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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-23 · 320 added, 217 removed, 365 unchanged (60% of the section changed)

Summary of Risk Factors

Our business is subject to numerous risks.

The following is a summary of the principal risks that we believe are material to our stockholders and prospective stockholders and that should be carefully considered when evaluating our Company, our business and prospects:

■ Our business depends on the continued growth of online commerce and digital financial services, the commercial and financial activity that our users generate on our platforms and the availability and reliability of the Internet in Latin America;

■ We operate in a highly competitive and evolving environment;

■ We rely on third-party platforms, such as Google Play and Apple app stores, to access our Mercado Libre and Mercado Pago apps;

■ Our future success depends on our ability to expand and adapt our operations to meet rapidly changing industry and technology standards in a cost-effective and timely manner;

■ The markets in which we operate are rapidly evolving and we may not be able to maintain our profitability;

■ We may be liable for or experience reputational damage from the failure of users of our Marketplace to deliver merchandise or make required payments;

■ Fraudulent activity by our users could negatively impact our operating results, brand and reputation and cause the use of services to decrease;

■ We are subject to consumer trends and could lose revenue if certain items become less popular or if we fail to meet customer demand;

■ Manufacturers may limit distribution of their products by distributors, prevent distributors from selling through us or encourage governments to limit e-commerce;

■ Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business;

■ We rely on banks and investment funds that acquire Mercado Pago’s receivables and payment processors to fund transactions, and changes to card association fees, rules or practices may adversely affect our business;

■ The failure of the financial institutions with which we conduct business may have a material adverse effect on our business, operating results, and financial condition;

■ A rise in interest rates may negatively affect our Mercado Pago payment volume;

■ Changes in Mercado Pago’s funding mix and ticket mix could adversely affect Mercado Pago’s results;

■ Our lending solution exposes us to the credit risk of our merchants and consumers, among other risks;

■ We face significant risks related to the ongoing reliability of our logistics network and shipping service;

■ Failure to successfully operate our fulfillment network may also negatively affect our business;

■ Problems that affect our service providers could potentially adversely affect us as well;

■ If we are unable to compete effectively for advertising spend, or if our merchants reduce advertising spend, our business and results of operations could be materially harmed;

■ We may not realize benefits from recent or future strategic investments, acquisitions of businesses, technologies, services or products, despite their capital outlay and potential dilution to our stockholders;

■ We depend on key personnel, the loss of which could have a material adverse effect on us;

■ We may have inadequate business insurance coverage, which would require us to spend significant resources in the event of a disruption of our services or other contingency;

■ Our debt instruments contain restrictions that limit our flexibility in operating our business, and changes by any rating agency to our outlook or credit rating could negatively affect us;

■ We hold and may acquire digital assets that may be subject to volatile market prices and unique risks of loss;

■ Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks;

■ There are potential risks related to our loyalty program and our cryptocurrency buy, hold and sell feature;

18 | MercadoLibre, Inc.

■ Natural disasters, climate change, geopolitical events, global health epidemics or pandemics, transportation disruptions and catastrophic events could materially adversely affect our financial performance;

■ We are subject to extensive government regulation and oversight.

Failure to comply with existing and future rules and regulations in the jurisdictions in which we operate could adversely affect the operations of one or more of our businesses in those jurisdictions;

■ It may be difficult to enforce judgments rendered against us in U.S.

■ We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms;

■ We may not be able to adequately protect and enforce our intellectual property rights.

We could potentially face claims alleging that our technologies infringe the property rights of others;

■ Any delay or problem with operating or upgrading our existing information technology infrastructure could cause a disruption in our business and adversely impact our financial results;

■ We are subject to security breaches, disruption and confidential data theft from our systems, which can adversely affect our reputation and business;

■ We may not be able to secure licenses for technologies on which we rely;

■ We face the risk of political and economic crises, instability, terrorism, civil strife, labor conflicts, expropriation, corruption and other risks of doing business in emerging markets;

■ Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate.

This involvement, as well as political and economic conditions, could adversely affect our business;

■ Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls;

■ Our transactions in Latin America may be impacted by the weaknesses of secure payment methods;

■ Provisions of our certificate of incorporation and Delaware law could inhibit others from acquiring us, prevent a change of control, and may prevent efforts by our stockholders to change our management;

■ We may require additional capital in the future, and this additional capital may not be available on acceptable terms or at all;

■ Shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well;

■ We cannot guarantee that any share repurchase program will be fully consummated or will enhance stockholder value, and share repurchases could increase the volatility of our stock prices and diminish our cash reserves.

Set forth below is a full description of each of the risks that we believe are material to our stockholders and prospective stockholders.

You should carefully consider the following factors in evaluating our Company, our properties and our business.

Risks related to our business and operations

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Availability, transaction speeds, acceptance, interest and use of the Internet across Latin America are all critical to our growth and services, and the occurrence of any one or more of the above challenges to Internet usage could have a material adverse effect on our business.

19 | MercadoLibre, Inc.

We operate in a highly competitive and evolving environment

The e-commerce and omnichannel retail, e-commerce services, fintech and digital content and electronic devices industries are relatively new in Latin America, rapidly evolving, highly innovative and intensely competitive, and we expect competition to become more intense in the future.

To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant and useful products and services in a timely manner.

Our competitors may respond to new or emerging technologies and changes in customer requirements faster and more effectively than we do, and they may also devote greater resources to the development, promotion, and sale of products and services.

Barriers to entry are relatively low and current offline and new competitors, including small businesses who want to create and promote their own stores or platforms, can easily launch new sites, mobile platforms or applications at relatively low cost using software that is commercially available or partner with other e-commerce, search, advertising or social media companies.

