequently are exposed to foreign currency risk. Additionally, the funding of its operations through variable rate financial debt makes the Company exposed to interest rate fluctuation risks. As a consequence, the Company uses derivative instruments to reduce the volatility of earnings and cash flows which were designated as hedges. All outstanding derivatives are recognized in the Company’s consolidated balance sheets at fair value except for the derivatives related to the Capped Call Transactions (as defined in Note 17 – Loans payable and other financial liabilities) which are recognized in equity at cost paid. The designated derivative’s gain or loss in a cash flow hedge is initially reported as a component of accumulated other comprehensive loss and is subsequently reclassified into the financial statement line item in which the variability of the hedged item is recorded in the period the forecasted transaction affects earnings. The designated derivative’s gain or loss in the net investment hedge is reported as a component of accumulated other comprehensive loss. The gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the same period that the interest expense affects earnings. Cash flows associated with the cash flow and net investment hedges are included in cash flows from investing activities on the consolidated statements of cash flows. Additionally, the Company uses swap contracts to hedge the interest rate and the foreign currency exposure of its fixed-rate, foreign currency financial debt issued by its non-US subsidiaries. The Company designated the swap contracts as fair value hedges. The derivative’s gain or loss is reported in the consolidated statements of income in the same line items as the change in the value of the financial debt due to the hedged risks. Since the terms of the interest rate swaps match the terms of the hedged debt, changes in the fair value of the interest rate swaps are offset by changes in the fair value of the hedged debt attributable to changes in interest rates. Accordingly, the net impact in current earnings is that the interest expense associated with the hedged debt is recorded at the floating rate. Cash flows associated with the fair value hedges are included in cash flows from investing activities on the consolidated statements of cash flows. Finally, the Company also hedges its economic exposure to foreign currency risk related to foreign currency denominated monetary assets and liabilities with foreign derivative currency contracts and interest rate fluctuation with swap contracts which were not designated as hedges. Accordingly, these outstanding non-designated derivatives are recognized in the Company’s consolidated balance sheets at fair value, and changes in fair value from these contracts are recorded in other income (expense), net in the consolidated statements of income. Funds payable to customers Funds payable to customers relate to the Company’s payments solution and are originated by the amounts due to users held by the Company. Funds, net of any amount due to the Company by the user, are maintained in the user’s current account until withdrawal is requested by the user. See Note 3 – Fintech Regulations of these audited consolidated financial statements for additional information on regulations over Mercado Pago business. Amounts payable due to credit and debit card transactions Amounts payable due to credit and debit card transactions are originated by purchase transactions carried out by the Company’s customers with debit and credit cards issued by Mercado Pago. Provision for buyer protection program The buyer protection program (“BPP”) is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance for all transactions completed through the Company’s online payment solution Mercado Pago (except for certain excluded categories). The Company’s BPP provides protection to consumers by reimbursing them for the total value of a purchased item and the value of any shipping service paid if it does not arrive, arrives incomplete or damaged, does not match the seller’s description or if the buyer regrets the purchase. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances, the Company enters into insurance contracts with third-party insurance companies in order to cover contingencies that may arise from the BPP. Provisions for BPP represent the Company’s estimate of probable losses based on its historical experience. The charge for the provision for BPP is recognized in sales and marketing expense line of the consolidated statements of income. See Note 15 – Commitments and Contingencies of these audited consolidated financial statements for further details. Share-based payments The liability related to the variable portion of the long term retention programs is remeasured at fair value. See Note 16 – Long term retention program of these audited consolidated financial statements for more details. Treasury stock Equity instruments of the Company that are repurchased by the Company are recognized at cost and deducted from equity. If the repurchase of the Company’s stock is carried out at a price significantly in excess of the current market price, there is a presumption that the repurchase price includes amounts attributable to items other than the stock repurchased; therefore, the Company uses the quoted market price of the common stock for purposes of determining the fair value of the treasury stock. See Note 25 – Share repurchase program of these audited consolidated financial statements for further details. 88 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Comprehensive income Comprehensive income is comprised of two components, net income and other comprehensive income (loss). This last component is defined as all other changes in the equity of the Company that result from transactions other than with shareholders. Other comprehensive income (loss) includes the cumulative adjustment relating to the translation of the financial statements of the Company’s foreign subsidiaries, unrealized gains and losse s on investments classified as available-for-sale, o n hedging activities and the corresponding tax effects. Total comprehensive income for the years ended December 31, 2023, 2022 and 2021 amounted to $ 1,161 million, $ 533 million and $ 36 million, resp ectively. Foreign currency translation All of the Company’s foreign operations have determined the local currency to be their functional currency, except for Argentina, which has used the U.S. dollar as its functional currency since July 1, 2018. Accordingly, the foreign subsidiaries with local currency as functional currency translate assets and liabilities from their local currencies into U.S. dollars by using year-end exchange rates while income and expense accounts are translated at the average monthly rates in effect during the year, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of the transaction are used. The resulting translation adjustment is recorded as a component of other comprehensive income (loss). Gains and losses resulting from transactions denominated in non-functional currencies are recognized in earnings. Net foreign currency transaction results are included in the consolidated statements of income under the caption “Foreign currency losses, net”. Argentine currency status and macroeconomic outlook As of July 1, 2018, the Company transitioned its Argentine operations to highly inflationary status in accordance with U.S. GAAP, and changed the functional currency for Argentine subsidiaries from Argentine Pesos to U.S. dollars, which is the functional currency of their immediate parent company. Argentina’s annual inflation rate for the years ended December 31, 2023, 2022 and 2021 was 211.4 %, 94.8 % and 50.9 %, respectively. The Company uses Argentina’s official exchange rate to account for transactions in the Argentine segment, which as of December 31, 2023,2022 and 2021 was 808.45 , 177.16 and 102.72 , respectively, against the U.S. dollar. For the years ended December 31, 2023, 2022 and 2021, Argentina’s official exchange rate against the U.S. dollar increased 356.3 %, 72.5 % and 22.1 %, respectively. On December 10, 2023, a new Government took office with the aim to boost a deregulation of the Argentine economy and a reduction of the fiscal deficit mainly through cutting spending (including a reduction of different type of subsidies). On December 13, 2023, the Argentine Government devalued the Argentine Peso from 366.45 to 799.95, which has generated an acceleration of the monthly inflation rate (25.5% in December 2023 and 20.6% in January 2024). The comprehensive program pursued by the new Government includes reforms in the economy, justice, labor and social security, and tax among other areas which should be passed by the Congress. The Company is permanently monitoring the evolution of the aforementioned program to determine the possible impacts that these new measures could have on the Company´s business and financial position. The following table sets forth the assets, liabilities and net assets of the Company’s Argentine subsidiaries and consolidated VIEs, before intercompany eliminations, as of December 31, 2023 and December 31, 2022: December 31, 2023 2022 (In millions) Assets $ 3,298 $ 3,238 Liabilities 1,878 2,419 Net assets $ 1,420 $ 819 The following table provides information relating to net revenues and direct contribution (see Note 9 – Segments of these audited consolidated financial statements for definition of direct contribution) for the years ended December 31, 2023, 2022 and 2021 of the Company’s Argentine subsidiaries and consolidated VIEs: Year Ended December 31, 2023 2022 2021 (In millions) Net revenues $ 3,240 $ 2,500 $ 1,531 Direct contribution 1,403 1,012 533 89 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Argentine exchange regulations In the second half of 2019, the Argentine government instituted exchange controls restricting the ability of companies and individuals to exchange Argentine Pesos for foreign currencies and their ability to remit foreign currency out of Argentina. An entity’s authorization request to the Central Bank of Argentina (“CBA”) to access the official exchange market to make foreign currency payments may be denied depending on the circumstances. As a result of these exchange controls, markets in Argentina developed trading mechanisms, in which an entity or individual buys U.S. dollar denominated securities in Argentina (i.e. shares, sovereign debt) using Argentine Pesos, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as “Blue Chip Swap Rate”). The Blue Chip Swap Rate has diverged significantly from Argentina’s official exchange rate (commonly known as exchange spread). In recent years, the Blue Chip Swap Rate has been higher than Argentina’s official exchange rate. As of December 31, 2023 and 2022, the spread of the Blue Chip Swap was 20.4 % and 94.2 %, respectively (see Note 25 – Share repurchase program of these audited consolidated financial statements.) As of the issuance date of these audited consolidated financial statements the spread of the Blue Chip Swap was 30.9 %. As part of the exchange controls, since 2019, the Argentine government imposes a tax on the acquisition of foreign currency through the official exchange market in certain circumstances. On July 24, 2023, through the Executive Power Decree No. 377/2023, the Argentine government extended the application of this tax to the following cases: (i) certain services acquired from abroad or services rendered by foreign residents in Argentina (i.e. technical, legal, accounting, management, advertising, engineering, audiovisual services, among others), which will be subject to a 25% tax rate, (ii) freight and other transportation services for import and export of goods, which will be subject to a 7.5% tax rate; and (iii) imported goods, which will be subject to a 7.5% tax rate, with certain exemptions (such as fuels and products of the basic food basket). Revenue recognition Revenues are recognized when control of the promised services or goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for them. Contracts with customers may include promises to transfer multiple services including discounts on current or future services. Determining whether services are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Revenues are recognized when each performance obligation is satisfied by transferring the promised good or service to the customer according to the following criteria described for each type of service: Commerce transactions ■ Revenues from intermediation services derived from final value fees and flat fees paid by sellers. Revenues related to final value fees and flat fees are recognized at the time that the transaction is successfully concluded (which occurs when the marketplace transaction is confirmed right after processing the payment). ■ Revenues from shipping services are generated when a buyer elects to receive the item through the Company’s shipping service and the service is rendered to the customer. When the Company acts as an agent, revenues derived from the shipping services are recognized at the time the transaction is successfully concluded for third-party sales, and presented net of the transportation costs charged by third-party carriers. When the Company acts as principal, revenues derived from the shipping services are recognized upon delivery of the good to the customer, and presented on a gross basis. As part of the Company’s business strategy, shipping costs may be fully or partially subsidized at the Company’s option. In addition, the Company generates storage fees, which are charged to sellers for utilizing the Company’s fulfillment facilities, and are recognized over time. ■ Revenues from inventories sales are generated when control of the good is transferred to the Company’s customers, which occurs upon delivery to the customer. ■ Revenues from advertising services provided to sellers, vendors, brands and others, through performance products (Product Ads and Brand Ads) and display formats, are recognized based on the number of clicks and impressions, respectively. ■ Classified advertising services are recorded as revenue ratably during the listing period. Those fees are charged at the time the listing is uploaded onto the Company’s platform and are not subject to successful sale of the items listed. 90 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Fintech transactions ■ Revenues from commissions the Company charges for transactions off-platform derived from the use of the Company’s payments solution or Mercado Pago credit and debit cards, and revenues derived from insurtech transactions, are recognized once the transaction is considered completed, when the payment is processed by the Company, net of rebates granted. The Company also earns revenues as a result of offering financing to its Mercado Pago users, either when the Company finances the transactions directly or when the Company sells the corresponding financial assets to financial institutions. When the Company finances the transactions directly, the financing component is separated from the revenue amount and is recognized over the financing period using the interest method. When the Company sells the corresponding financial assets to financial institutions, the result of such sale is accounted for as financing revenues net of financing costs at the time of transfer of the financial assets. The aggregate gain included in “Fintech services” revenues arising from financing transactions and sales of financial assets, net of the costs recognized on sale of credit card receivables, is $ 1,440 million, $ 1,054 million and $ 575 million, for the years ended December 31, 2023, 2022 and 2021, respectively. ■ Revenues from sale of mobile point of sale products are recognized when control of the good is transferred. ■ Revenues from interest earned on loans and advances granted to merchants and consumers, and credit card transactions are recognized over the period of the loan and are based on effective interest rates. The Company places loans on non-accrual status at 90 days past due. When more than one service is included in one single arrangement with the same customer, the Company recognizes revenue according to multiple element arrangements accounting, distinguishing between each of the services provided and allocating revenues based on their respective estimated selling prices. Benefits granted to customers under the Company’s loyalty program are accounted for as material rights and therefore the allocated amount of revenue is deferred until the customers exercise their material rights or until expiration, whichever occurs first. Revenues recognized under ASC 606 “Revenue from contracts with customers” amounted to $ 10,487 million, $ 7,450 million and $ 5,710 million for the years ended December 31, 2023, 2022 and 2021, respectively. Revenues recognized under ASC 860 “Transfers and Servicing” and ASC 310 “Receivables” amounted to $ 3,986 million, $ 3,087 million and $ 1,359 million for the years ended December 31, 2023, 2022 and 2021, respectively. Contract balances Timing of revenue recognition may differ from the timing of invoicing to customers. Receivables represent amounts invoiced and revenue recognized prior to invoicing when the Company has satisfied the performance obligation and has the unconditional right to payment. Accounts receivable and credit card receivables and other means of payments are presented net of allowance for doubtful accounts and chargebacks of $ 42 million and $ 25 million as of December 31, 2023 and 2022, respectively. See Note 7 – Loans receivable, net of these audited consolidated financial statements for information related to the allowance for doubtful accounts with respect to the Company’s loans receivable. Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the year in accordance with ASC 606. Due to the generally short-term duration of contracts, the majority of the performance obligations are satisfied in the following months. Deferred revenue as of December 31, 2022 was $ 44 million , of which substantially all was recognized as revenue during the year ended December 31, 2023. As of December 31, 2023, total deferred revenue was $ 29 million , mainly due to fees related to classified advertising services billed and loyalty programs that are expected to be recognized as revenue in the coming months. Sales tax The Company’s subsidiaries in Brazil, Argentina and Colombia are subject to certain sales taxes which are classified as cost of net revenues and totaled $ 1,119 million, $ 790 million and $ 569 million for the years ended December 31, 2023, 2022 and 2021, respectively. Brazilian Tax Reform In December 2023 the Brazilian National Congress approved the Tax Reform that will change the consumption taxation (goods and services), replacing ICMS (State tax) and ISS (Municipal tax) by IBS (Goods and Services Tax) and PIS/COFINS (Federal taxes) by CBS (Goods and Services Federal Tax). Overall, IBS and CBS will have a single flat rate, around 27% according to current studies, full non-cumulative system (taxpayer full entitlement to recover taxes paid in the previous transactions), and a 7-year transition, starting in 2026. Also, this change will simplify the Brazilian Tax Legislation, reducing tax litigation between taxpayers and the Government. The next step is to start discussions over the supplementary regulation that will detail the new tax system. These discussions should take place in the Brazilian Congress in 2024 and will enable the taxpayers to better understand the impacts of all changes in their operations. 91 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Advertising costs The Company expenses the costs of advertisements in the period during which the advertising space or airtime is used as sales and marketing expense. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally over the greater of the ratio of the number of clicks delivered over the total number of contracted clicks, on a pay-per-click basis, or on a straight-line basis over the term of the contract. Advertising costs for the years ended December 31, 2023, 2022 and 2021 amounted to $ 787 million, $ 593 million and $ 531 million, respectively. Recently Adopted Accounting Standards On October 28, 2021, the Financial Accounting Standards Board (“FASB”) issued the ASU 2021-08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. The amendments in this update improve comparability for the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination by specifying for all acquired revenue contracts regardless of their timing of payment (1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities. The amendments provide consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The Company adopted this standard effective as of January 1, 2023 and it did not have a material impact on the Company’s financial statements. On March 31, 2022, the FASB issued the ASU 2022-02 “Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses”, which eliminates the accounting guidance on TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company adopted this standard effective as of January 1, 2023 and it did not have a material impact on the Company’s financial statements. On September 29, 2022, the FASB issued the ASU 2022-04 “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. The amendments in this update require entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about their obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The Company adopted this standard effective as of January 1, 2023, except for the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The guidance should be applied retrospectively to all periods in which a balance sheet is presented, except for the rollforward requirement, which should be applied prospectively. The Company and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of the Company’s suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in the Company’s payment policies. Suppliers’ voluntary inclusion of invoices in the SFP does not change the Company’s payment terms, the amounts paid or liquidity. The supplier invoices that have been confirmed as valid under the program require payment in full according to the terms established in the Company’s payment policies (a range of 60 and 90 days from the invoicing date). There are no assets pledged as security or other forms of guarantees provided for the committed payment to the financial institution. The Company has no economic interest in a supplier’s decision to participate in the SFP and has no financial impact in connection with the SFP. As of December 31, 2023 and 2022, the obligations outstanding that the Company has confirmed as valid to the financial institutions amounted to $ 381 million and $ 227 million, respectively, and are included in the consolidated balance sheets within accounts payable and accrued expenses line. On December 13, 2023, the FASB issued the ASU 2023-08 “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets”. The amendments in this update improve the accounting for and disclosure of certain crypto assets. It applies to assets that meet all of the following criteria: meet the definition of intangible assets as defined in the Codification, do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets, are created or reside on a distributed ledger based on blockchain or similar technology, are secured through cryptography, are fungible and are not created or issued by the reporting entity or its related parties. An entity is required to subsequently measure assets that meet those criteria at fair value with changes recognized in net income each reporting period. The amendments in this update are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If the Company adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The amendments require a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which the Company adopts the amendments. The Company adopted this standard effective January 1, 2023, resulting in an increase of the carrying value of the digital assets of $ 15 million, a gain of $ 14 million recognized within the “General and administrative” line item and an increase in the beginning balance of retained earnings of $ 1 million. The digital assets are presented within “Intangible assets at fair value” in the consolidated balance sheets. 92 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table presents the digital assets name, cost basis, fair value, and number of units for each significant digital asset holding as of December 31, 2023: Digital asset name Cost basis Fair value Number of units held (in millions, except for number of units held) Bitcoin $ 6 $ 17 412.7 Ether 3 7 3,041.6 The following table summarizes the digital assets rollforward activity during the year ended December 31, 2023: December 31, 2023 (in millions) Balance at beginning of year (1) $ 9 Adoption of ASU 2023-08 1 Gains included in net income 14 Balance at end of year (2) $ 24 (1) Included in Intangible assets, net as of December 31, 2022. (2) Included in Intangible assets at fair value as of December 31, 2023. The method used by the Company for determining the cost basis of its digital assets is the weighted average price method. Accounting Pronouncements Not Yet Adopted On November 27, 2023, the FASB issued the ASU 2023-07 “Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures”. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance should be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements. On December 14, 2023, the FASB issued the ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this update provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information, requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The other amendments in this update improve the effectiveness and comparability of disclosures by adding disclosures of pretax income (or loss) and income tax expense (or benefit) and removing disclosures that no longer are considered cost beneficial or relevant. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The guidance should be applied on a prospective basis while retrospective application is permitted. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements. NOTE 3. FINTECH REGULATIONS New regulations issued by the Central Banks and other regulators of the countries where the Company operates its Fintech business are described below. Brazil During March 2022, the Central Bank of Brazil announced new rules for payment institutions based on their size and complexity and raised standards for required capital. The new framework, which was effective starting in July 2023 with full implementation by January 2025, will extend the application of the rule regarding proportionality of regulatory requirements (currently applicable to conglomerates of financial institutions) to financial conglomerates led by payment institutions. The new rules require a gradual increase in regulatory capital requirements for the Company’s regulated Brazilian subsidiaries until 2025: 6.75% from July 2023, 8.75% from January 2024 and 10.50% from January 2025. 93 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Argentina On December 30, 2021, the board of the CBA issued a regulation by which financial institutions must set up a reserve of 100 % of the customer funds deposited by payment service providers that offer payment accounts. According to this new regulation, from January 1, 2022, 100 % of the customer funds that have not been invested by users in Mercado Fondo, have remained deposited at financial institutions, and such financial institutions deposited 100% of those funds at the CBA, and available for users. On September 22, 2022, the CBA modified the aforementioned resolution and established that financial institutions in which the Company deposits customer funds may invest up to 45 % of funds that have not already been invested by users in Mercado Fondo in Argentine, peso-denominated treasury bonds due May 23, 2027. As a result of the amended regulation, the Company withdrew on September 5, 2022 the cases it had originally filed challenging the December 30, 2021 regulation. On August 24, 2023, the CBA issued Communication “A” 7825, which states that payment service providers who offer payment accounts (“PSPOCP” according to its Spanish acronym) must allocate in full to their clients any compensation received from financial institutions for investing clients’ funds held in deposit accounts into Argentine treasury bonds. Since August 25, 2023, MercadoLibre S.R.L. is not receiving any compensation from financial institutions for clients’ funds held in deposit account. As a consequence, Communication “A” 7825 has no applicable effect for MercadoLibre S.R.L. On September 14, 2023, the CBA issued Communication “A” 7861 establishing that starting on December 1, 2023, DEBIN (debit immediate), the main and simple funding source of Mercado Pago users’ accounts, will be suspended and replaced with a pull transfer method that requires the consent of the client outside of Mercado Pago’s environment before the first use. After several extensions, on January 11, 2024, the CBA issued a new regulation establishing that the suspension of DEBIN must be effective starting on April 30, 2024. Mexico On April 29, 2022, MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico, a Mexican subsidiary obtained the final approval by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or the “CNBV”) to operate as an Electronic Payment Institution (Institución de Fondos de Pago Electrónico or “IFPE”, as referred to by the Financial Technology Institutions Act) which enables that entity to issue, manage, redeem and make electronic transfers of money on behalf of its clients, through computer applications, interfaces, web sites or any other means of electronic or digital communication. MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico became a regulated financial entity towards third parties, effective on May 11, 2022 duly published in the Official Gazette, and is subject to the supervision and jurisdiction of the relevant Mexican financial regulators, including but not limited to the National Commission for the Protection and Defense of Users of Financial Services, CNBV and the Central Bank of Mexico. Amongst the regulatory obligations to which Electronic Payment Institutions are subject, the following are noteworthy: a) maintain minimum capital requirements, b) maintain sufficient reserves in high-quality liquid assets (e.g. cash, treasury bills, etc.), so as to be able to redeem, on par, the funds held on behalf of the clients, c) comply with anti-money laundering and countering of terrorism financing regulations, d) develop and maintain sound cybersecurity and information security policies, including but not limited to the performance of recurrent vulnerability tests and the deployment of strict infrastructure controls. Chile On October 12, 2022, the Chilean Congress approved the Fintech and Open-Banking Law Project, which was published on January 4, 2023, and came into effect on February 3, 2023. This law established a regulatory framework for certain technological financial services that did not have their own legal framework. These services are: (i) Alternative Transaction Systems, (ii) Crowdfunding Financing Platforms, (iii) Financial Instrument Intermediation, (iv) Order Routing, (v) Credit Advisory, and (vi) Investment Advisory. Pursuant to this law, Mercado Pago Crypto S.A. shall file a license request with the Commission for the Financial Market (“CMF” according to its Spanish acronym) in order to continue offering Order Routing services through the “buy, hold and sell” product launched in 2023 in collaboration with Ripio Chile SpAp. The rules governing the specifics of this filing and the license that CMF must grant, were issued on January 12, 2024, giving Mercado Pago Crypto S.A. until February 2025 to file the license request. In addition, an Open Finance System is created to allow financial service providers to exchange customer financial information. The CMF has until June 3, 2024 to issue secondary regulation. On April 27, 2023, the CMF authorized the merger of Mercado Pago Operadora S.A. (formerly known as “MercadoPago S.A.”) and Red Procesadora de Pagos Limitada, effective on May 1, 2023. This merger allows Mercado Pago Operadora S.A. to extend the processing of transactions and enable businesses and entrepreneurs in Chile the opportunity to access the Company’s ecosystem of Fintech services. Colombia In June 2023, MercadoPago S.A. Compañía de Financiamiento obtained a license to operate as a financial institution in Colombia, and therefore is able to offer credits, digital accounts, investments and prepaid cards. We expect this new company to be operational by the first quarter of 2024 and be subject to minimum capital, reporting, consumer protection and risk management requirements. 94 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Uruguay In July 2023, MercadoPago Uruguay S.R.L. obtained the approval by the BCU to operate as an Electronic Money Issuing Institution (“IEDE”) facilitating electronic money transfers. On October 1, 2023, MercadoPago Uruguay S.R.L. started operations, and since then, must adhere to regulations regarding the placement of user funds, including the obligation to deposit and maintain these funds in designated local bank accounts to guarantee the availability of balances in each user’s digital account. In October 2023, MercadoPago Uruguay S.R.L. was authorized by the BCU, subject to the terms of the regulations, to invest its user funds in short-term investments, including “overnight” bank deposits, leveraging results and assuming associated risks. Peru On November 10, 2022, the Central Reserve Bank of Peru (“BCRP”) enacted regulations related to the card payment processing system that applies to issuers, acquirers and payment facilitators. On January 27, 2023, MercadoPago Perú S.R.L. was registered by the BCRP as a payment facilitator entity, allowing it to (a) affiliate merchants to the card payment system, (b) offer POS, and (c) transmit or process card payment orders and /or participate in the process of settlement to the merchants affiliated. NOTE 4. NET INCOME PER SHARE Basic earnings per share for the Company’s common stock is computed by dividing, net income for the period by the weighted average number of common shares outstanding during the year. In August, 2018, the Company issued an aggregate principal amount of $ 880 million of 2.00 % Convertible Senior Notes due 2028 (“2028 Notes”) which were fully converted or redeemed in November 2023. The conversion of these notes was included in the calculation for diluted earnings per share utilizing the “if converted” method for the year ending December 31, 2023 and 2022. For the year ended 2021, the effect of the conversion of the 2028 Notes would have been antidilutive and, as a consequence, it was not factored into the calculation of diluted earnings per share. Accordingly, conversion of these 2028 Notes is not assumed for purposes of computing diluted earnings per share if the effect is antidilutive. The denominator for diluted net income per share for the years ended on December 31, 2023, 2022 and 2021 did not include any effect from the capped call transactions entered into by the Company with certain financial institutions with respect to shares of the Company’s common stock (“2028 Notes Capped Call Transactions”), which were settled on September 1, 2023, because it would be antidilutive. See Note 17 – Loans payable and other financial liabilities to these consolidated financial statements for more details regarding the 2028 Notes and the 2028 Notes Capped Call Transactions. Net income per share of common stock is as follows for the years ended December 31, 2023, 2022 and 2021: . Year Ended December 31, 2023 2022 2021 Basic Diluted Basic Diluted Basic Diluted Net income per common share (1) $ 19.64 $ 19.46 $ 9.57 $ 9.53 $ 1.67 $ 1.67 Numerator (in millions): Net income $ 987 $ 987 $ 482 $ 482 $ 83 $ 83 Effect of dilutive 2028 Notes — 6 — 7 — — Net income available to common stock $ 987 $ 993 $ 482 $ 489 $ 83 $ 83 Denominator: Weighted average of common stock outstanding for earnings per share 50,262,302 50,262,302 50,345,353 50,345,353 49,802,993 49,802,993 Adjustment for assumed conversions — 744,558 — 990,268 — — Adjusted weighted average of common stock outstanding for earnings per share 50,262,302 51,006,860 50,345,353 51,335,621 49,802,993 49,802,993 (1) Figures have been calculated using non-rounded amounts. 95 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 5. CASH, CASH EQUIVALENTS, RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENTS The composition of cash, cash equivalents, restricted cash and cash equivalents, short-term and long-term investments is as follows: December 31, 2023 2022 (In millions) Cash in bank accounts $ 1,458 $ 1,160 Money market 639 599 Time deposits 367 130 U.S. government debt securities 60 21 Foreign government debt securities 32 — Total cash and cash equivalents 2,556 1,910 Securitization transactions (1) 355 459 Foreign government debt securities (Central Bank of Brazil mandatory guarantee) 114 158 Cash in bank accounts (Argentine Central Bank regulation) 309 496 Cash in bank accounts (Mexican National Banking and Securities Commission regulation) 91 9 Time deposits (Mexican National Banking and Securities Commission regulation) 314 239 Cash in bank accounts (Chilean Commission for the Financial Market regulation) 42 4 Time deposits (Chilean Commission for the Financial Market regulation) 54 49 Money market (Secured lines of credit guarantee) 7 33 Cash in bank accounts (Central Bank of Uruguay mandatory guarantee) 1 — Time deposits (Central Bank of Uruguay mandatory guarantee) 1 — Money market (Central Bank of Uruguay mandatory guarantee) 2 — Foreign government debt securities (Central Bank of Uruguay mandatory guarantee) 2 — Cash in bank accounts (Financial Superintendence of Colombia regulation) — 1 Money market (Financial Superintendence of Colombia regulation) — 5 Total restricted cash and cash equivalents 1,292 1,453 Total cash, cash equivalents, restricted cash and cash equivalents (2) $ 3,848 $ 3,363 U.S. government debt securities $ 1,009 $ 558 Foreign government debt securities (3) 2,451 1,342 Time deposits (4) 15 439 Corporate debt securities 5 — Total short-term investments $ 3,480 $ 2,339 U.S. government debt securities $ — $ 175 Foreign government debt securities 56 70 Securitization transactions (1) 23 21 Corporate debt securities 25 — Equity securities held at cost 58 56 Total long-term investments $ 162 $ 322 (1) Investments from securitization transactions are restricted to the payment of amounts due to third-party investors. (2) Cash, cash equivalents, restricted cash and cash equivalents as reported in the consolidated statements of cash flows. (3) As of December 31, 2023 and 2022, includes $ 2,283 million and $ 1,219 million considered restricted due to Central Bank of Brazil mandatory guarantee. Also, as of December 31, 2023, includes $ 6 million that guarantees a line of credit and is considered restricted. (4) As of December 31, 2023 and 2022, the time deposits in excess of $ 100 thousand, are in majority foreign deposits. 96 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 6. BALANCE SHEET COMPONENTS Accounts receivable, net December 31, 2023 2022 (In millions) Accounts receivable $ 177 $ 144 Allowance for doubtful accounts ( 21 ) ( 14 ) Accounts receivable, net $ 156 $ 130 The following table summarizes the allowance for doubtful accounts activity during the years ended December 31, 2023, 2022 and 2021: Year ended December 31, 2023 2022 2021 (In millions) Balance at beginning of year $ 14 $ 8 $ 7 Net charged to Net income 22 9 4 Charges utilized/ Currency translation adjustments/ Write-offs and other adjustments ( 15 ) ( 3 ) ( 3 ) Balance at end of year $ 21 $ 14 $ 8 Credit card receivables and other means of payments, net December 31, 2023 2022 (In millions) Credit card receivables and other means of payments $ 3,653 $ 2,957 Allowance for chargebacks ( 17 ) ( 11 ) Allowance for doubtful accounts ( 4 ) — Credit card receivables and other means of payments, net $ 3,632 $ 2,946 97 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following tables summarize the allowance for chargebacks and the allowance for doubtful accounts activity during the years ended December 31, 2023, 2022 and 2021: Year ended December 31, 2023 2022 2021 Allowance for chargebacks (In millions) Balance at beginning of year $ 11 $ 14 $ 18 Net charged to Net income 35 13 24 Charges utilized/ Currency translation adjustments/ Write-offs and other adjustments ( 29 ) ( 16 ) ( 28 ) Balance at end of year $ 17 $ 11 $ 14 Year ended December 31, 2023 2022 2021 Allowance for doubtful accounts (In millions) Balance at beginning of year $ — $ 17 $ 24 Net charged (credited) to Net income 4 ( 2 ) ( 3 ) Charges utilized/ Currency translation adjustments/ Write-offs and other adjustments — ( 15 ) ( 4 ) Balance at end of year $ 4 $ — $ 17 Other assets December 31, 2023 2022 (In millions) VAT credits $ 25 $ 17 Income tax credits 26 65 Sales tax credits 54 30 Advance to ATM providers 14 38 Advance to suppliers 46 17 Derivative instruments 1 1 Tax credit from promotional regime in Argentina 15 15 Incentives to be collected 35 59 Receivables with suppliers 3 9 Prepaid expenses 27 38 Other 31 15 Current other assets $ 277 $ 304 December 31, 2023 2022 (In millions) Judicial deposits $ 8 $ 205 VAT credits 2 12 Income tax credits 4 22 Derivative instruments 22 — Other 32 17 Non current other assets $ 68 $ 256 98 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Property and equipment, net Estimated useful life (years) December 31, 2023 2022 (In millions) Equipment 3 - 5 $ 248 $ 254 Land and building 50 (1) 145 118 Furniture and fixtures 3 - 10 835 598 Software 3 694 647 Vehicles 4 151 59 Subtotal 2,073 1,676 Accumulated depreciation ( 823 ) ( 683 ) Property and equipment, net $ 1,250 $ 993 (1) Estimated useful life attributable to “building”. Year Ended December 31, 2023 2022 2021 (In millions) Cost of net revenues $ 149 $ 101 $ 50 Product and technology development 232 182 83 Sales and marketing 7 5 2 General and administrative 16 21 10 Depreciation and amortization $ 404 $ 309 $ 145 Other liabilities December 31, 2023 2022 (In millions) Deferred revenue $ 29 $ 44 Contingent considerations and escrows from acquisitions 1 11 Customer advances 36 37 Derivative instruments 21 17 Other 32 20 Current other liabilities $ 119 $ 129 December 31, 2023 2022 (In millions) Provisions and contingencies $ 124 $ 53 Contingent considerations and escrows from acquisitions 8 7 Joint venture — 3 Incentives collected in advance 9 13 Derivative instruments 10 7 Salaries and social security payable — 6 Other 49 6 Non current other liabilities $ 200 $ 95 99 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 7. LOANS RECEIVABLE, NET December 31, 2023 2022 (In millions) Loans receivable $ 3,671 $ 2,778 Allowance for doubtful accounts ( 1,042 ) ( 1,074 ) Current loans receivable, net $ 2,629 $ 1,704 December 31, 2023 2022 (In millions) Loans receivable $ 107 $ 62 Allowance for doubtful accounts ( 42 ) ( 30 ) Non current loans receivable, net $ 65 $ 32 The Company classifies loans receivable as “On-line merchant”, “Consumer”, “In-store merchant” and “Credit cards”. As of December 31, 2023 and December 31, 2022, Loans receivable, net were as follows: December 31, 2023 Loans receivable Allowance for doubtful accounts Loans receivable, net (In millions) On-line merchant $ 429 $ ( 119 ) $ 310 Consumer 1,808 ( 592 ) 1,216 In-store merchant 332 ( 137 ) 195 Credit cards 1,209 ( 236 ) 973 Total $ 3,778 $ ( 1,084 ) $ 2,694 December 31, 2022 Loans receivable Allowance for doubtful accounts Loans receivable, net (In millions) On-line merchant $ 394 $ ( 120 ) $ 274 Consumer 1,568 ( 614 ) 954 In-store merchant 267 ( 145 ) 122 Credit cards 611 ( 225 ) 386 Total $ 2,840 $ ( 1,104 ) $ 1,736 The allowance for doubtful accounts with respect to the Company’s loans receivable amounts to $ 1,102 million and $ 1,112 million as of December 31, 2023 and 2022, respectively, which includes $ 18 million and $ 8 million related to unused agreed loan commitment on credit cards portfolio presented in Other liabilities of the consolidated balance sheets as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the Company is exposed to off-balance sheet unused agreed loan commitment on credit cards portfolio which expose the Company to credit risks for $ 934 million and $ 271 million, respectively. For the years ended December 31, 2023 and 2022 the Company recognized in Provision for doubtful accounts $ 8 million and $ 8 million as expected credit losses, respectively. 100 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following tables summarize the allowance for doubtful accounts activity during the years ended December 31, 2023, 2022 and 2021: December 31, 2023 On-line merchant Consumer In-store merchant Credit cards Total (In millions) Balance at beginning of year $ 120 $ 614 $ 145 $ 225 $ 1,104 Net charged to Net Income 104 572 129 211 1,016 Currency translation adjustments 6 6 3 18 33 Write-offs ( 111 ) ( 600 ) ( 140 ) ( 218 ) ( 1,069 ) Balance at end of year $ 119 $ 592 $ 137 $ 236 $ 1,084 December 31, 2022 On-line merchant Consumer In-store merchant Credit cards Total (In millions) Balance at beginning of year $ 79 $ 232 $ 76 $ 48 $ 435 Net charged to Net Income 109 600 139 210 1,058 Currency translation adjustments 1 ( 9 ) ( 1 ) ( 1 ) ( 10 ) Write-offs ( 69 ) ( 209 ) ( 69 ) ( 32 ) ( 379 ) Balance at end of year $ 120 $ 614 $ 145 $ 225 $ 1,104 The increase in write-offs, for the year ended December 31, 2023 compared to the same period in 2022, is mainly generated by higher originations of loans receivable in 2022, compared to the same period in 2021, generating a higher write-offs effect in the year ended December 31, 2023. December 31, 2021 On-line merchant Consumer In-store merchant Credit cards Total (In millions) Balance at beginning of year $ 20 $ 45 $ 13 $ — $ 78 Net charged to Net Income 75 234 74 51 434 Currency translation adjustments ( 3 ) ( 7 ) ( 3 ) — ( 13 ) Write-offs ( 13 ) ( 40 ) ( 8 ) ( 3 ) ( 64 ) Balance at end of year $ 79 $ 232 $ 76 $ 48 $ 435 The Company closely monitors credit quality for all loans receivable on a recurring basis to assess and manage its exposure to credit risk. To assess merchants and consumers seeking a loan under the Mercado Credito solution, the Company uses, among other indicators, risk models internally developed, as a credit quality indicator to help predict the merchant’s and consumer’s ability to repay the principal balance and interest related to the credit. The risk model uses multiple variables as predictors of the merchant’s and consumer’s ability to repay the credit, including external and internal indicators. Internal indicators consider user behavior related to credit/payment history, and with lower weight in the risk models, the Company uses number of transactions in the Company’s ecosystem and merchant’s annual sales volume, among other indicators. In addition, the Company considers external bureau information to enhance the model and the decision making process. 101 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The amortized cost of the loans receivable classified by the Company’s credit quality internal indicator was as follows: December 31, 2023 2022 (In millions) 1-14 days past due $ 99 $ 54 15-30 days past due 92 64 31-60 days past due 114 88 61-90 days past due 103 86 91-120 days past due 111 103 121-150 days past due 97 110 151-180 days past due 82 112 181-210 days past due 76 100 211-240 days past due 74 93 241-270 days past due 69 89 271-300 days past due 59 73 301-330 days past due 74 85 331-360 days past due 66 75 Total past due 1,116 1,132 To become due 2,662 1,708 Total $ 3,778 $ 2,840 As of December 31, 2023 and 2022, renegotiations represented 2.8 %% and 1 % of the loans receivable portfolio, respectively. As described in Note 2 – Summary of significant accounting policies, the Company places loans on non-accrual status at 90 days past due. There are no loans receivable on non-accrual status for which there is no related allowance for doubtful accounts. NOTE 8. BUSINESS COMBINATIONS, GOODWILL, AND INTANGIBLE ASSETS Business combinations Acquisition of a payment services company in Chile On December 13, 2021, the Company, through its subsidiaries Mercado Pago LLC and SFSC LLC, completed the acquisition of 100 % of the equity interest of Redelcom S.A., a payment services provider that also offers point-of-sales terminals with the latest technology to retailers in the Republic of Chile. Redelcom is located and organized under the laws of Chile. The objective of the acquisition was to consolidate the Company’s value proposition in Chile and enhance the growth of its multiple payment tools and digital financial solutions. The aggregate purchase price for the acquisition was $ 24 million, measured at its fair value amount, which included: (i) the total cash payment of $ 16 million; (ii) an escrow of $ 3 million and (iii) $ 5 million of contingent consideration. The Company’s consolidated statements of income include the results of operations of the acquired business as from December 2021. The net loss before intercompany eliminations of the acquired Company included in the Company’s consolidated statement of income since the acquisition amounted to less than $ 1 million for the year ended December 31, 2021. In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred. 102 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table summarizes the purchase price allocation for the acquisition: Redelcom S.A. (In millions) Cash and cash equivalents $ 1 Convertible notes agreements 1 Other net tangible liabilities ( 2 ) Total net tangible assets acquired $ — Platform 1 Goodwill 23 Purchase Price $ 24 The purchase price was allocated based on the final measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the initial accounting date. The valuation of identifiable intangible assets acquired reflects Management’s estimates based on the use of established valuation methods. The Company recognized goodwill for this acquisition based on Management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was allocated to each of the segments identified by the Company’s Management, considering the synergies expected from this acquisition and it is expected that the acquisition will contribute to the earnings generation process of such segments. Goodwill arising from this acquisition is not deductible for tax purposes. The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the Company’s consolidated statements of income and, accordingly, pro forma information has not been presented. Acquisition of a shipping company in Brazil On November 3, 2021, the Company, through its subsidiary eBazar.com.br Ltda., completed the acquisition of 100 % of the equity interest of Kangu Participações S.A. and its subsidiaries, a logistics technology platform which connects sellers, e-commerce companies, carriers, third-party logistics providers and consumers through its vertically integrated network of drop-off and pick-up points throughout Brazil, Mexico and Colombia. Kangu Participações S.A. is located and organized under the laws of Brazil. The objective of the acquisition was to enhance the capabilities of the Company in terms of logistics. The aggregate purchase price for the acquisition was $ 53 million, measured at its fair value amount, which included: (i) the total cash payment of $ 38 million at the time of closing; (ii) an escrow of $ 4 million and (iii) $ 11 million related to the fair value at the acquisition date of a call option to purchase 20 % of the equity interest of Kangu Participações S.A. As result of the acquisition, the Company recognized a gain for the fair value amount of the option. The Company’s consolidated statements of income include the results of operations of the acquired business as from November 2021. The acquired business contributed net income of $ 1 million for the period from November 3, 2021 to December 31, 2021. In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred. The following table summarizes the purchase price allocation for the acquisition: Kangu Participações S.A. (In millions) Cash and cash equivalents $ 3 Other net tangible assets 1 Total net tangible assets acquired $ 4 Customer lists and non-compete agreements 1 Hubs network 3 Goodwill 45 Purchase Price $ 53 103 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The purchase price was allocated based on the final measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the initial accounting date. The valuation of identifiable intangible assets acquired reflects Management’s estimates based on the use of established valuation methods. The Company recognized goodwill for this acquisition based on Management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was allocated to each of the segments identified by the Company’s Management, considering the synergies expected from this acquisition and it is expected that the acquisition will contribute to the earnings generation process of such segments. Goodwill arising from this acquisition will be deductible for tax purposes in case of a merger between eBazar.com.br Ltda. and Kangu Participações S.A. The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the Company’s consolidated statements of income and, accordingly, pro forma information has not been presented. Goodwill and intangible assets The composition of goodwill and intangible assets is as follows: December 31, 2023 2022 (In millions) Goodwill $ 163 $ 153 Intangible assets with indefinite lives Trademarks 4 4 Digital assets (1) — 9 Amortizable intangible assets Licenses and others 14 13 Non-compete agreements 4 4 Customer lists 12 12 Trademarks 12 12 Hubs network 4 4 Others 3 3 Total intangible assets 53 61 Accumulated amortization ( 42 ) ( 36 ) Total intangible assets, net $ 11 $ 25 Intangible assets at fair value (1) $ 24 $ — (1 ) Digital assets as of December 31, 2023 are included within “Intangible assets at fair value” of the consolidated balance sheets. See Note 2 – Summary of significant accounting policies – Recently Adopted Accounting Standards of these audited consolidated financial statements for further detail. Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 are as follows: Year ended December 31, 2023 Brazil Argentina Mexico Chile Colombia Other countries Total (In millions) Balance, beginning of the period $ 60 $ 10 $ 39 $ 37 $ 5 $ 2 $ 153 Effect of exchange rates changes 4 — 5 — 1 — 10 Balance, end of the period $ 64 $ 10 $ 44 $ 37 $ 6 $ 2 $ 163 104 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Year ended December 31, 2022 Brazil Argentina Mexico Chile Colombia Other Countries Total (In millions) Balance, beginning of the year $ 56 $ 10 $ 37 $ 37 $ 6 $ 2 $ 148 Effect of exchange rates changes 4 — 2 — ( 1 ) — 5 Balance, end of the year $ 60 $ 10 $ 39 $ 37 $ 5 $ 2 $ 153 Intangible assets with definite useful life Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, hubs network, acquired software licenses and other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets totale d $ 6 million , $ 9 million and $ 6 million for the years ended December 31, 2023, 2022 and 2021, respectively. The following table summarizes the remaining amortization of intangible assets with definite useful life as of December 31, 2023: For year to be ended December 31, 2024 $ 3 For year to be ended December 31, 2025 1 For year to be ended December 31, 2026 1 For year to be ended December 31, 2027 1 Thereafter 1 $ 7 NOTE 9. SEGMENTS Reporting segments are based upon the Company’s internal organizational structure, the manner in which the Company’s operations are managed and resources are assigned, the criteria used by Management to evaluate the Company’s performance, the availability of separate financial information and overall materiality considerations. Segment reporting is based on geography as the main basis of segment breakdown in accordance with the criteria, as determined by Management, used to evaluate the Company’s performance. The Company’s segments include Brazil, Argentina, Mexico and other countries (which includes Chile, Colombia, Costa Rica, Ecuador, Peru and Uruguay). Direct contribution consists of net revenues from external customers less direct costs, which include costs of net revenues, product and technology development expenses, sales and marketing expenses, provision for doubtful accounts and general and administrative expenses over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, payroll and third-party fees. All corporate related costs have been excluded from the segment’s direct contribution. Expenses over which segment managers do not currently have discretionary control, such as certain technology and general and administrative costs, are monitored by Management through shared cost centers and are not evaluated in the measurement of segment performance. 105 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following tables summarize the financial performance of the Company’s reporting segments: Year Ended December 31, 2023 Brazil Argentina Mexico Other Countries Total (In millions) Net revenues $ 7,595 $ 3,240 $ 2,985 $ 653 $ 14,473 Direct costs ( 5,763 ) ( 1,837 ) ( 2,371 ) ( 595 ) ( 10,566 ) Direct contribution 1,832 1,403 614 58 3,907 Operating expenses and indirect costs of net revenues ( 2,084 ) Income from operations 1,823 Other income (expenses): Interest income and other financial gains 723 Interest expense and other financial losses ( 378 ) Foreign currency losses, net ( 615 ) Net income before income tax expense and equity in earnings of unconsolidated entity $ 1,553 Year Ended December 31, 2022 Brazil Argentina Mexico Other Countries Total (In millions) Net revenues $ 5,666 $ 2,500 $ 1,864 $ 507 $ 10,537 Direct costs ( 4,717 ) ( 1,488 ) ( 1,579 ) ( 481 ) ( 8,265 ) Direct contribution 949 1,012 285 26 2,272 Operating expenses and indirect costs of net revenues ( 1,238 ) Income from operations 1,034 Other income (expenses): Interest income and other financial gains 265 Interest expense and other financial losses ( 321 ) Foreign currency losses, net ( 198 ) Net income before income tax expense and equity in earnings of unconsolidated entity $ 780 106 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Year Ended December 31, 2021 Brazil Argentina Mexico Other Countries Total (In millions) Net revenues $ 3,910 $ 1,531 $ 1,172 $ 456 $ 7,069 Direct costs ( 3,233 ) ( 998 ) ( 1,139 ) ( 380 ) ( 5,750 ) Direct contribution 677 533 33 76 1,319 Operating expenses and indirect costs of net revenues ( 878 ) Income from operations 441 Other income (expenses): Interest income and other financial gains 138 Interest expense and other financial losses ( 229 ) Foreign currency losses, net ( 109 ) Net income before income tax expense and equity in earnings of unconsolidated entity $ 241 The following tables summarize net revenues per reporting segment, which have been disaggregated by similar products and services for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 Brazil Argentina Mexico Other Countries Total (In millions) Commerce services (1) $ 3,655 $ 1,036 $ 1,653 $ 410 $ 6,754 Commerce products sales (2) 857 225 326 39 1,447 Total commerce revenues 4,512 1,261 1,979 449 8,201 Fintech services (3) 1,910 1,292 296 185 3,683 Credit revenues (4) 1,155 684 699 8 2,546 Fintech products sales (5) 18 3 11 11 43 Total fintech revenues 3,083 1,979 1,006 204 6,272 Total net revenues $ 7,595 $ 3,240 $ 2,985 $ 653 $ 14,473 Year Ended December 31, 2022 Brazil Argentina Mexico Other Countries Total (In millions) Commerce services (1) $ 2,585 $ 814 $ 1,036 $ 329 $ 4,764 Commerce products sales (2) 487 271 246 40 1,044 Total commerce revenues 3,072 1,085 1,282 369 5,808 Fintech services (3) 1,464 904 152 125 2,645 Credit revenues (4) 1,102 506 421 4 2,033 Fintech products sales (5) 28 5 9 9 51 Total fintech revenues 2,594 1,415 582 138 4,729 Total net revenues $ 5,666 $ 2,500 $ 1,864 $ 507 $ 10,537 107 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Year Ended December 31, 2021 Brazil Argentina Mexico Other Countries Total (In millions) Commerce services (1) $ 2,076 $ 614 $ 756 $ 304 $ 3,750 Commerce products sales (2) 405 242 168 70 885 Total commerce revenues 2,481 856 924 374 4,635 Fintech services (3) 938 490 80 82 1,590 Credit revenues (4) 468 178 163 — 809 Fintech products sales (5) 23 7 5 — 35 Total fintech revenues 1,429 675 248 82 2,434 Total net revenues $ 3,910 $ 1,531 $ 1,172 $ 456 $ 7,069 (1) Includes final value fees and flat fees paid by sellers derived from intermediation services and related shipping and storage fees, classified fees derived from classified advertising services and ad sales. (2) Includes revenues from inventory sales and related shipping fees. (3) Includes revenues from commissions the Company charges for transactions off-platform derived from use of the Company’s payment solution, revenues as a result of offering installments for the payment to its Mercado Pago users, either when the Company finances the transactions directly or when the Company sells the corresponding financial assets, Mercado Pago credit and debit card fees and insurtech fees. (4) Includes interest earned on loans and advances granted to merchants and consumers, and interest earned on Mercado Pago credit card transactions. (5) Includes sales of mobile point of sales devices. The following table summarizes the allocation of the property and equipment based on geography: December 31, 2023 2022 (In millions) US property and equipment, net $ 2 $ 1 Other countries Argentina 208 188 Brazil 603 514 Mexico 345 206 Other countries 92 84 1,248 992 Total property and equipment, net $ 1,250 $ 993 The following table summarizes the allocation of the operating lease right-of-use assets based on geography: December 31, 2023 2022 (In millions) Argentina $ 51 $ 53 Brazil 396 286 Mexico 380 245 Other countries 72 72 Right of use asset, net $ 899 $ 656 108 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table summarizes the allocation of the goodwill and intangible assets based on geography: December 31, 2023 2022 (In millions) US intangible assets at fair value (1) $ 24 $ — $ 24 $ — US intangible assets, net (1) $ — $ 9 Goodwill and intangible assets, net Argentina 12 14 Brazil 68 63 Mexico 44 40 Other countries 50 52 174 169 Total goodwill and intangible assets $ 198 $ 178 (1 ) Digital assets as of December 31, 2023 are included within “Intangible assets at fair value” of the consolidated balance sheets. See Note 2 – Summary of significant accounting policies – Recently Adopted Accounting Standards of these audited consolidated financial statements for further detail. 109 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 10. FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES Assets and liabilities measured and recorded at fair value on a recurring basis The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022: Balances as of December 31, 2023 Quoted Prices in active markets for identical Assets (Level 1) Significant other observable inputs (Level 2) Balances as of December 31, 2022 Quoted Prices in active markets for identical Assets (Level 1) Significant other observable inputs (Level 2) Unobservable inputs (Level 3) (In millions) Cash and cash equivalents: Money market $ 639 $ 639 $ — $ 599 $ 599 $ — $ — U.S. government debt securities (1) 60 60 — 21 21 — — Foreign government debt securities (1) 32 32 — — — — — Restricted cash and cash equivalents: Money market (2) 278 278 — 352 352 — — Foreign government debt securities (1) 116 116 — 158 158 — — Investments: U.S. government debt securities (1) 1,009 1,009 — 733 733 — — Foreign government debt securities (1) (3) 2,530 2,530 — 1,433 1,433 — — Corporate debt securities 30 30 — — — — — Other assets: Derivative instruments 23 — 23 1 — 1 — USDC — — — 3 3 — — Customer crypto-assets safeguarding assets 34 — 34 15 — 15 — Intangible assets at fair value 24 24 — — — — — Total assets $ 4,775 $ 4,718 $ 57 $ 3,315 $ 3,299 $ 16 $ — Long-term retention program $ 104 $ — $ 104 $ 58 $ — $ 58 $ — Other liabilities: Contingent considerations — — — 8 — — 8 Derivative instruments 31 — 31 24 — 24 — Customer crypto-assets safeguarding liabilities 34 — 34 15 — 15 — Total liabilities $ 169 $ — $ 169 $ 105 $ — $ 97 $ 8 (1) Measured at fair value with impact on the consolidated statements of income for the application of the fair value option. (See Note 2 – Summary of significant accounting policies – Fair value option applied to certain financial instruments.) (2) As of December 31, 2023 and 2022 includes $ 269 million and $ 314 million, respectively, of money market funds from securitization transactions. (See Note 5 – Cash, cash equivalents, restricted cash and cash equivalents and investments.) (3) As of December 31, 2023 and 2022 includes $ 23 million and $ 21 million, respectively, of investments from securitization transactions that are restricted to the payment of amounts due to third-party investors. In additional, includes foreign government debt securities that are also restricted due to regulations issued by the Central Banks and other regulators or because guarantees a line of credit. (See Note 5 – Cash, cash equivalents, restricted cash and cash equivalents and investments.) 110 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements As of December 31, 2023 and 2022, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis were valued using i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets); ii) Level 2 inputs: obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date; and iii) Level 3 inputs: valuations based on unobservable inputs reflecting Company’s assumptions. The unobservable inputs of the fair value of contingent considerations classified as Level 3 refer to the amounts to be paid according to the respective agreements of each acquisition, the likelihood of achievement of the performance targets arising from each one (expected to be 100%), and the Company’s historical experience with similar arrangements. Reasonable variation on those unobservable inputs would not significantly change the fair value of those instruments. As of December 31, 2023 and 2022, the Company had not changed the methodology nor the assumptions used to estimate the fair value of the financial instruments. There were no transfers to and from Levels 1, 2 and 3 during the year ended December 31, 2023. There were no transfers to and from Levels 1, 2 and 3 during the year ended December 31, 2022, other than as detailed in the table below. The following tables summarize the reconciliation of the financial assets and liabilities measured at fair value using Level 3 inputs as of December 31, 2022: Year Ended December 31, 2022 Derivative Instruments, net Contingent Considerations (1) (In millions) Balance, beginning of the year $ 11 $ ( 9 ) Net Additions 3 — Settlements 7 1 Foreign Currency Translation ( 5 ) — Losses in Other Comprehensive Income ( 15 ) — Losses in Income Statement ( 28 ) — Transfers out of level 3 27 — Balance, end of the year $ — $ ( 8 ) (1) As of December 31, 2023, the contingent considerations measured at fair value using Level 3 inputs were settled. The Company’s election of the fair value option applies to the: i) Foreign government debt securities, and ii) U.S. government debt securities. The Company recognized fair value changes in interest income and other financial gains which includes the related interest income of those instruments. Such fair value changes and interest income amount to $ 268 million, $ 154 million and $ 36 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, the cost and the estimated fair value of the Company’s investment in corporate debt securities classified as available for sale amounted to $ 30 million. During the year ended December 31, 2023, the gross unrealized gains were less than $ 1 million. As of December 31, 2022, the Company held no investment in corporate debt securities classified as available for sale. However, during the year ended December 31, 2022, the Company purchased and sold these kind of instruments, being the proceeds from the sales $ 156 million and the gross realized gains less than $ 1 million. The cost of these securities are determined under a specific identification basis. The following table summarizes the net carrying amount of the corporate debt securities classified as available for sale, classified by its contractual maturities: Balances as of December 31, 2023 (In millions) One year or less $ 5 One year to two years 12 Two years to three years 4 Three years to four years 3 Four years to five years 6 Total available for sale investments $ 30 111 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table summarizes the net carrying amount of the debt securities not classified as available for sale, classified by its contractual maturities or Management expectation to convert the investments into cash: Balances as of December 31, 2023 Balances as of December 31, 2022 (In millions) One year or less $ 3,668 $ 2,079 One year to two years 4 201 Two years to three years — 5 Three years to four years 35 — Four years to five years 37 30 More than five years 3 30 $ 3,747 $ 2,345 Financial assets and liabilities not measured and recorded at fair value The following table summarizes the estimated fair value level of the financial assets and liabilities of the Company not measured at fair value as of December 31, 2023 and 2022: Balances as of December 31, 2023 Estimated fair value as of December 31, 2023 Balances as of December 31, 2022 Estimated fair value as of December 31, 2022 (In millions) Cash and cash equivalents $ 1,825 $ 1,825 $ 1,290 $ 1,290 Restricted cash and cash equivalents 898 898 943 943 Investments 15 15 439 439 Accounts receivables, net 156 156 130 130 Credit card receivables and other means of payment, net 3,632 3,632 2,946 2,946 Loans receivable, net 2,694 2,676 1,736 1,761 Other assets 131 131 273 273 Total Assets $ 9,351 $ 9,333 $ 7,757 $ 7,782 Accounts payable and accrued expenses $ 2,117 $ 2,117 $ 1,393 $ 1,393 Funds payable to customers 4,475 4,475 3,454 3,454 Amounts payable due to credit and debit card transactions 1,092 1,092 488 488 Salaries and social security payable 441 441 349 349 Loans payable and other financial liabilities 4,495 4,441 4,758 4,997 Other liabilities 285 285 186 186 Total Liabilities $ 12,905 $ 12,851 $ 10,628 $ 10,867 As of December 31, 2023 and 2022, the carrying value of the Company’s financial assets (except for loans receivable and equity securities held at cost) not measured at fair value approximated their fair value mainly because of their short-term maturity. If these financial assets were measured at fair value in the financial statements, cash and restricted cash would be classified as Level 1 (where cost and fair value are aligned) and the remaining financial assets would be classified as Level 2. The estimated fair value of the loans receivable would be classified as Level 3 based on the Company’s assumptions. 112 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements As of December 31, 2023 and 2022, the carrying value of the Company’s financial liabilities (except for 2028 Notes, 2026 Sustainability Notes and 2031 Notes) not measured at fair value approximated their fair value mainly because of their short-term maturity and the effective interest rates are not materially different from market interest rates. If these financial liabilities were measured at fair value in the financial statements, these would b e classified as Level 2. As of December 31, 2023 and 2022, the estimated fair value of the 2026 Notes would be $ 375 million and $ 359 million, respectively, and the estimated fair value of the 2026 Notes would be $ 599 million and $ 541 million, resp ectively, which is based on Level 2 inputs. Also, as of December 31, 2022, the estimated fair value of the 2028 Notes was $ 884 million, and was classified as Level 2 based on the closing trading price per $ 100 principal amount of the 2028 Notes as of the last day of trading for the period. The fair value of the 2028 Notes was primarily affected by the trading price of the Company’s common stock and market interest rates. NOTE 11. COMMON STOCK Authorized, issued and outstanding shares As of December 31, 2023 and 2022, as stated in the Company’s Fourth Amended and Restated Certificate of Incorporation, the Company has authorized 110,000,000 shares of Common Stock, par value $ 0.001 per share (“Common Stock”). As of December 31, 2023 and 2022, there were 50,697,442 and 50,257,751 shares of common stock issued and outstanding with a par value of $ 0.001 per share. Voting rights Each outstanding share of common stock, is entitled to one vote on all matters submitted to a vote of holders of common stock, except for stockholders that beneficially own more than 20 % of the shares of the outstanding common stock, in which case the board of directors (the “Board”) may declare that any shares of stock above such 20 % do not have voting rights. The holders of common stock do not have cumulative voting rights in the election of directors. NOTE 12. REDEEMABLE CONVERTIBLE PREFERRED STOCK Pursuant to the Fourth Amended and Restated Certificate of Incorporation, the Company is authorized to issue 40,000,000 shares of preferred stock, par value $ 0.001 per share. As of December 31, 2023, and 2022 the Company has no preferred stock subscribed or issued. NOTE 13. EQUITY COMPENSATION PLAN On June 10, 2019, at the Annual Shareholders’ Meeting, the Company’s shareholders approved the adoption of the Amended and Restated 2009 Equity Compensation Plan (the “Amended and Restated 2009 Plan”), which contains terms substantially similar to the terms of the “2009 Equity Compensation Plan” (the “2009 Plan”) that expired in 2019. As of December 31, 2023, there are 989,811 shares of common stock available for granting under the Amended and Restated 2009 Plan. Equity compensation awards granted under the Amended and Restated 2009 Plan are at the discretion of the Company’s board of directors and may be in the form of either incentive or non-qualified stock options. As of December 31, 2023, there were 5,658 shares of restricted stock outstanding under such plan. 113 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 14. INCOME TAXES The components of income tax for the years ended December 31, 2023, 2022 and 2021 are as follows: Year Ended December 31, 2023 2022 2021 (In millions) Income Tax: Current: U.S. $ 41 $ 12 $ — Non-U.S. 812 383 178 853 395 178 Deferred: U.S. 36 55 ( 3 ) Non-U.S. ( 320 ) ( 152 ) ( 26 ) ( 284 ) ( 97 ) ( 29 ) Income tax expense $ 569 $ 298 $ 149 The components of net income before tax expense and equity in earnings of unconsolidated entity for the years ended December 31, 2023, 2022 and 2021 are as follows: Year Ended December 31, 2023 2022 2021 (In millions) U.S. $ ( 362 ) $ ( 207 ) $ ( 214 ) Non-U.S. 1,915 987 455 $ 1,553 $ 780 $ 241 114 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following is a reconciliation of the difference between the actual charge for income tax and the expected income tax expense computed by applying the statutory income tax rate for the years ended December 31, 2023, 2022 and 2021 to net income before income tax: Year Ended December 31, 2023 2022 2021 (In millions) Net income before income tax $ 1,553 $ 780 $ 241 Income tax rate 21 % 21 % 21 % Expected income tax expense $ 326 $ 164 $ 51 Permanent differences: Transfer pricing adjustments 11 3 2 Non-deductible tax 7 1 4 Non-deductible expenses 107 54 29 Dividend distributions ( 32 ) 12 36 Non-taxable income ( 167 ) ( 62 ) ( 32 ) Effect of rates different than statutory 117 37 8 Currency translation 335 48 16 Change in valuation allowance 4 92 56 Tax Inflation Adjustments ( 136 ) ( 35 ) ( 19 ) Inventory Adjustments — — ( 1 ) True up ( 3 ) ( 16 ) ( 1 ) Income tax expense $ 569 $ 298 $ 149 Income taxes are determined by each subsidiary on a standalone basis according to income tax law of each jurisdiction. The Company’s consolidated effective tax rate for year ended December 31, 2023 as compared to 2022, decreased from 38.2 % to 36.6 % as a result of the reversal of the valuation allowances in one of the Company´s Mexican subsidiaries during the third quarter of 2023. This decrease was partially offset by taxable foreign exchange gains accounted for local tax purposes in Argentina, which are not recorded for accounting purposes given that under U.S. GAAP and due to Argentina’s highly inflationary status, Argentina’s operations’ functional currency is the U.S. dollar, and higher non-deductible foreign exchange losses related to the acquisition of the Company´s own common stock in the Argentine market (please see Note 25 – Share repurchase program for further information). 