Users who purchase or sell goods and services through us have increasingly more options and merchants have more channels to reach consumers.

Competitors may also be more narrowly focused on a particular type of goods and create a compelling community.

The e-commerce and omnichannel retail, e-commerce services, fintech and digital content and electronic devices industries are still relatively new in Latin America, rapidly evolving, highly innovative and intensely competitive, and we expect competition to become more intense in the future.

To compete successfully, we must accurately anticipate technological developments and deliver innovative, relevant and useful products and services in a timely manner.

Our competitors may respond to new or emerging technologies and capabilities, including practical applications of AI and ML, as well as changes in customer requirements, faster and more effectively than we may, and they may also devote greater resources to the development, promotion, and sale of products and services.

Barriers to entry are relatively low, and our current offline and new digital competitors, including small businesses who want to create and promote their own stores or platforms, can easily launch new sites, mobile platforms or applications at relatively low costs using software that is commercially available, or partner with other e-commerce, search, advertising or social media companies.

Users who purchase or sell goods and services through us have increasingly more options, and merchants also have more channels to reach consumers.

Competitors may also be more narrowly focused on a particular type of goods and create a compelling community for those particular goods.

We have many competitors in different industries, ranging from large and established companies to emerging start-ups.

Mercado Libre’s Marketplace currently competes with a number of companies, including:

Mercado Libre’s Marketplace currently competes with a number of companies operating throughout Latin America, including:

traditional brick and mortar retailers, e-commerce and omnichannel retailers and vendors and distributors offering physical, digital and interactive media products that we offer and sell on our platform;

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business-to-consumer online commerce services.

in each case located throughout Latin America.

Mercado Pago competes with existing online and offline payment methods, including, among others:

Mercado Pago competes with existing online and offline companies, including, among others:

traditional banks and financial institutions;

fintechs (e.g., crowdfunding institutions, electronic payment providers), and other providers of financial services, particularly credit, prepaid and debit cards, checks, money orders, and electronic bank deposits and transactions;

fintech companies (e.g., crowdfunding institutions, electronic payment providers), and other providers of financial services and payment methods, particularly credit, prepaid and debit cards, checks, money orders, and electronic bank deposits and transactions;

payment networks that facilitate processing and aggregation of payments cards and retail networks;

tokenized and contactless payment services, digital wallets, QR code-based solutions and other payment solutions;

tokenized and contactless payment services, digital wallets, cryptocurrency wallets, QR code-based solutions and other payment solutions;

international and local online payments services;

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peer to peer payments and electronic money remittances and other point of sale terminals and devices or technologies installed at merchants’ sites.

Competitors with larger, more well-established and well-financed companies have greater resources, longer history, greater brand recognition, more customers and better access to suppliers of critical inputs and products.

This positioning allows our competitors to acquire, invest in or enter into commercial relationships with competing businesses, adopt more aggressive pricing, secure better terms from suppliers, devote more resources to technology, marketing and promotional campaigns, infrastructure, fulfillment and payment solutions.

Competitors with larger, more well-established and well-financed companies have greater resources, a longer history, greater brand recognition, more customers and better access to suppliers of critical inputs and products.

This positioning allows our competitors to acquire, invest in or enter into commercial relationships with competing businesses, adopt more aggressive pricing, secure better terms from suppliers, make acquisitions and enter into other strategic arrangements, devote more resources to technology, marketing and promotional campaigns, infrastructure, fulfillment and payment solutions and continue to compete for users, advertisers, customers, and partners.

These competitive advantages could be used to harm our competitive position through the adoption of restrictive covenants with suppliers, self-preferencing their product offerings, tying and bundling services and cross subsidizing.

Competing services tied to established banks and other financial institutions may offer greater liquidity and create greater consumer confidence in the safety and efficacy of their services.

Competing services tied to established banks and other financial institutions may offer greater liquidity and create greater consumer confidence in the safety and efficacy of our competitors' services.

Established banks and other financial institutions currently offer online payments, and those that do not yet provide such a service could quickly and easily develop it.

In many cases, companies that directly or indirectly compete with us provide Internet access.

Some of these providers may take measures that could degrade, disrupt, increase the cost of customers’ use of our services or advocate in favor of government measures that could increase or change regulatory requirements resulting in increased costs for us, all of which could adversely affect our business and results of operations.

Further, discrepancies in enforcement of existing laws may enable our lesser known competitors to aggressively interpret those laws without commensurate scrutiny, thereby affording them competitive advantages.

Similarly, some of our competitors have been accused in other jurisdictions of anticompetitive business practices, which they can replicate in jurisdictions and markets where we actively compete, particularly in Latin American countries where antitrust authorities have not yet focused on such commercial practices.

18 | MercadoLibre, Inc.

Some of these providers may take measures that could degrade, disrupt, increase the cost of customers’ use of our services or advocate for government measures that could increase or change regulatory requirements that increase our costs, all of which could adversely affect our business and results of operations.

Further, discrepancies in the enforcement of existing laws may enable our competitors to leverage such discrepancies in their favor, thereby affording them competitive advantages.

Similarly, some of our competitors have been accused, in other jurisdictions, of anticompetitive business practices, which they can replicate in Latin American countries where antitrust authorities have not yet focused on such commercial practices and where we actively compete.

The global financial services and payments industry is continuously changing and increasingly subject to regulatory supervision and continued examination.

Some of the payment services offered by our competitors operate at lower commission rates than Mercado Pago’s current rates, which has resulted in market pressures with respect to the commissions we charge for our Mercado Pago services.