115 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. The following table summarizes the composition of deferred tax assets and liabilities for the years ended December 31, 2023 and 2022: December 31, 2023 2022 (In millions) Deferred tax assets Allowance for doubtful accounts $ 234 $ 110 Unrealized net gains 3 8 Property and equipment, net 58 43 Accounts payable and accrued expenses 8 17 Payroll and social security payable 42 32 Provisions 275 131 U.S. foreign tax credit 304 156 Tax loss carryforwards 177 255 Inventories 14 3 Tax inflation adjustments — 3 Total deferred tax assets 1,115 758 Valuation allowance ( 374 ) ( 360 ) Total deferred tax assets, net 741 398 Deferred tax liabilities Property and equipment, net ( 21 ) ( 29 ) Customer lists — ( 1 ) Unrealized net losses ( 4 ) ( 3 ) Goodwill ( 4 ) ( 4 ) Accounts payable and accrued expenses ( 2 ) ( 3 ) Payroll and social security payable — ( 7 ) Outside Basis Dividends ( 182 ) ( 103 ) Provisions ( 1 ) ( 8 ) Total deferred tax liabilities $ ( 214 ) $ ( 158 ) $ 527 $ 240 Valuation allowance on deferred tax assets The following table summarizes the tax valuation allowance activity during the years ended December 31, 2023, 2022 and 2021: Year Ended December, 31 2023 2022 2021 Tax valuation allowance (In millions) Balance at beginning of year $ 360 $ 262 $ 179 Charged to Net income 4 92 56 Charges Utilized/Currency translation adjustments and other adjustments 10 6 27 Balance at end of year $ 374 $ 360 $ 262 116 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements As of December 31, 2023, consolidated deferred tax asset on tax loss carryforwards for income tax purposes wer e $ 177 million. If not utilized, tax loss carryforwards will begin to expire as follows: 2026 $ 1 2027 2 2028 7 2029 31 2030 38 Thereafter 56 Without due dates 42 Total $ 177 Ba sed on Management’s assessment of available objective evidence, the Company maintained a valuation allowance on deferred tax assets of $ 374 million and $ 360 million as of December 31, 2023 and 2022, respectively. This valuation allowance includes $ 304 million and $ 156 million to fully reserve the outstanding U.S. foreign tax credits as of December 31, 2023 an d 2022, respectively. The valuation allowance increased as of December 31, 2023 compared to 2022 , mainly related to the impairment of $ 148 million on U.S. foreign tax credit, offset by the reversal of $ 141 million given that is more likely than not that deferred tax assets from DeRemate.com de México, S. de R.L. de C.V., a Mexican subsidiary, will be realized in the foreseeable future. The change in judgment regarding the realizability of the deferred tax assets of the Mexican subsidiary was triggered during the year ended December 31, 2023, as positive trends observed in recent periods became enough evidence to support the conclusion. Knowledge-based economy promotional regime in Argentina On June 10, 2019, the Argentine government enacted Law No. 27,506 (knowledge-based economy promotional regime), which established a regime that provides certain tax benefits for companies that meet specific criteria, such as companies that derive at least 70 % of their revenues from certain specified activities related to the knowledge-based economy. The regime was suspended on January 20, 2020, until new rules for the application of the knowledge-based economy promotional regime were issued. On October 7, 2020, changes to the knowledge-based economy promotional regime were finally approved by the Congress. The approved regime has effect from January 1, 2020 through December 31, 2029. Based on the amended promotional regime, companies that meet new specified criteria shall be entitled to: i) a reduction of the income tax burden ( 60 % for micro and small enterprises, 40 % for medium-sized enterprises and 20 % for large enterprises) over the promoted activities for each fiscal year, applicable to both Argentine source income and foreign source income, ii) stability of the benefits established by the knowledge-based economy promotional regime (as long as the beneficiary is registered and in good standing), and iii) a tax credit bond amounting to 70 % (which can be up to 80 % in certain specific cases) of the Company’s contribution to the social security regime of every employee whose job is related to the promoted activities (caps on the number of employees are applicable). Such bonds can be used within 24 months from their issue date (which period can be extended for an additional 12 months in certain cases) to offset certain federal taxes, such as value-added tax. On December 20, 2020, Argentina’s Executive Power issued Decree No. 1034/2020, which set the rules to implement the provisions of the knowledge-based economy promotional regime. Eligible companies must enroll in a registry according to the terms and conditions to be established by the Application Authority, which will verify compliance with the requirements. The Decree also set the mechanism for calculating the level of investment in research and development, the level of employee retention, exports, among others. It also establishes that exports of services from companies participating in this regime will not be subject to export duties. On January 13, 2021, Argentina’s Ministry of Productive Development –current Application Authority of the knowledge-based economy promotional regime– issued Resolution No. 4/2021, which was followed by Disposition N° 11/2021 issued by the Under Secretariat of Knowledge Economy on February 12, 2021. Both rules establish further details on the requirements, terms, conditions, application, and compliance procedures to be eligible under the promotional regime. In August 2021, the Under Secretariat of Knowledge Economy issued the Disposition 316/2021 approving MercadoLibre S.R.L.’s application for eligibility under the knowledge-based economy promotional regime. Tax benefits granted pursuant to the promotional regime to MercadoLibre S.R.L. were retroactive to January 1, 2020. As a result, the Company accounted for an income tax benefit of $ 14 million for the year ended December 31, 2021, which $ 8 million corresponded to the year ended December 31, 2020. The aggregate per share effect of the income tax benefit amounted to $ 0.29 for the year ended December 31, 2021. Furthermore, the Company recorded a social security benefit of $ 45 million for the year ended December 31, 2021, which $ 15 million corresponded to the year ended December 31, 2020. Given that the promotional regime establishes that exports of services by eligible companies are not subject to export duties, the Company recognized a gain of $ 24 million related to export duties accrued from January 2020 to August 2021 that are no longer required to be paid. Additionally, for the year ended December 31, 2021, the Company accrued a charge of $ 4 million to pay knowledge-based economy promotional law audit fees and FONPEC (“Fondo Fiduciario para la Promoción de la Economía del Conocimiento”) contribution. 117 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements During the years ended December 31, 2023 and 2022, the Company accounted for an income tax benefit of $ 42 million and $ 27 million, respectively. The aggregate per share effect of the income tax benefit amounted to $ 0.84 and $ 0.54 for the years ended December 31, 2023 and 2022, respectively. Furthermore, the Company recorded a social security benefit of $ 67 million and $ 54 million for the years ended December 31, 2023 and 2022, respectively. Additionally, during the years ended December 31, 2023 and 2022, the Company accrued a charge of $ 6 million and $ 5 million, respectively, to pay knowledge-based economy promotional law audit fees and FONPEC contribution. NOTE 15. COMMITMENTS AND CONTINGENCIES Litigation and Other Legal Matters The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers it to be probable that future costs will be incurred and such costs can be reasonably estimated. Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of December 31, 2023, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of $ 124 million within non current other liabilities to cover legal actions against the Company for which its Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided. In addition, as of December 31, 2023, the Company and its subsidiaries are subject to certain legal actions considered by Management and its legal counsels to be reasonably possible for an aggregate amount up to $ 159 million . No loss amounts have been accrued for such reasonably possible legal actions, the most significant of which are described below. The following table summarizes the contingencies activity during the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Contingencies (In millions) Balance at beginning of year $ 53 $ 13 $ 11 Charged to Net income 335 16 5 Reclassifications of judicial deposits ( 273 ) — — Charges Utilized / Currency translation adjustments / Write-offs 9 24 ( 3 ) Balance at end of year $ 124 $ 53 $ 13 Tax Claims Brazilian preliminary injunction against the Brazilian tax authorities (withholding Income tax) O n November 6, 2014, the Brazilian subsidiaries, Mercadolivre.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Pago.com Representações Ltda. and the Argentine subsidiary, MercadoLibre S.R.L., filed a writ of mandamus and requested a preliminary injunction with the Federal Court of Osasco against the federal tax authority to avoid the withholding income tax ( “ IRRF ” ) over payments remitted by the Brazilian subsidiaries to MercadoLibre S.R.L. for the provision of IT support and assistance services by the latter, and requested reimbursement of the amounts improperly withheld over the course of the preceding five (5) years. The preliminary injunction was granted on the grounds that such withholding income tax violated the convention signed between Brazil and Argentina that prevents double taxation. In August 2015, the injunction was revoked by the first instance judge in an award favorable to the federal tax authority. The Company appealed the decision and deposited into court the disputed amounts. In June 2020, the Company’s appeal was dismissed. The Company submitted a new remedy before the same court in July 2020, which was dismissed on February 17, 2021. On March 18, 2021, the Company filed two appeals with the superior courts. However, the Vice President of the local Federal Court dismissed the remittance of the appeals to the Superior Courts and retained the cases in the local court. Against this decision, the Company filed new appeals, one interlocutory appeal in the Federal Court and other interlocutory appeals in the Superior Courts. On November 29, 2023, the interlocutory appeal was dismissed in the Federal Court, while the interlocutory appeals in the Superior Courts are pending judgment. Besides, in recent cases involving other taxpayers which also applied the convention signed between Brazil and Argentina to prevent double taxation ("Convention") as amended by the 2017 protocol, the Superior Court of Justice decided the IRRF is due in the State of the source (i.e. Brazil), given that the Convention grants such rights regardless whether the services provided between the parties contain transfer of technology or not. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case became probable based on the technical merits of the Company’s tax position and the existence of recent adverse decisions issued by the Superior Court of Justice. For that reason, the Company has recorded a provision for the disputed amounts, which was $ 327 million as of December 31, 2023 , and which was recorded in non-current other liabilities in the consolidated balance sheets, net of the corresponding judicial deposits for $ 273 million (which includes $ 64 million of interest income). The provision has impacted the consolidated statement of income for the year ended December 31, 2023 within Product and technology development expenses by $ 261 million, Cost of net revenues b y $ 58 million, General and administrative expenses b y $ 1 million, b ased on the classification of the original expense to which the IRRF relates, and as a reversal of Interest income by $ 4 million that offsets the interest gains generated by the judicial deposits since the case became probable. 118 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Interstate rate of ICMS-DIFAL on interstate sales Interstate rate of ICMS-DIFAL on interstate sales without Complementary Law During 2020 and 2021, the Brazilian subsidiaries, eBazar.com.br Ltda. and Mercado Pago Instituição de Pagamento Ltda., filed 15 writs of mandamus with the State Courts of Justice where these companies have sales branches in order to prevent Brazilian states from collecting the ICMS on interstate sales at a differential rate (“ICMS-DIFAL”) without the existence of a complementary law. Four of these cases were filed in 2020 (for the branches of Barueri and Louveira) and the other 11 were filed in 2021, after eBazar.com.br Ltda. opened a new branch in Extrema. On February 24, 2021, the Brazilian Supreme Court ruled on the controversy in a binding precedent, which declared the unconstitutionality of ICMS-DIFAL without the proper complementary law. In the same case, however, the Supreme Court ruled on the modulation of the effects of its decision (with retroactive effect). From those 11 cases filed by the Company after the Supreme Court’s decision (after February 24, 202 1), 6 became final and unappealable in favor of the corresponding States ( cases related to the branch of Extrem a: São Paulo, Rio Grande do Sul, Paraná, Distrito Federal, Bahia and Rio de Janeiro ), and therefore their corresponding liabilities were settled with the corresponding judicial deposits. Another one of the 11 cases became final and unappealable in favor of Ebazar.com.br Ltda. Finally, the remaining 4 of those 11 cases are still pending and may not stand because of the modulation of effects with respect to that decision. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing is probable. For that reason, the Company has recorded a $ 3 million provision for the disputed amounts related to thes e 4 cases. With respect to the 4 cases filed by the Company prior to the Supreme Court’s decision (before February 24, 2021), 2 of them became final and unappealable in favor of the Company. Of the remaining 2 cases, for which a judgment is still pending, Management considers that the risk of losing is remote. For that reason, the Company has not recorded any liability for the controversial amounts. The Company deposited into court the disputed amounts. As of December 31, 2023, the total amount of the deposits related to the ongoing cases was $ 7 million. Interstate rate of ICMS-DIFAL on interstate sales under Law No. 190/22 In January 2022, (therefore, already in the course of fiscal year 2022 and already in full application of the understanding of the Supreme Court for unconstitutionality), supplementary Law No. 190/22 was published, outlining the general rules for the requirement of DIFAL and expressly mentioning the need to comply with the principle of anticipation or prospective application of taxes (pursuant to which no tax may be levied before the expiry of ninety days from the enactment of the law or in the same fiscal year of enactment). Notwithstanding this provision, which expressly points to the need to comply with the anticipation, Brazil’s Federation Units have not complied with this guarantee. Therefore, eBazar.com.br Ltda. and Mercado Pago Instituição de Pagamento Ltda., filed writs of mandamus to the 27 Federation Units, aimed at preventing the Brazilian tax authorities demand payments of the DIFAL. In this regard, the Brazilian Supreme Court ( “ STF ” ) has issued a decision regarding the constitutionality of the supplementary Law on November 29, 2023. In the judgment, the majority of STF judges considered the supplementary Law No. 190/22 to be constitutional, therefore, the ICMS-DIFAL is due from April 5, 2022, due to the corresponding time lapse of ninety days between the law enacting and the beginning of the charge. The decision has not yet become final and unappealable and a motion to clarify is yet to be presented. However, such motion to clarify, if and when presented, is unlikely to change the merit of the decision. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is remote for the period between January 1, 2022 to April 4, 2022, and probable for the period between April 5, 2022 to December 31, 2022 based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any liability for the controversial amounts related to the period through April 4, 2022, and has recorded liabilities for the disputed amounts related to the period from April 5, 2022 to December 31, 2022, by $ 30 million , which are presented net of the corresponding judicial deposits of $ 29 million . Interstate rate of ICMS-DIFAL over fixed assets From April to September 2022, the Brazilian subsidiary Mercado Envios Serviços de Logística Ltda., now incorporated by eBazar.com.br Ltda., also filed writs of mandamus to 3 Federation Units (São Paulo, Santa Catarina e Bahia), for the purpose of preventing the Brazilian tax authorities from demanding payment of the DIFAL over their respective fixed assets not explicitly addressed by the supplementary Law No. 190/22. Regarding this topic, the STF has not expressly pointed to the principle of anticipation. Therefore, there are two controversies regarding DIFAL over fixed assets: (i) if DIFAL is applicable under the previous supplementary Law No. 87/96, and (ii) if supplementary Law No. 87/96 is deemed not applicable, if the new supplementary Law No. 190/22 needs to comply with the principle of anticipation. In this last controversy, the same decision above mentioned applies to the Brazilian subsidiary Mercado Envios Serviços de Logística Ltda., and its writs of mandamus. Therefore, Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible for the period between January 1, 2022 to April 4, 2022, and prob able for the period between April 5, 2022 to December 31, 2022 based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any liability for the controversial amounts related to the period until April 4, 2022, and has recorded liabilities for the disputed amounts related to the period from April 5, 2022 to December 31, 2022 for $ 2 million which are presented net of the corresponding judicial deposits of $ 2 million. Exclusion of ICMS tax benefits from federal taxes base The Company has ICMS tax incentives granted by the State of Minas Gerais, through a special regime signed with the state by means of a term of agreement, which are aimed at implementing and expanding business in that state. See Note 2 – Summary of significant accounting policies of these audited consolidated financial statements for additional detail on the ICMS tax incentives. 119 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements On November 9, 2021 the Company filed a writ of mandamus which claimed the exclusion of the amounts relating to the ICMS tax benefits granted by the State of Minas Gerais through the special regime from the tax base of the Corporate Income Tax (“IRPJ”) and of the Social Contribution on Net Profits (“CSLL”). On January 31, 2022, a decision was rendered granting the injunction requested in order to exclude the amounts of tax benefits granted by the State of Minas Gerais in the tax base of IRPJ and CSLL. However, the Court did not rule on the requirements set forth in article 30 of Law 12,973/14 and article 38 of Decree-Law 1577/98. On August 14, 2023, a judgment was handed down in favor of the Company and the Public Prosecutor's Office filed an appeal. During the fourth quarter of 2023 and after the judgment on Topic 1,182, the Superior Court of Justice ( “ STJ ” ) annulled a ruling by the Federal Regional Court which had denied its jurisdictional provision, determining the return of the files to the Court of origin so that the need to comply with the requirements could be analyzed. Requirements in article 30 of Law 12,973/14 set forth the exclusion of presumed credits from the IRPJ and CSLL calculation basis, as in the judges' opinion this provision has not been revoked. The ruling is deemed to be innovative because these requirements, until then, were not required in cases of presumed credit. On January 31, 2024, after the Company presented its counter-appeal, the case was sent to the Federal Regional Court for judgment in the second instance, which is still pending. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is not more likely than not based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any expense or liability for the disputed amounts. The Company recorded an income tax benefit arising from the ICMS tax incentives during the year ended December 31, 2023 for $ 23 million and for the year ended December 31, 2022 for $ 17 million (of which $ 5 million corresponded to the year ended December 31, 2021). On April 25, 2023, the Company filed a writ of mandamus seeking an injunction and claiming the exclusion of the amounts relating to the ICMS tax benefits granted by the State of Minas Gerais in the tax base of the Social Contributions (PIS and COFINS). On May 26, 2023, a decision was rendered granting the injunction requested. The Company is currently waiting for the final judicial decision. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible but not probable based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any expense or liability for the disputed am ounts. The Company recorded $ 12 million of PIS and COFINS tax benefits arising from the ICMS tax incentives for the year ended December 31, 2023, of which $ 4 million corresponded to the period ended December 31, 2021, and $ 2 million corresponded to the period ended December 31, 2022. Marketplace joint and several liability In the context of intermediation transactions on the marketplace platform, the Brazilian subsidiary eBazar.com.br Ltda. received four tax assessments aimed at collecting alleged ICMS debts for the 2017 to 2019 fiscal years, in the amount of $ 9 million, considering the exchange rate as of December 31, 2023 . The tax assessments intend to attribute to eBazar.com.br Ltda. the joint and several liability for the payment of ICMS allegedly due by sellers on the sale of goods without compliant invoices. The Company presented its objections in August 2023 and received unfavorable decisions from the administrative court in the first instance. The Companies filed appeals in each one of the cases with the administrative court, which are now pending. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible, but not probable. Services Tax exclusion in the tax base of the Federal Contributions (PIS/COFINS) On August 29, 2017, the Brazilian subsidiaries, Ebazar.com.br Ltda., Ibazar.com Atividades de Internet Ltda., MercadoPago.com Representações Ltda., Mercado Envios Serviços de Logística Ltda., filed a writ of mandamus and requested a preliminary injunction before the Federal Justice in Osasco against the Federal Government to exclude the Municipal Service Tax in the tax base of the Federal Contributions (PIS/COFINS). The federal judge granted the preliminary injunction and ruled in favor of the companies on January 15, 2019. On April 8, 2019, the Federal Government presented an appeal that was rejected by the Federal Court. Following the Federal Court's decision, the Federal Government filed two appeals with the superior courts. However, since February 12, 2021, the mandamus remains suspended by a decision settled by the Brazilian Supreme Court, who shall judge the leading case and set a binding jurisprudence to this case. Management, based on the opinion of external legal counsel and the current composition of the Brazilian Supreme Court (who has shown dubious jurisprudence in similar cases), is of the opinion that the risk of losing the case is probable. For that reason, the Company has recognized a provision for the disputed amounts of $ 44 million. 120 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Administrative tax claims On October 30, 2020 and November 9, 2020, MercadoPago.com Representações Ltda. and eBazar.com.br Ltda., respectively, received tax assessments claiming income tax payments for the 2016 fiscal year, with respective penalties and fines. In these assessments, the tax authorities do not recognize certain expenses incurred by the Brazilian subsidiaries, such as technology services imported from MercadoLibre S.R.L., Meli Uruguay S.R.L., and MercadoLibre Inc., as deductible for income tax purposes. The tax authorities concluded that the Brazilian entities failed to submit sufficient evidence during the tax assessment that these services were necessary and effectively hired and paid by the Brazilian subsidiaries. The tax assessments that MercadoPago.com Representações Ltda. and eBazar.com.br Ltda. received amounted to a total of $ 20 million and $ 14 million , respectively, considering the exchange rate as of December 31, 2023. The subsidiaries filed their defenses on December 1, 2020 and December 8, 2020, respectively, arguing that the agreements and other documentation were submitted as evidence during the tax assessment. The defenses were also complemented by specific descriptions for each project that was impacted by such services to justify the necessity of all the expenses in dispute. On May 25, 2021, MercadoPago.com received an unfavorable decision from the administrative court in the first instance, and on June 28, 2021, eBazar.com.br also received an unfavorable decision from the administrative court in the first instance. The Companies filed appeals in respect of both cases with the administrative court in the second instance, which are now pending. The Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is not more likely than not. For that reason, the Company has not recorded any expense or liability for the disputed amounts. On December 30, 2022 , eBazar.com.br Ltda. and one of the Company’s Senior Legal Directors received three tax assessments claiming corporate income taxes (IRPJ and CSLL) in the amount of $ 76 million, withholding income tax (IRRF) in the amount of $ 11 million, and PIS and COFINS in the amount of $ 12 million, all of them in relation to the taxable year of 2017, including punitive fine of 150 % over the tax charged and interest on late payments based on the SELIC rate, and according to the exchange rate as of December 31, 2023. The Senior Legal Director was assessed as jointly liable with eBazar.com.br, due to his role as statutory officer, under provisions of the National T ax Code that enable joint tax liability for acts potentially in violation of the law or the by-laws. With respect to IRPJ, CSLL, PIS and COFINS, the tax authorities concluded that the Brazilian company failed to report taxable income as the company has made book entries in the profit and loss accounts, reverting previous revenues or other revenue accounts, as well as for using foreign languages such as English and Spanish in its book-keeping. The tax authorities also claimed that the company failed in the issuance of invoices, disregarding that the company indeed has a Special Tax Regime granted by the Municipality of Osasco that allows the issuance of a single invoice per period. Regarding the IRRF, the amount claimed by the tax authorities is already deposited in court under the writ of mandamus that discusses the company’s right not to pay IRRF on payments made to its affiliate in Argentina, due to the provisions of the Brazil and Argentina double tax treaty (for further details see contingency Brazilian preliminary injunction against Brazilian tax authorities (withholding Income tax)). Those deposits were incorrectly ignored by tax authorities. The Company presented the objection on January 30, 2023. Taking into account the documents attached to the Company's objection, in the case of PIS and COFINS, the administrative authorities decided in December 2023 to carry out a verification diligence to analyze the documents, which may influence the outcome of the case. The Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the cases is not more likely than not in the cases of IRPJ and CSLL and reasonably possible, but not probable in the cases of PIS and COFINS, based on the technical merits. In the case of IRRF, the Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is remote. For that reason, the Company has not recorded any expense or liability for the disputed amounts. Buyer protection program The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated. See Note 2 – Summary of significant accounting policies – Provision for buyer protection program of these audited consolidated financial statements for further detail. As of December 31, 2023 and 2022, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is $ 5,072 million and $ 4,002 million, respectively, for which the Company recorded a provision of $ 8 million and $ 6 million, respectively. Commitments The Company committed to purchase cloud platform services from two U.S. suppliers based on the following terms: 1. for a total amount of $ 824 million, to be paid between October 1, 2021 and September 30, 2026. As of December 31, 2023, the Company had paid $ 427 million; and 2. for a total amount of $ 200 million, to be paid between September 23, 2022 and September 23, 2025. As of December 31, 2023, the Company had paid $ 61 million. In connection with the closing of MELI Kaszek Pioneer Corp’s (“MEKA”) initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between Company’s subsidiary MELI Capital Ventures LLC and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $ 10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination. MEKA was deemed dissolved on January 2, 2024, resulting in the extinguishment of this commitment. 121 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements On April 8, 2022, the Company signed a 10-year agreement with Gol Linhas Aereas S.A. under which the Company is committed to contract a minimum amount of air logistics services for a total annual cost of $ 43 million (total amount once all the dedicated aircraft are in operation). Pursuant to the agreement, Gol Linhas Aereas S.A. provides logistics services in Brazil to Mercado Envios through six dedicated aircraft, all of which have already started operations as of December 31, 2023. Since October 2023, the Company signed 3-year agreements with certain shipping companies in Brazil, under which the Company is committed to contract a minimum amount of logistics services for a total cost of $ 31 million. On January 10, 2024, the Company signed a 5-year agreement for the naming rights of the Complexo Pacaembu (municipal stadium of the city of São Paulo), for a total amount of $ 56 million. The agreement has the option to extend the term for 5 additional independent periods of 5 years each, for the same amount indexed by the Brazilian inflation rate index IPCA. NOTE 16. LONG TERM RETENTION PROGRAM On May 3, 2023, the board of directors, upon the recommendation of the Compensation Committee, adopted the 2023 Long-Term Retention Program (“2023 LTRP”). In addition to the annual salary and bonus of each employee, certain employees (“Eligible Employees”) are eligible to participate in the 2023 LTRP, which provides for the grant to an Eligible Employee of a cash-settled fixed (a “2023 LTRP Fixed Award”) and cash-settled variable award (a “2023 LTRP Variable Award”, and together with any 2023 LTRP Fixed Award, the “2023 LTRP Awards”). In order to receive payment in respect of the 2023 LTRP Awards, each Eligible Employee must remain employed as of each applicable payment date. The 2023 LTRP award is payable as follows: ■ the eligible employee will receive 16.66 % of half of his or her target 2023 LTRP bonus once a year for a period of six years , with the first payment occurring no later th an April 30, 2024 ( the “2023 Annual Fixed Payment”); and ■ on each date the Company pays the Annual Fixed payment to the eligible employee, he or she will also receive a payment (the “2023 LTRP Variable Payment”) equal to the product of (i) 16.66 % of half of the target 2023 LTRP Award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the 2022 Stock Price (as defined below). For purposes of the 2023 LTRP, the “2022 Stock Price” shall equal $ 888.69 (the average closing price of the Company’s common stock on the NASDAQ Global Select Market during the final 60 trading days of 2022) and the “Applicable Year Stock Price” shall equal the average closing price of the Company’s common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date for so long as the Company’s common stock is listed on the NASDAQ. The rest of the LTRPs outstanding as of December 31, 2023, 2022 and 2021 follow a similar calculation method as explained above for the 2023 LTRP, e xcept that the 2016, 2017 and 2018 LTRP h ave performance conditions established by the board of directors that must be achieved at the first year-end of each program. Similar to the 2023 LTRP, the rest of the outstanding LTRPs additionally have eligibility conditions to be achieved at each year-end and require the employee remain employed by the Company as of each payment date. During the year ended December 31, 2023, the Company paid $ 90 million ($ 33 million in cash-settled fixed and $ 57 million in cash-settled variable award) of LTRP plus social security obligations applicable in each local jurisdiction. The following table summarizes th e 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023 LTRP Variable Award contractual obligation for the years ended December 31, 2023, 2022 and 2021: December 31, 2023 December 31, 2022 December 31, 2021 Aggregate Intrinsic value Weighted-average remaining contractual life (years) Aggregate Intrinsic value Weighted-average remaining contractual life (years) Aggregate Intrinsic value Weighted-average remaining contractual life (years) (In millions) Outstanding LTRP 2016 — — — — 15 0.08 Outstanding LTRP 2017 — — 7 0.08 24 0.58 Outstanding LTRP 2018 4 0.08 5 0.58 14 1.08 Outstanding LTRP 2019 37 0.61 35 1.08 84 1.58 Outstanding LTRP 2020 55 1.12 45 1.58 100 2.09 Outstanding LTRP 2021 51 1.62 39 2.08 85 2.58 Outstanding LTRP 2022 115 2.12 86 2.58 — — Outstanding LTRP 2023 270 2.62 — — — — 122 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table summarizes the LTRP accrued compensation expense for the years ended December 31, 2023, 2022 and 2021: December 31, 2023 2022 2021 (In millions) LTRP 2016 $ — $ — $ 2 LTRP 2017 — ( 2 ) 3 LTRP 2018 3 ( 1 ) 2 LTRP 2019 18 16 27 LTRP 2020 21 19 29 LTRP 2021 23 21 26 LTRP 2022 42 31 — LTRP 2023 60 — — $ 167 $ 84 $ 89 123 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 17. LOANS PAYABLE AND OTHER FINANCIAL LIABILITIES The following tables summarize the Company’s loans payable and other financial liabilities as of December 31, 2023 and 2022: December 31, 2023 2022 (In millions) Loans from banks $ 485 $ 319 Bank overdrafts 33 9 Secured lines of credit 39 115 Financial Bills — 113 Deposit Certificates 976 993 Commercial Notes 7 6 Finance lease liabilities 35 14 Collateralized debt 693 535 2028 Notes — 3 2026 Sustainability Notes 4 4 2031 Notes 9 10 Other lines of credit 11 10 Current loans payable and other financial liabilities $ 2,292 $ 2,131 Loans from banks $ 72 $ 145 Secured lines of credit 17 24 Financial Bills 8 — Deposit Certificates — 3 Commercial Notes 211 187 Finance lease liabilities 96 37 Collateralized debt 782 703 2028 Notes — 436 2026 Sustainability Notes 389 398 2031 Notes 626 694 Other lines of credit 2 — Non-Current loans payable and other financial liabilities $ 2,203 $ 2,627 124 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Type of instrument Currency Interest Weighted Average Interest Rate Maturity December 31, 2023 2022 (In millions) Loans from banks Chilean Subsidiaries Chilean Pesos Fixed 9.48 % January 2024 - April 2025 $ 104 $ 150 Brazilian Subsidiary (1) US Dollar — — — — 59 Brazilian Subsidiary (1) US Dollar Fixed 5.90 % August - November 2024 216 — Brazilian Subsidiary Brazilian Reais Variable TJLP + 0.8 % January 2024 - May 2031 9 9 Mexican Subsidiary Mexican Pesos Variable TIIE + 2.20 % - 3.50 % January 2024 - June 2027 178 177 Uruguayan Subsidiary Uruguayan Pesos Fixed 9.59 % January 2024 50 47 Colombian Subsidiary Colombian Pesos Fixed — — — 22 Bank overdrafts Uruguayan Subsidiary Uruguayan Pesos Fixed 10.32 % January 2024 13 9 Chilean Subsidiary Chilean Pesos Variable TIB + 2.00 % January 2024 20 — Secured lines of credit Argentine Subsidiaries Argentine Pesos Fixed 92.27 % January 2024 29 107 Mexican Subsidiary Mexican Pesos Fixed 10.24 % January 2024 - July 2027 27 32 Financial Bills Brazilian Subsidiary Brazilian Reais Variable CDI + 1.15 % - 1.40 % March - September 2025 8 113 Deposit Certificates Brazilian Subsidiary Brazilian Reais — — — — 272 Brazilian Subsidiary Brazilian Reais Variable 98.5 % to 200 % of CDI January - December 2024 703 565 Brazilian Subsidiary Brazilian Reais Fixed 9.85 % - 14.20 % January - June 2024 77 114 Brazilian Subsidiary Brazilian Reais Variable 106 % of CDI January 2024 196 45 Commercial Notes Brazilian Subsidiary Brazilian Reais Variable DI + 0.88 % January 2024 - August 2027 78 71 Brazilian Subsidiary Brazilian Reais Variable IPCA + 6.41 % January 2024 - August 2029 140 122 Finance lease liabilities 131 51 Collateralized debt 1,475 1,238 2028 Notes US Dollar — — — — 439 2026 Sustainability Notes US Dollar Fixed 2.375 % January 2024 - January 2026 393 402 2031 Notes US Dollar Fixed 3.125 % January 2024 - January 2031 635 704 Other lines of credit 13 10 $ 4,495 $ 4,758 (1) The carrying amount includes the effect of the derivative instrument that qualified for fair value hedge accounting. See Note 24 – Derivative instruments of these audited consolidated financial statements for further detail. 125 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements See Note 21 – Securitization transactions and Note 23 – Leases of these audited consolidated financial statements for details regarding the Company’s collateralized debt securitization transactions and finance lease liabilities, respectively. 2.375 % Sustainability Senior Notes Due 2026 and 3.125 % Senior Notes Due 2031 On January 14, 2021, the Company closed a public offering of $ 400 million aggregate principal amount of 2.375 % Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and $ 700 million aggregate principal amount of 3.125 % Notes due 2031 (the “2031 Notes”, and together with the 2026 Sustainability Notes, the “Notes”). The Company pays interest on the Notes on January 14 and July 14 of each year, beginning on July 14, 2021. The 2026 Sustainability Notes will mature on January 14, 2026, and the 2031 Notes will mature on January 14, 2031. In connection with the Notes, the Company capitalized $ 11 million of debt issuance costs, which are amortized during the term of the Notes. The Company may, at its option, redeem the 2026 Sustainability Notes, in whole or in part, at any time prior to December 14, 2025 (the date that is one month prior to the maturity of the 2026 Sustainability Notes) and the 2031 Notes, in whole or in part, at any time prior to October 14, 2030 (the date that is three months prior to the maturity of the 2031 Notes), in each case by paying 100 % of the principal amount of such Notes so redeemed plus the applicable “make-whole” amount and accrued and unpaid interest and additional amounts, if any. The Company may, at its option, redeem the 2026 Sustainability Notes, in whole or in part, on December 14, 2025 or at any time thereafter and the 2031 Notes on October 14, 2030 or at any time thereafter, in each case at the redemption price of 100 % of the principal amount of such Notes so redeemed plus accrued and unpaid interest and additional amounts, if any. If the Company experiences certain change of control triggering events, it may be required to offer to purchase the notes at 101 % of their principal amount plus any accrued and unpaid interest thereon through the purchase date. During 2023, the Company repurchased $ 9 million and $ 70 million principal amount of the outstanding 2026 Sustainability Notes and 2031 Notes, respectively plus $ 1 million of interest accrued. The total amount paid amounted to $ 66 million. For the year ended December 31, 2023, the Company recognized $ 14 million as a gain in Interest income and other financial gains in the consolidated statement of income. The Company intends to allocate an amount equal to the net proceeds from the issuance of the 2026 Sustainability Notes to finance or refinance Eligible Projects. “Eligible Projects” are investments and expenditures made by the Company beginning with the issuance date of the 2026 Sustainability Notes or in the 24 months prior to the issuance of the 2026 Sustainability Notes, that: (i) contribute to environmental objectives such as: clean transportation, land conservation and preservation, energy efficiency, renewable energy, green buildings and pollution prevention and control, (ii) aim to address or mitigate a specific social issue or seek to achieve positive social outcomes especially, but not exclusively, for one or more target populations or (iii) combine (i) and (ii). Certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) fully and unconditionally guarantee the payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes (the “Subsidiary Guarantees”). The initial Subsidiary Guarantors were MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., Mercado Pago Instituição de Pagamento Ltda. (formerly known as “MercadoPago.com Representações Ltda.”), MercadoLibre Chile Ltda., MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico (formerly known as “MercadoLibre, S. de R.L. de C.V.”), DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. On October 27, 2021, MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico became an excluded subsidiary pursuant to the terms of the Notes and it was released from its Subsidiary Guaranty. On October 27, 2021, MP Agregador, S. de R.L. de C.V. became a Subsidiary Guarantor under the Notes. On July 1 and October 1, 2022, Ibazar.com Atividades de Internet Ltda. and Mercado Envios Servicos de Logistica Ltda. were merged into eBazar.com.br Ltda, respectively. The Notes rank equally in right of payment with all of the Company’s other existing and future senior unsecured debt obligations. Each Subsidiary Guarantee will rank equally in right of payment with all of the Subsidiary Guarantor’s other existing and future senior unsecured debt obligations, except for statutory priorities under applicable local law. 2.00 % Convertible Senior Notes Due 2028 On August 24, 2018, the Company issued $ 800 million of 2.00 % Convertible Senior Notes due 2028 and issued an additional $ 80 million of notes on August 31, 2018 pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, for an aggregate principal amount of $ 880 million of 2.00 % 2028 Notes. The 2028 Notes were unsecured, unsubordinated obligations of the Company, which paid interest in cash semi-annually, on February 15 and August 15 of each year, at a rate of 2.00 % per annum. The 2028 Notes would have matured on August 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes were convertible, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $ 443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes. The Company did not have the right to redeem the notes prior to August 21, 2023. On or after August 21, 2023, if the last reported sale price of the Company’s common stock was at or above 130 % of the conversion price during specified periods, the Company could (at its option) redeem all or any portion of the 2028 Notes for cash equal to the 2028 Notes’ principal amount plus accrued and unpaid interest to, but excluding the redemption date. 126 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Holders were able to convert their 2028 Notes at their option at any time prior to February 15, 2028 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter was greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2028 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company called any or all of the 2028 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after February 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders could convert their 2028 Notes at any time, regardless of the foregoing circumstances. In January 2021, the Company repurchased $ 440 million principal amount of the outstanding of the 2028 Notes. The total amount paid amounted to $ 1,865 million, which includes principal, interest accrued and premium. The settlement consideration was first allocated to the extinguishment of the liability component of the 2028 Notes repurchased. The difference of $ 30 million between the fair value of the liability component and the net carrying amount of the liability component and unamortized debt issuance costs was recognized as a loss on debt extinguishment; in addition, $ 19 million paid as a premium was recognized as a loss in Interest expense and other financial losses line in the consolidated statement of income in January 2021. The remaining consideration of $ 1,484 million (net of income tax effects) was allocated to the reacquisition of the equity component and recognized as a reduction of stockholders’ equity. On September 19, 2023, the Company announced its intention to redeem all its 2028 Notes on November 14, 2023. Holders of the 2028 Notes could elect to convert their notes at any time before November 13, 2023. Each $1,000 principal amount of 2028 Notes was convertible into 2.2952 shares of MercadoLibre common stock. This conversion rate reflected an increase of 0.0399 additional shares per $1,000 principal amount of 2028 Notes above the otherwise applicable conversion rate, which applied because the notes were called for redemption. The Company settled any conversions solely in shares of common stock, except that any fractional shares that would otherwise be deliverable were paid out in cash. The redemption price paid for any notes that were not converted was 100% of the redeemed notes’ principal amount plus accrued and unpaid interest up to, but excluding, the redemption date. As of November 13, 2023, holders of the 2028 Notes converted $ 439 million principal amount of 2028 Notes into 1,007,597 shares of the Company’s common stock which MercadoLibre held as treasury stock. As of December 31, 2023, no principal amount of 2028 Notes remained outstanding. As of December 31, 2022, the principal and issuance costs of the 2028 Notes amounted to $ 439 million and $ 3 million, respectively. The Company entered into 2028 Notes Capped Call Transactions. The 2028 Notes Capped Call Transactions were expected generally to reduce the potential dilution upon conversion of the 2028 Notes in the event that the market price of the Company’s common stock was greater than the strike price and lower than the cap price of the 2028 Notes Capped Call Transactions. In June and August 2021, the Company terminated certain of its 2028 Notes Capped Call Transactions and received as consideration $ 102 million in cash and 57,047 shares of common stock, and $ 295 million in cash and 89,978 shares of Common Stock, respectively. Cash proceeds of terminating certain of the 2028 Notes Capped Call Transactions in June and August 2021 were used to repurchase 71,175 shares and 158,413 shares of common stock, respectively. The settlement averaging period with respect to the 2028 Notes Capped Call Transactions began on June 28, 2023 and ended on August 30, 2023, and the 2028 Notes Capped Call Transactions settlement date was September 1, 2023. As a result the Company received 289,675 shares of common stock. The following table presents the interest expense for contractual interest, the amortization of debt discount and of debt issuance costs: Year ended December 31, 2023 2022 2021 (In millions) Contractual coupon interest expense $ 7 $ 8 $ 9 Amortization of debt discount (1) — — 16 Amortization of debt issuance costs — 1 — Total interest expense related to the 2028 Notes $ 7 $ 9 $ 25 (1) For the years ended December 31, 2023 and 2022 no amortization of debt discount was recorded due to the adoption of ASU 2020-06. Revolving Credit Agreement On March 31, 2022, the Company, as borrower, entered into a $ 400 million revolving credit agreement (the “Credit Agreement”). Under the Credit Agreement, the Company’s subsidiaries MercadoLibre S.R.L., eBazar.com.br Ltda, Mercado Envios Serviços de Logística Ltda. (merged into eBazar.com.br Ltda. on October 1, 2022), Mercado Pago Instituição de Pagamento Ltda., DeRemate.com de México S. de R.L. de C.V., MP Agregador, S. de R.L. de C.V., MercadoLibre Chile Ltda., and MercadoLibre Colombia Ltda. have guaranteed the Company’s obligations. 127 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The interest rates under the Credit Agreement are based on Adjusted Term SOFR (“Secured Overnight Funding Rate”) plus an interest margin of 1.25 % per annum. Any loans drawn under the Credit Agreement must be repaid on or prior to March 31, 2025. The Company is also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125 %. As of December 31, 2023, no amounts have been borrowed under the facility. NOTE 18. RELATED PARTY TRANSACTIONS Indemnification agreements The Company has entered into indemnification agreements with each of the directors and executive officers of its local subsidiaries. These agreements require the Company to indemnify such individuals, to the fullest extent permitted by the laws of the jurisdiction where these subsidiaries operate, for certain liabilities to which they may become subject by reason of the fact that such individuals are or were directors or executive officers of the local subsidiaries of the Company. Advisory Agreement and Shares granted On April 8, 2022, the Company entered into an Advisory Services Agreement with Mr. Stelleo Tolda (former MercadoLibre’s Executive officer) whereby he will provide the Company with certain consulting and advisory services as an independent contractor for a three-year period for a fee of $ 10,000 per month. The Company also entered into a restricted stock award agreement with Mr. Tolda on April 8, 2022, whereby the Company awarded Mr. Tolda a grant of 5,051 shares of restricted stock under the Amended and Restated 2009 Equity Compensation Plan. One-fifth of the restricted stock award vests on each of the five anniversaries of the grant date, subject to Mr. Tolda’s continued compliance with the restrictive covenants set forth in the agreement. As of December 31, 2023, Mr. Tolda continues to comply with the aforementioned restrictive covenants. 128 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 19. QUARTERLY FINANCIAL DATA (UNAUDITED) The following tables present certain consolidated quarterly financial information for each of the last twelve quarters for the years ended December 31, 2023, 2022 and 2021: Quarter Ended March 31, June 30, September 30, December 31, (In millions, except for share data) 2023 Net Revenues $ 3,037 $ 3,415 $ 3,760 $ 4,261 Gross profit 1,536 1,720 1,995 1,955 Net Income 201 262 359 165 Net Income per share-basic 4.01 5.22 7.18 3.26 Net Income per share-diluted 3.97 5.16 7.16 3.25 Weighted average shares Basic 50,245,073 50,162,687 50,008,320 50,631,669 Diluted 51,235,341 51,152,955 50,209,439 50,697,515 2022 Net Revenues $ 2,248 $ 2,597 $ 2,690 $ 3,002 Gross profit 1,073 1,284 1,348 1,458 Net Income 65 123 129 165 Net Income per share-basic 1.30 2.43 2.57 3.28 Net Income per share-diluted 1.30 2.43 2.56 3.25 Weighted average shares Basic 50,408,754 50,364,529 50,325,075 50,284,640 Diluted 50,408,754 50,364,529 51,315,343 51,274,909 2021 Net Revenues $ 1,378 $ 1,703 $ 1,858 $ 2,130 Gross profit 591 754 807 853 Net (loss) Income ( 34 ) 68 95 ( 46 ) Net (loss) Income per share-basic ( 0.68 ) 1.37 1.92 ( 0.92 ) Net (loss) Income per share-diluted ( 0.68 ) 1.37 1.92 ( 0.92 ) Weighted average shares Basic 49,867,625 49,822,272 49,597,157 49,926,533 Diluted 49,867,625 49,822,272 49,597,157 49,926,533 NOTE 20. CASH DIVIDEND DISTRIBUTION After reviewing the Company’s capital allocation process the board of directors has concluded that it has multiple investment opportunities that can generate greater return to shareholders through investing capital into the business over a dividend policy. Consequently, the board of directors suspended the payment of dividend to shareholders as from the first quarter of 2018. 129 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 21. SECURITIZATION TRANSACTIONS The process of securitization consists of the issuance of securities collateralized by a pool of assets through a special purpose entity (“SPEs”), often under a VIE. The Company securitizes financial assets associated with its credit card receivables and loans receivable portfolio. The Company’s securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote SPEs. The Company generally retains economic interests in the collateralized securitization transactions, which are retained in the form of subordinated interests. For accounting purposes, the Company is generally precluded from recording the transfers of assets in securitization transactions as sales and is required to consolidate the SPE. The Company securitizes certain credit card receivables related to users’ purchases through Chilean SPEs. Under the SPE contracts, the Company has determined that it has no obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it does not retain any equity certificate of participation or subordinated interest in the SPEs. As the Company does not control the vehicles, its assets, liabilities and related results are not consolidated in the Company’s financial statements. Additionally, the Company securitizes certain credit card receivables related to users’ purchases through Brazilian SPEs. Under the SPE contracts, the Company has determined that it has the obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it retains subordinated interest in the SPEs. As the Company controls the vehicles, the assets, liabilities and related results are consolidated in its financial statements. The Company securitizes certain loans receivable through Brazilian, Argentine and Mexican SPEs, formed to securitize loans receivable provided by the Company to its users or purchased from financial institutions that grant loans to the Company’s users through Mercado Pago. According to the SPE contracts, the Company has determined that it has both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity that could be significant because it retains the equity certificates of participation and would therefore also be consolidated. When the Company controls the vehicle, it accounts for the securitization transactions as if they were secured financing and therefore the assets, liabilities and related results are consolidated in its financial statements. 130 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The following table summarizes the Company’s collateralized debt under securitization transactions, as of December 31, 2023: SPEs Collateralized debt as of December 31, 2023 Interest rate Currency Maturity Mercado Crédito I Brasil Fundo de Investimento Em Direitos Creditórios Não Padronizados $ 208 CDI + 2.50 % Brazilian Reais May 2025 Mercado Crédito Fundo de Investimento Em Direitos Creditórios Não Padronizado 17 CDI + 3.50 % Brazilian Reais August 2025 Olimpia Fundo de Investimento Em Direitos Creditórios 104 CDI + 1.25 % Brazilian Reais November 2024 Mercado Crédito II Brasil Fundo De Investimento Em Direitos Creditórios Nao Padronizados 151 CDI + 2.35 % Brazilian Reais January 2030 Seller Fundo De Investimento Em Direitos Creditórios 208 CDI + 1.60 % Brazilian Reais March 2026 Seller Fundo De Investimento Em Direitos Creditórios 104 CDI + 1.80 % Brazilian Reais May 2026 Seller Fundo De Investimento Em Direitos Creditórios 42 CDI + 1.40 % Brazilian Reais September 2026 Seller Fundo De Investimento Em Direitos Creditórios 21 CDI + 1.60 % Brazilian Reais November 2026 Mercado Crédito Consumo XIX 1 Badlar rates plus 200 basis points with a min 60 % and a max 92 % Argentine Pesos February 2024 Mercado Crédito Consumo XX 5 Badlar rates plus 200 basis points with a min 60 % and a max 92 % Argentine Pesos March 2024 Mercado Crédito Consumo XXI 7 Badlar rates plus 200 basis points with a min 80 % and a max 120 % Argentine Pesos June 2024 Mercado Crédito Consumo XXII 8 Badlar rates plus 200 basis points with a min 80 % and a max 120 % Argentine Pesos June 2024 Mercado Crédito Consumo XXIII 8 Badlar rates plus 200 basis points with a min 80 % and a max 120 % Argentine Pesos August 2024 Mercado Crédito Consumo XXIV 8 Badlar rates plus 200 basis points with a min 100 % and a max 140 % Argentine Pesos October 2024 Mercado Crédito Consumo XXV 9 Badlar rates plus 200 basis points with a min 100 % and a max 150 % Argentine Pesos November 2024 Mercado Crédito Consumo XXVI 9 Badlar rates plus 200 basis points with a min 100 % and a max 160 % Argentine Pesos November 2024 Mercado Crédito Consumo XXVII 9 Badlar rates plus 200 basis points with a min 100 % and a max 180 % Argentine Pesos March 2025 Mercado Crédito XIX 6 Badlar rates plus 200 basis points with a min 100 % and a max 140 % Argentine Pesos August 2024 Mercado Crédito XX 4 Badlar rates plus 200 basis points with a min 100 % and a max 170 % Argentine Pesos December 2024 Fideicomiso de administración y fuente de pago CIB/3756 247 The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 2.35 % Mexican Pesos August 2026 Fideicomiso de administración y fuente de pago CIB/3369 30 The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 7.0 % Mexican Pesos April 2025 Fideicomiso de administración y fuente de pago CIB/3369 269 The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.0 % Mexican Pesos April 2025 $ 1,475 This secured debt is issued by the SPEs and includes collateralized securities used to fund the Company’s Fintech business. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt and do not have recourse to the Company. Additionally, the cash flows generated by the SPEs are restricted to the payment of amounts due to third-party investors, but the Company retains the right to residual cash flows. 131 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The assets and liabilities of the SPEs are included in the Company’s audited consolidated financial statements as of December 31, 2023 and 2022, as follows: December 31, 2023 2022 Assets (In millions) Current assets: Restricted cash and cash equivalents $ 355 $ 459 Credit card receivables and other means of payments, net 105 317 Loans receivable, net 1,198 799 Total current assets 1,658 1,575 Non-current assets: Long-term investments 23 21 Loans receivable, net 27 24 Total non-current assets 50 45 Total assets $ 1,708 $ 1,620 Liabilities Current liabilities: Accounts payable and accrued expenses $ — $ 4 Loans payable and other financial liabilities 693 535 Other liabilities 1 1 Total current liabilities 694 540 Non-current liabilities: Loans payable and other financial liabilities 782 703 Total non-current liabilities 782 703 Total liabilities $ 1,476 $ 1,243 NOTE 22. EQUITY OFFERING On November 18, 2021, the Company closed a public equity offering of $ 1,550 million of common stock at a public offering price of $ 1,550 per share (the “Offering”). Pursuant to the Offering, the Company issued 1,000,000 shares of common stock, par value $ 0.001 per share (the “Common Stock”). The Company raised funds in the amount of $ 1,520 million net of issuance costs paid. 132 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 23. LEASES The Company leases certain fulfillment, cross-docking and service centers, office space, aircraft, aircraft hangars, machines and vehicles in the various countries in which it operates. The lease agreements do not contain any residual value guarantees or material restrictive covenants. Supplemental balance sheet information related to leases was as follows: December 31, 2023 2022 Operating Leases (In millions) Operating lease right-of-use assets $ 899 $ 656 Operating lease liabilities $ 838 $ 656 Finance Leases Property and equipment, at cost 183 87 Accumulated depreciation ( 50 ) ( 31 ) Property and equipment, net $ 133 $ 56 Finance lease liabilities $ 131 $ 51 The following table summarizes the weighted average remaining lease term and the weighted average incremental borrowing rate for operating leases and the weighted average discount rate for finance leases as of December 31, 2023: Year Ended December 31, 2023 2022 Weighted average remaining lease term Operating leases 8 Years 8 Years Finance leases 3 Years 3 Years Weighted average discount rate (1) Operating leases 9 % 10 % Finance leases 34 % 16 % (1) Includes discount rates of leases in local currency and U.S dollar. The components of lease expense were as follows: Year Ended December 31, 2023 2022 2021 (In millions) Operating lease cost $ 173 $ 128 $ 80 Finance lease cost: Depreciation of property and equipment 22 18 9 Interest on lease liabilities 13 8 5 Total finance lease cost $ 35 $ 26 $ 14 Variable lease cost (1) $ 35 $ 17 $ 13 (1) Variable lease payments are expensed as incurred and include charges such as flight hours above minimum, fuel, among others. 133 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Supplemental cash flow information related to leases was as follows: Year Ended December 31, 2023 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: (In millions) Operating cash flows from operating leases $ 168 $ 117 $ 71 Financing cash flows from finance leases 33 20 17 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 314 $ 317 $ 229 Finance leases 99 18 37 The following table summarizes the fixed, future minimum rental payments, excluding variable costs, which are discounted by the Company’s incremental borrowing rates to calculate the lease liabilities for the operating and finance leases: Period Ending December 31, 2023 Operating Leases Finance Leases (In millions) One year or less $ 190 $ 52 One year to two years 184 47 Two years to three years 153 38 Three years to four years 130 27 Four years to five years 119 9 Thereafter 404 — Total lease payments $ 1,180 $ 173 Less imputed interest ( 342 ) ( 42 ) Total $ 838 $ 131 NOTE 24. DERIVATIVE INSTRUMENTS Cash flow hedges As of December 31, 2023, the Company used foreign currency exchange contracts to hedge the foreign currency effects related to the forecasted purchase of MPOS devices in U.S. dollars owed by a Brazilian subsidiary whose functional currency is the Brazilian Real. The Company designated the foreign currency exchange contracts as cash flow hedges, the derivatives’ gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Cost of net revenues” line item, in the same period the forecasted transaction affects earnings. As of December 31, 2023, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive loss will be reclassified into the consolidated statements of income within the next 12 months. In addition, the Company has entered into swap contracts to hedge the interest rate fluctuation of its financial debt held by one of its Brazilian subsidiaries. The Company designated the swap contracts as cash flow hedges. The derivatives’ gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Interest expense and other financial losses” line item within the next 12 months. Fair value hedges The Company has entered into swap contracts to hedge the interest rate and the foreign currency exposure of its fixed-rate, foreign currency financial debt held by its Brazilian subsidiaries. The Company designated the swap contracts as fair value hedges. The derivatives’ gain or loss is reported in the consolidated statements of income in the same line items as the change in the value of the financial debt due to the hedged risks. Since the terms of the interest rate swaps match the terms of the hedged debts, changes in the fair value of the interest rate swaps are offset by changes in the fair value of the hedged debts attributable to changes in interest rates. Accordingly, the net impact in current earnings is that the interest expense associated with the hedged debts is recorded at the floating rate. 134 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements Net investment hedge The Company used cross currency swap contracts, to reduce the foreign currency exchange risk related to its investment in its Brazilian foreign subsidiaries and the interest rate risk. This derivative was designated as a net investment hedge and, accordingly, gains and losses are reported as a component of accumulated other comprehensive loss. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Interest expense and other financial losses” and “Foreign currency losses, net” line items, in the same period that the interest expense affects earnings. Derivative instruments not designated as hedging instruments As of December 31, 2023, the Company entered into certain foreign currency exchange contracts to hedge the foreign currency fluctuations related to certain transactions denominated in U.S. dollars of certain of its Brazilian subsidiaries, whose functional currencies are the Brazilian Real. These transactions were not designated as hedges for accounting purposes. In addition, the Company entered into full cross currency swap contracts to hedge the interest rate fluctuation and foreign currency fluctuations of its financial debt nominated in U.S. dollars held by its Brazilian subsidiaries. These transactions were not designated as hedges for accounting purposes. Finally, as of December 31, 2023, the Company entered into swap contracts to hedge the interest rate fluctuation of certain portion of its financial debt in its Brazilian subsidiaries and VIEs. These transactions were not designated as hedges for accounting purposes. The following table presents the notional amounts of the Company’s outstanding derivative instruments: Notional Amount as of December 31, 2023 2022 (In millions) Designated as hedging instrument Foreign exchange contracts $ 91 $ 109 Interest rate swap contracts — 229 Cross currency swap contracts 244 133 Not designated as hedging instrument Foreign exchange contracts 16 110 Interest rate swap contracts 245 480 Derivative instruments contracts The fair values of the Company’s outstanding derivative instruments as of December 31, 2023 and December 31, 2022 were as follows: Derivative Instruments Balance sheet location December 31, 2023 2022 (In millions) Foreign exchange contracts designated as cash flow hedges Other current assets $ — $ 1 Cross currency swap contracts designated as fair value hedge Other current assets 1 — Interest rate swap contracts not designated as hedging instruments Other non-current assets 22 — Cross currency swap contracts designated as net investment hedge Other current liabilities 6 2 Interest rate swap contracts designated as cash flow hedges Other current liabilities — 8 Cross currency swap contracts designated as fair value hedge Other current liabilities 4 2 Interest rate swap contracts not designated as hedging instruments Other current liabilities 7 1 Foreign exchange contracts not designated as hedging instruments Other current liabilities 1 2 Foreign exchange contracts designated as cash flow hedges Other current liabilities 3 2 Interest rate swap contracts not designated as hedging instruments Other non-current liabilities 10 6 Cross currency swap contracts designated as net investment hedge Other non-current liabilities — 1 135 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements The effects of derivative contracts designated as hedging instruments on the consolidated statements of comprehensive income as of December 31, 2023 and December 2022 were as follows: December 31, 2022 Amount of gain (loss) recognized in other comprehensive income Amount of (gain) loss reclassified from accumulated other comprehensive loss December 31, 2023 (In millions) Foreign exchange contracts designated as cash flow hedges $ ( 2 ) $ ( 12 ) $ 10 $ ( 4 ) Interest swap contracts designated as cash flow hedges ( 2 ) 8 ( 6 ) — Cross currency swap contracts designated as net investment hedge ( 1 ) ( 9 ) 7 ( 3 ) $ ( 5 ) $ ( 13 ) $ 11 $ ( 7 ) The effect of the Company’s fair value hedge relationships on the consolidated statements of income for the years ended December 31, 2023 and 2022 was a loss of $ 19 million and a loss of less than $ 1 million, respectively, and affected interest expense and other financial losses and foreign exchange losses, net (there were no fair value hedge relationships during the year ended December 31, 2021). The carrying amount of the hedged items for fair value hedges included in the “Loans payable and other financial liabilities” line item of the consolidated balance sheets as of December 31, 2023 and 2022 are $ 216 million and $ 59 million, respectively. The effect of the Company’s fair value hedge relationships on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of December 31, 2023 and 2022 are $ 1 million and less than $ 1 million, respectively (there were no fair value hedge relationships during the year ended December 31, 2021). The effects of derivative contracts not designated as hedging instruments on the consolidated statements of income during the years ended December 31, 2023, 2022 and 2021 were as follows: Year Ended December 31, 2023 2022 2021 (In millions) Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net $ ( 11 ) $ ( 10 ) $ ( 2 ) Currency swap contracts not designated as hedging instruments recognized in Foreign currency losses, net — ( 29 ) 2 Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses 2 ( 7 ) — $ ( 9 ) $ ( 46 ) $ — 136 | MercadoLibre, Inc. Table of Contents MercadoLibre, Inc. Notes to Consolidated Financial Statements NOTE 25. SHARE REPURCHASE PROGRAM On February 21, 2023, the Board authorized the Company to repurchase shares of the Company’s common stock, for an aggregate consideration of up to $ 900 million to expire on March 31, 2024. As of December 31, 2023, the estimated remaining balance available for share repurchases under this Program was $ 157 million. The Company expects to purchase shares at any time and from time to time, in compliance with applicable federal securities laws, through open-market purchases, block trades, derivatives, trading plans established in accordance with SEC rules, or privately negotiated transactions. The timing of repurchases will depend on factors including market conditions and prices, the Company’s liquidity requirements and alternative uses of capital. The share repurchase program may be suspended from time to time or discontinued, and there is no assurance as to the number of shares that will be repurchased under the program or that there will be any additional repurchases. As of December 31, 2023, the Company had acquired 278,917 shares under the aforementioned share repurchase program. From time to time, the Company acquires shares of its own common stock in the Argentine market and pays for them in Argentine Pesos at a price that reflects the additional cost of accessing U.S. dollars through securities denominated in U.S. dollars, because of restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate in Argentina (See Note 2 – Summary of significant accounting policies – Argentine currency status and macroeconomic outlook of these audited consolidated financial statements). As a result, the Company recognized foreign currency losses o f $ 386 million, $ 141 million and $ 90 million for the years ended December 31, 2023, 2022 and 2021, respectively. 137 | MercadoLibre, Inc.