Moreover, establishing a financial services and payments solution entity in Latin America has proven to be difficult and resource intensive (time and money).

Moreover, establishing a financial services and payments solution entity in Latin America has proven to be difficult and resource intensive in terms of time and capital.

Traditional banking and financial institutions in Latin America still have significant influence over sectoral regulators and have been relatively successful at influencing the enactment of new regulations that may hinder or restrict the overall success of fintech businesses by imposing unnecessary and cumbersome requirements or otherwise limiting their business models.

This influence makes it harder to promote innovative payment solutions and policy changes to adapt regulation to an ever changing and fast growing innovative and disrupting industry.

20 | MercadoLibre, Inc.

We are expanding our investment in AI across the entire Company.

This includes using generative AI and continuing to integrate AI capabilities into our products and services.

While AI/ML can present significant benefits, it can also present risks and challenges to our business.

Data sourcing, technology integration, bias in decision-making algorithms, security challenges and the protection of personal privacy could slow down or impair the adoption and acceptance of AI/ML.

AI technology and services are highly competitive, rapidly evolving, and require significant investment, including development and operational costs, to meet the changing needs and expectations of our existing users and attract new users.

Our ability to deploy and leverage certain AI technologies critical for our products and services and for our business strategy, and to enhance productivity across the organization, may depend on the availability and pricing of third-party equipment and technical infrastructure.

Additionally, other companies may develop AI products and technologies that are similar or superior to our technologies or more cost-effective to deploy.

Other companies may also have (or in the future may obtain) patents, copyrights or other proprietary rights that could prevent, limit, or interfere with our ability to make, use, or sell our own AI products and services.

We may not be able to compete effectively with our competitors and our strategy to integrate AI/ML technology into our products and services may also not be accepted by our customers or by other businesses in the marketplace.

Furthermore, the non-deterministic nature of generative AI outputs may undermine the reliability and trustworthiness of our products and services, which may lead to customer dissatisfaction, brand or reputational harm or legal or regulatory liabilities.

If the output from AI/ML in our products or services is deemed to be inaccurate or questionable, or if the use of AI/ML does not operate as anticipated or perform as promised, our business and reputation may be harmed.

The integration of AI/ML may also expose us to risks regarding intellectual property ownership and license rights, particularly if any copyrighted material is embedded in training models.

We rely on third-party platforms, such as Google Play and Apple app stores, to access our Mercado Libre and Mercado Pago apps

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We are subject to the standard terms and conditions that these providers have for application developers, which govern the content, promotion, distribution, and operation of apps on their platforms or marketplaces, and which the providers can change unilaterally on short or no notice.

Those terms and conditions include limitations on the sale of digital goods and services (e.g., streaming video services), the mandatory use of the providers’ own payment processor for the sale of digital goods with a steep fee that ranges from 15% to 30% of the product’s listed price and anti-steering rules that forbid developers from informing users of their apps that alternative means of purchase are available outside the respective app store.

Apple also forbids the distribution and commercialization of third-party digital goods, thereby prohibiting the development of a digital goods marketplace in iOS in competition with Apple.

Those terms and conditions include limitations on the sale of digital goods and services (e.g., streaming video services), the mandatory use of the providers’ own payment processor for the sale of digital goods, with a steep fee that ranges from 15% to 30% of the product’s listed price, and anti-steering rules that forbid developers from informing users of their apps, via in-app communications, about alternative means of purchase available outside the respective app.

Apple also forbids the in-app distribution and commercialization of third-party digital goods, thereby prohibiting the development of a digital goods marketplace in iOS in competition with Apple.

Apple and Google’s terms and conditions for in-app purchases of digital goods may cause friction with Mercado Libre’s initiatives for its loyalty program as well as other new projects involving the sale of digital goods or the provision of advertisement video on demand streaming services.

These limitations may prevent the deployment of initiatives for mobile apps, thereby limiting the range of their overall impact.

These limitations may materially affect our competitiveness with respect to other digital integrated conglomerates that do not face the same limitations, thereby impacting our capacity to grow, to innovate and to enter and compete in new markets.

In addition, if changes to the existing terms and conditions interfere with the distribution of our products, if the platforms are unavailable for any prolonged period of time or if we are unable to maintain a good relationship with these third-party providers (including as a result of ongoing or future claims of anticompetitive practices), our business and results of operations could suffer.

These limitations may materially affect our competitiveness with respect to other digitally integrated conglomerates that do not face the same limitations, thereby negatively impacting our capacity to grow, innovate, enter and compete in new markets.

In addition, if changes to the existing terms and conditions interfere with the distribution of our products, if the platforms are unavailable for a prolonged period of time or if we are unable to maintain a good relationship with these third-party providers (including as a result of ongoing or future claims of anticompetitive practices), our business and results of operations could suffer.

Our future success depends on our ability to expand and adapt our operations to meet rapidly changing industry and technology standards in a cost-effective and timely manner

Rapid, significant, and disruptive technological changes impact the industries in which we operate, and the effects of technological changes on our business are uncertain.

Our success depends on our ability to develop and incorporate new technologies and adapt to technological changes and evolving industry standards if we are unable to do so in a timely or cost-effective manner, our business could be harmed.

Rapid, significant and disruptive technological changes impact the industries in which we operate.

Moreover, the effects of technological changes on our business are uncertain.

Our success depends on our ability to develop and incorporate new technologies and adapt to technological changes and evolving industry standards.

We are also increasingly leveraging AI technologies, including generative AI, in our products and services and are making investments to expand our use of generative AI capabilities.

If we are unable to do so in a timely or cost-effective manner, our business could be harmed.

We plan to continue to expand our operations by expanding our services internationally and developing and promoting new and complementary services.

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Similarly, a lack of market acceptance of these services or our inability to generate satisfactory revenues from any expanded services to offset their cost could have a material adverse effect on our business, results of operations and financial condition.

We must constantly add new hardware, update software, enhance and improve our billing and transaction systems, and add and train new engineering and other personnel to accommodate the increased use of our website and the new products and features we regularly introduce.

This upgrade process is expensive, and the increasing complexity and enhancement of our website results in higher costs.

We must constantly add new hardware, update software, enhance and improve our billing and transaction systems, and add and train new engineering and other personnel to accommodate the increased use of our website, apps and the new products and features we regularly introduce.

This upgrade process is expensive, the increasing complexity and enhancement of our website results in higher costs, and ultimately may not be successful.

Our revenues depend on prompt and accurate billing processes.

Failure to upgrade our technology, transaction-processing capabilities, features, transaction processing systems, security infrastructure, or network infrastructure to accommodate increased traffic or transaction volume, or the increased complexity of our website could materially harm our business and our ability to collect revenue.

In addition, our use of AI involves significant technical complexity and requires specialized expertise.

Any disruption or failure in our AI systems or infrastructure, or those of our third-party providers, could result in system failures, delays or errors in our operations, which could harm our business and financial results.

We may also need to enter into relationships with various strategic partners, websites, other online service providers, shipping companies and other third parties necessary to our business.

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The expansion of our Mercado Pago and Mercado Envios businesses into new countries may also require a close commercial relationship with one or more local banks or other intermediaries, which may prevent, delay or limit the introductions of our services in such countries.

If our users have negative experiences with, or view unfavorably, any of the companies or partners with whom we have relationships, it could cause them to stop using our products and services and negatively impact our results of operations.

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The markets in which we operate are rapidly evolving and we may not be able to maintain our profitability

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We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.

Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition.

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Accordingly, any significant shortfall in revenues relative to our planned expenditures may have an immediate adverse effect on our business, results of operations and financial condition.

We may be liable for or experience reputational damage from the failure of users of our Marketplace to deliver merchandise or make required payments

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Fraudulent activity by our users could negatively impact our operating results, brand and reputation and cause the use of services to decrease

We are subject to the risk of fraudulent activity by our users, including fraudulent and illicit sales, money laundering, bank fraud, fraud from means of payment entities, employee fraud and online securities fraud.

Measures to detect and reduce the occurrence of fraudulent activities are complex and require continuous improvement, and there can be no assurance that they will be sufficient to accurately detect, prevent or deter fraud, particularly new and continually evolving forms of fraud.

As our business grows, the cost of remediating for fraudulent activity, including customer reimbursements, may materially increase and could negatively affect our operating results.

In addition, users’ fraudulent or potential illegal activities when using any platform we operate or payment solutions we offer could expose us to civil or criminal liability and could have a material adverse effect on our financial performance, our business or reputation in the future.

As our business grows, the cost of remediating fraudulent activity, including customer reimbursements, may materially increase and could negatively affect our operating results.

In addition, users’ fraudulent or potential illegal activities when using our platforms or payment solutions we offer could expose us to civil or criminal liability and could have a material adverse effect on our financial performance, our business or reputation.

We incur losses from claims of customers who did not authorize a purchase, from buyer fraud and from erroneous transmissions.

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A decline in the demand for or popularity of certain items sold through the Mercado Libre Marketplace without an increase in demand for different items could result in reduced revenues.

Also, certain consumer “fads” or other factors may temporarily inflate the volume of certain types of items listed on the Mercado Libre Marketplace, posing an inventory risk and placing a significant strain on our infrastructure and transaction capacity.

These trends may also cause significant fluctuations in our operating results from one quarter to the next.

Although it is difficult to accurately forecast consumer trends and demand, we strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.

Our ability to predict and adapt to changing tastes and preferences depends on many factors, including, but not limited to, obtaining accurate and relevant data on customer preferences, emphasizing relevant merchandise categories, effectively managing our inventory levels, and implementing competitive and effective pricing and promotion strategies.

Although it is difficult to accurately forecast consumer trends and demand, we strive to predict these trends using the methods described above as overstocking or understocking products we sell could lead to lower sales, missed opportunities and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.

Failure to accurately forecast consumer trends and demand could significantly affect our revenue and our future growth.

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Manufacturers may limit distribution of their products by distributors, prevent distributors from selling through us or encourage governments to limit e-commerce

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In order to respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among some of our sellers, which could reduce activity on our websites and harm our profitability.

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Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business

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Any failure to maintain necessary controls or to properly manage customer funds could severely reduce customer use of Mercado Pago, and we could be found to be in violation of applicable laws and regulations, be subject to fines or other penalties or forced to cease providing this service.

Mercado Pago offers its users in Argentina, Mexico and Chile the option to use the balances stored on their Mercado Pago wallets to invest in low-risk investment funds (money market fund equivalents).

For the purposes of offering such intermediated investment functionality, Mercado Pago entered into diverse contractual relationships with licensed third party brokers and fund managers who serve as the managers of the investment funds and the facilitators of all associated investment services, including but not limited to the execution of investment orders.

Mercado Pago offers its users in Argentina, Mexico and Chile the option to use the balances stored on their Mercado Pago digital accounts to invest in low-risk investment funds (money market fund equivalents).

For the purposes of offering such intermediated investment functionality, Mercado Pago has entered into diverse contractual relationships with licensed third party brokers and fund managers who serve as the managers of the investment funds and the facilitators of all associated investment services, including but not limited to the execution of investment orders.

The scope of Mercado Pago’s involvement in these services is strictly limited to (i) the processing of charges and payments from users that use their balances held with Mercado Pago to invest, and (ii) sending the appropriate instructions to our investment partners.

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A disruption in our relationships with such third party providers or any of the services they provide to our users could adversely affect our customers’ confidence in our business.

In addition, the value of the investments made by our users in the respective investment funds, may fluctuate over time as a result of market conditions and investment decisions made by our third party providers.

In addition, the value of the investments made by our users in the respective investment funds may fluctuate over time as a result of factors not in our control, such as market conditions and investment decisions made by our third party providers.

If there is a disruption in the services provided by our third party providers or the investments made by our users otherwise decrease in value, our users may try to pursue claims or legal actions against us, which could affect our reputation and results of operations.

We rely on banks and investment funds which acquire Mercado Pago’s receivables and payment processors to fund transactions, and changes to card association fees, rules or practices may adversely affect our business

Mercado Pago relies on banks, investment funds or payment processors to process the funding of Mercado Pago transactions and Mercado Libre Marketplace collections, and must pay a fee for this service.

We rely on banks and investment funds that acquire Mercado Pago’s receivables and payment processors to fund transactions, and changes to card association fees, rules or practices may adversely affect our business

Mercado Pago relies on banks, investment funds or payment processors to process the funding of Mercado Pago transactions and Mercado Libre Marketplace collections, and we must pay a fee for this service.

From time to time, card associations may increase the interchange fees they charge for each transaction using one of their cards.

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These increased fees increase the operating costs of Mercado Pago, reduce our profit margins from Mercado Pago operations and, to a lesser degree, affect the operating margins of the Mercado Libre Marketplace.

We also offer Mercado Pago prepaid cards in Brazil and Mercado Pago credit cards in Brazil and Mexico, all under the VISA brand, as well as an electronic payment funds card (equivalent to a debit card) in Mexico and Argentina issued under the MasterCard brand.

We also offer Mercado Pago prepaid cards in Brazil and Mercado Pago credit cards in Brazil and Mexico, all under the VISA brand, as well as an electronic payment funds card (similar to a debit card) in Mexico and Argentina issued under the MasterCard brand.

If any of these companies were to be unwilling or unable to provide these services to us, or if they are willing to provide these services but at less favorable terms, our business and results of operations would be adversely affected.

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■ We may be required to increase the installment and financing fees we charge to customers for purchases made in installments or cease offering installment purchases altogether, each of which may result in a lower volume of transactions completed;

■ We may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so.

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■ We may be unable to access financing in the credit and capital markets at reasonable rates.

Due to the nature of our Mercado Pago and Mercado Libre Marketplace businesses, we generate high credit card receivables and consumer and merchant loans that from time to time we sell to financial institutions, and accordingly, lack of access to credit or significant changes to the terms of any existing credit, or bank liquidations could cause us to experience severe difficulties;

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Our ability to replace those instruments on the same or similar terms may be limited under difficult market conditions.

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A rise in interest rates may negatively affect our Mercado Pago payment volume

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Mercado Pago pays significant transaction fees when customers fund payment transactions using certain debit and credit cards or through unaffiliated entities, nominal fees when customers fund payment transactions from their bank accounts, and no fees when customers fund payment transactions from an existing Mercado Pago account balance.

Mercado Pago’s financial success will remain highly sensitive to changes in the rate at which its senders fund payments using credit cards.

Customers may prefer to pay using credit cards rather than bank account transfers for a number of reasons, including the ability to pay in installments, the ability to dispute and reverse charges, the ability to earn frequent flyer miles or other incentives offered by credit cards, the ability to defer payment, or a reluctance to provide bank account information to us.

Mercado Pago’s financial success remains highly sensitive to changes in the rate at which its senders fund payments using credit cards.

Customers may prefer to pay using credit cards rather than bank account transfers for a number of reasons, including the ability to pay in installments, dispute and reverse charges, earn frequent flyer miles or other incentives offered by credit cards, defer payment, or due to a reluctance to provide bank account information to us.

Certain costs and transactions fees that Mercado Pago pays in connection with certain payment methods are fixed regardless of the ticket price.

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If Mercado Pago receives a larger percentage of low ticket transactions, our profit margin may erode, or we may need to raise prices, which, in turn, may affect the volume of transactions.

Our Mercado Credito solution exposes us to the credit risk of our merchants and consumers, among other risks

Our Mercado Credito solution is offered to certain merchants and consumers, and the financial success of this product depends on the effective management of the credit related risk.

We assess the credit risk of merchants and/or consumers seeking a loan based on a risk model internally developed, among other factors, which may not accurately predict their creditworthiness due to inaccurate assumptions about the particular merchant and/or consumer or the economic environment or limited product history, among other aspects.

The accuracy of the risk model and our ability to manage credit risk may also be affected by legal or regulatory changes (e.g., bankruptcy laws and minimum payment regulations), competitors’ actions, changes in consumer behavior, funding resources, changes in the economic environment and other factors.

Our lending solution exposes us to the credit risk of our merchants and consumers, among other risks

Our lending solution is offered to certain merchants and consumers, and the financial success of this product depends on the effective management of the credit-related risk.

We assess the credit risk of merchants and/or consumers seeking a loan based on an internally-developed risk model which, among other factors, may not accurately predict their creditworthiness due to inaccurate assumptions about the particular merchant and/or consumer or the economic environment or limited product history, among other aspects.

A decline in economic, political, market, health and social conditions could impact our users as well, and their decisions could reduce the number of cards, accounts, and credit lines of their account holders, which ultimately impact our revenues.

Any events or conditions that impair the functioning of the financial markets, tighten the credit market, or lead to a downgrade of our current credit rating could increase our future borrowing costs and impair our ability to access the capital and credit markets on favorable terms, which could affect our liquidity and capital resources, or significantly increase our cost of capital.

Like other businesses with significant exposure to credit losses, we face the risk that Mercado Credito merchants and consumers will default on their payment obligations, making the receivables uncollectible and creating the risk of potential charge-offs, which could impact our liquidity.

Similar to other businesses with significant exposure to credit losses, we face the risk that our lending users may default on their payment obligations, making the receivables uncollectible and creating the risk of potential charge-offs, which could negatively impact our liquidity.

Any of these events could adversely affect our business and results of operation.

The funding and growth of our Mercado Credito business is directly related to interest rates;

a rise in interest rates may negatively affect our Mercado Credito business and results of operations.

The funding and growth of our lending business are directly related to interest rates;

a rise in interest rates may negatively affect our lending business and results of operations.

We face significant risks related to the ongoing reliability of our logistics network and shipping service

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We generally pay local carriers directly for their shipping costs, and then we decide how much of those costs we transfer to our customers.

The decision to raise the shipping fees we charge to users may have a negative effect on Mercado Envios’ shipping volume, and the decision not to do that may result in an increase in operating costs of Mercado Envios which could generate net losses in our commerce operations.

The decision to raise the shipping fees we charge to users may have a negative effect on Mercado Envios’ shipping volume, and the decision not to do so may result in a decrease in the operating margins of our commerce operations.

We rely on a number of local carriers (through non-exclusivity agreements) to receive the inventories for our first-party business and on third parties to ship orders to customers.

The unavailability of the services of local carriers because of unfavorable contractual or commercial terms or performance problems or any other difficulty experienced by the local carriers could negatively affect our ability to provide shipping services to our customers, which could in turn have a material adverse effect on our shipping service, operating results, and financial condition.

The unavailability of the services of local carriers in certain regions with high demand could negatively affect our ability to provide shipping services to our customers, which could in turn have a material adverse effect on our shipping service, operating results, and financial condition.

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Failure to successfully operate our fulfillment network may also negatively affect our business

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We also use fulfillment and warehousing services for our first-party business.

As we continue to add fulfillment centers, our fulfillment network may become more complex, and the operation of such centers may present significant challenges including an increased complexity of tracking inventories and operating our fulfillment network.

Our failure to accurately forecast customer demand, staffing and properly handle inventories and commercial relationships with third parties could result in excess or insufficient fulfillment capacity, service interruptions, an inability to optimize platform fulfillment or staffing, unexpected costs and adversely affect our reputation or results of operations.

Any supply chain constraints that affects us, our merchants or vendors could also adversely affect our ability to operate our fulfillment network effectively.

As we continue to add fulfillment centers, our fulfillment network may become more complex, and the operation of such centers may present significant challenges, including organized crime and drug dealers operating in certain regions where we provide logistic solutions, increasing the complexity of tracking inventories and the operation of our fulfillment network.

Our failure to accurately forecast customer demand, seller demand for storage, staffing and properly handle inventories and commercial relationships with third parties could result in excess or insufficient fulfillment capacity, service interruptions, an inability to optimize platform fulfillment or staffing, unexpected costs and may adversely affect our reputation or results of operations.

Any supply chain constraint that affects us, our merchants or vendors could also adversely affect our ability to operate our fulfillment network effectively.

We offer to sellers our Fulfillment Protection Program for any damage or loss of seller’s inventories as a result of using our fulfillment network service, subject to certain conditions.

We may in the future receive additional requests from sellers requesting reimbursement or threatening legal action against us if we do not reimburse them, the result of which could materially adversely affect our business and financial condition.

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We continue to build new warehouses to manage increasing demand on our logistics solution.

These construction efforts are subject to a risk of delay and also to risks relating to the quality of the construction, both of which could increase our costs and impact our ability to grow capacity in time to adequately meet demand.

We may in the future receive additional requests from sellers requesting reimbursement through this program or threatening legal action against us if we do not reimburse them, which could materially adversely affect our business and financial condition.

We continue to build new warehouses to manage the increasing demand of our logistics solution.

These construction efforts are subject to a risk of delay as well as risks relating to the quality of the construction, which could increase our costs and negatively impact our ability to grow capacity in time to adequately meet demand.

Problems that affect our service providers could potentially adversely affect us as well

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These services include the hosting of our servers, shipping and the postal and payments infrastructures that allow users to deliver and pay for goods and services, in addition to paying their Mercado Libre Marketplace bills.

Financial, regulatory, or other problems that might prevent these companies from providing services to us or our users could reduce the number of listings on our websites or make completing transactions on our websites more difficult, which would harm our business.

Financial, regulatory, or other problems that might prevent these companies from providing services to us or our users could reduce the number of listings on our websites or make completing transactions on our ecosystem more difficult, which may harm our business.

Any security breach at one of these companies could also affect our customers and harm our business.

If we are unable to compete effectively for advertising spend, or if our merchants reduce advertising spend, our business and results of operations could be materially harmed

We developed a growing advertising business on our platform.

We have developed a growing advertising business on our platform.

If we are unable to compete effectively for advertising spend, or if merchants reduce advertising spend due to adverse macroeconomic conditions or for other reasons, our business and results of operations could be materially harmed.

Our ability to maintain or increase the amount and pricing of advertising sold through our platform will depend on our ability to create more value (such as increased numbers of users, transactions and monetization, as well as increased brand awareness) than our competitors.

Some of our competitors are online sites that have larger customer bases and greater brand recognition, as well as a better understanding of local culture and commerce in certain jurisdictions.

Our ability to maintain or increase advertising revenue through our platform will depend on our ability to create more value for advertisers (such as increased numbers of users, increased transactions, enhanced monetization and stronger brand awareness) than our competitors.

Some of our current and potential competitors have greater resources, larger customer bases and greater brand recognition in certain jurisdictions, particularly with respect to our newly launched products and services.

Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition and operating results.

Changes to our advertising policies and data privacy practices, or those of other companies, may adversely affect the advertising that we are able to sell.

In addition, the existence and development of technologies that block ads online or affect our ability to customize ads could harm our advertising business.

We may not realize benefits from recent or future strategic investments, acquisitions of businesses, technologies, services or products despite their costs in cash and dilution to our stockholders

Changes to our advertising policies and data privacy practices, or those of other companies, may adversely affect the advertising revenues.

In addition, the existence and development of technologies that block advertisements online or affect our ability to customize advertisements could harm our advertising business.

We may not realize benefits from recent or future strategic investments, acquisitions of businesses, technologies, services or products, despite their capital outlay and potential dilution to our stockholders

We intend to continue to enter into a wide array of potential strategic transactions, including strategic investments, acquiring businesses, technologies, services or products, as appropriate opportunities arise.

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If debt financing for potential future acquisitions is unavailable, we may determine to issue shares of our common stock or preferred stock in connection with such an acquisition, and any such issuance could result in the dilution of our common stock.

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We depend on key personnel, the loss of which could have a material adverse effect on us

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In addition, changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies, which could adversely affect our ability to attract and retain qualified personnel.

Failure to successfully hire, train, manage, and retain sufficient personnel to meet our needs, as well as successfully transition key roles, such as the Chief Financial Officer transition we recently underwent, can be inherently difficult to manage, strain our operations, increase payroll and other costs, and harm our business and reputation.

Failure to successfully hire, train, manage, and retain sufficient and qualified personnel to meet our needs, as well as successfully transition key roles can be inherently difficult to manage, strain our operations, increase payroll and other costs, and harm our business and reputation.

We may have inadequate business insurance coverage, which would require us to spend significant resources in the event of a disruption of our services or other contingency

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Any business disruption, litigation, system failure or natural or man-made disaster may cause us to incur substantial costs and divert resources, which could have a material adverse effect on our business, results of operation and financial condition.

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Our debt instruments contain restrictions that limit our flexibility in operating our business, and changes by any rating agency to our outlook or credit rating could negatively affect us

The terms of our senior unsecured notes issued in January 2021 and certain collateralized debt under securitization transactions contain, and any debt instruments we enter in the future may contain, covenants that restrict or could restrict, among other things, our business and operations.

Failure to pay amounts due under a debt instrument or breach any of its covenants may result in the acceleration of the indebtedness (subject in certain cases to a grace or cure period).

Failure to pay amounts due under a debt instrument or a breach of any of its covenants may result in the acceleration of the indebtedness (subject in certain cases to a grace or cure period).

Moreover, any such acceleration and required repayment of, or default in respect of, any of our indebtedness could, in turn, constitute an event of default under other debt instruments, thereby resulting in the acceleration and required repayment of other indebtedness we may have.

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In addition, changes by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase our borrowing costs.

If our credit ratings are downgraded or other negative action is taken, the interest rates payable by us under our indebtedness may increase.

If our credit ratings are downgraded or other negative action by rating agencies is taken, the interest rates payable by us under our indebtedness may increase.

In addition, any downgrades to our credit ratings may affect our ability to obtain additional financing in the future and the terms of any such financing.

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We hold and may acquire digital assets that may be subject to volatile market prices and unique risks of loss

We used a portion of our cash reserve to purchase digital assets or certain other alternative reserve assets.

During 2021, we invested an aggregate $30 million in bitcoin and ether (both, cryptocurrencies), and we may continue acquiring and holding digital assets from time to time in the future.

However, in 2023 and 2022, we have not bought additional cryptocurrencies.

We have used a portion of our cash reserve to purchase digital assets or certain other alternative reserve assets and we may continue acquiring and holding digital assets from time to time in the future.

The prices of digital assets have been, and may continue to be, highly volatile, including as a result of various associated risks and uncertainties.

For example, the prevalence of such assets is a relatively recent development, and their long-term adoption by investors, consumers and businesses is unpredictable.

Moreover, they rely on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.

Moreover, these assets rely on technology for their creation, existence and transactional validation, and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.

The status of such assets for a variety of regulatory purposes is unclear and may change in the future.

As digital assets, including bitcoin, have grown in popularity and market size, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist activities, or entities subject to sanctions regimes.

If we are found to have purchased bitcoin or other digital assets from persons that have used the digital assets to launder money or from persons subject to sanctions, we may be subject to regulatory proceedings and further transactions or dealings in bitcoin or other digital assets may be restricted or prohibited.

As digital assets, including Bitcoin, have grown in popularity and market size, there has been an increasing focus on the extent to which such digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist activities and/or entities subject to sanctions regimes.

If we are found to have engaged in transactions involving Bitcoin or other digital assets with persons that have used such digital assets to launder money or persons subject to sanctions, we may be subject to regulatory obligations, proceedings or other actions, and our further transactions or dealings in Bitcoin or other digital assets may be restricted or prohibited.

The rapidly evolving regulatory landscape with respect to digital assets may subject us to additional costs, such as the implementation of additional and potentially costly controls or other actions.

As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions, that may result in operational problems or the loss or destruction of private keys needed to access such assets, which may be irreversible and could adversely affect the value of our digital assets and an investment in our Company.

While we intend to take reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be adversely affected.

As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions, that may result in operational problems or the loss, compromise or destruction of, or our inability to access, cryptographic private keys needed to access such assets, which may be irreversible and could adversely affect the value of our digital assets and an investment in our Company.

While we have taken reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be adversely affected.

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Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks

We have published an annual integrated impact report, sustainability bond reports in connection with the allocation of proceeds from the sale of our 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”), a Sustainability Bond Framework 2020 (the “Framework”), and a specific analysis of climate related risk factors following the guideline and recommendations of the Task Force on Climate-related Financial Disclosures.

These reports describe, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, diversity, inclusion and financial education, human capital management and efforts to reduce our environmental impact.

We publish an annual integrated impact report, that describes, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, inclusion and financial education, human capital management and efforts to reduce our environmental impact.

The implementation of these initiatives is complex and subject to contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, and may require considerable investments.

As such, we cannot guarantee that we will be able to execute any of these initiatives, including, but not limited to, the Company’s intention to allocate the proceeds from the sale of the 2026 Sustainability Notes to eligible projects meeting the criteria and within the time frame described in our Framework.

Further, these efforts may contribute to increased scrutiny from customers, regulators, investors and other stakeholders related to our ESG practices and disclosure.

Further, these efforts may impose additional costs and expose us to new risks, including increased scrutiny from customers, regulators, investors and other stakeholders related to our ESG practices and disclosure.

For example, some of our Marketplace customers may elect to reduce purchases from us if we are unable to verify that our performance and products meet the specifications of responsible sourcing programs.

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In addition, there can be no assurance that our current policies, practices, reporting frameworks and principles will be in compliance with any new environmental and social laws and regulations that may be promulgated in the U.S.

and elsewhere.

and other jurisdictions.

New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, taxes, diligence and disclosure.

The costs of changing any of our current practices to comply with any new legal and regulatory requirements in the U.S.

and elsewhere may be substantial.

and other jurisdictions may be substantial.

Furthermore, industry and market practices may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends and stay competitive among our peers.

Increased ESG related compliance costs for us as well as among Marketplace merchants and vendors and various other parties within our supply chain could result in increases to our overall operational costs.

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Failure or perceived failure to adapt to achieve our goals or commitments, or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners and our stock price.

Government, media or activist pressure to limit emissions could negatively impact consumers’ perceptions of our products and services, which could have a material adverse effect on our business, and the actions taken by governments and other actors to reduce emissions could impose costs that could materially affect our financial condition.

In addition, our sustainability initiatives may be unsuccessful for a variety of reasons, including if we are unable to realize the expected benefits of new technologies or if we do not successfully plan or execute new strategies, or if we fail to timely allocate the proceeds from our Sustainable Notes, which in turn could harm our business or damage our reputation.

There are potential risks related to our loyalty token program and our cryptocurrency buy, hold and sell feature

There are potential risks to MercadoLibre from the loyalty token program.

In addition, our sustainability initiatives may be unsuccessful for a variety of reasons, including if we are unable to realize the expected benefits of new technologies or if we do not successfully plan or execute new strategies, which in turn could harm our business or damage our reputation.

There are potential risks related to our loyalty program and our cryptocurrency buy, hold and sell feature

There are potential risks to MercadoLibre from the loyalty program.

Because of the novelty of digital assets, there is regulatory uncertainty about the legal and accounting treatment of the tokens issued in connection with the loyalty program in certain jurisdictions, which has and may continue to limit our ability to roll out the program in new jurisdictions or continue it successfully or at all under its current terms.

Such uncertainty could also subject us to regulatory actions or claims.

If the impact of the program becomes material to our operations, our reported results could be affected by variations in the market price of the token, since, under the current terms of the program, the tokens can be sold at the then prevailing market price and users may use the resulting fiat currency to purchase products and services on the Mercado Libre Marketplace.

In addition, while we have taken steps to make the tokens secure, digital assets in the custody of various other custodians have in the past been hacked or lost, and any users of our tokens that in the future may have similar experiences might try to pursue claims against us.

Despite our disclaimer of liability for any loss, damage, claim, cost and/or expense that may arise in connection with the loyalty token program, users may also try to pursue claims against us if the loyalty token program is unsuccessful or the tokens otherwise decrease in value.

Any such claims could affect our customers’ confidence in our digital assets, affecting our reputation and results of operations.

We cannot assure that the loyalty token program will achieve its objectives relating to customer usage and customer loyalty.

We provide our customers the ability to access through our Mercado Pago platform crypto-assets trading and custody services that are rendered by third parties, which allows users to buy, hold, sell and transfer certain global cryptocurrencies and stablecoins.

We also rely on third party service providers to perform several functions in connection with our loyalty token program.

If the impact of the program becomes material to our operations, our reported results could be affected by variations in the market price of the tokens, since, under the current terms of the program, the tokens can be sold at the then prevailing market price and users may use the resulting fiat currency to purchase products and services on the Mercado Libre Marketplace.

Despite our disclaimer of liability for any loss, damage, claim, cost and/or expense that may arise in connection with the loyalty program, users may also try to pursue claims against us if the loyalty program is unsuccessful or the tokens otherwise decrease in value.

Any such claims could negatively affect our customers’ confidence in our digital assets, adversely affecting our reputation and results of operations.

We cannot assure you that the loyalty program will achieve its objectives relating to customer usage and customer loyalty.

There are also potential risks to MercadoLibre in connection with a feature of our Mercado Pago services that gives customers the ability to access—through our Mercado Pago platform—crypto-assets trading and custody services that are rendered by third parties, which allow users to buy, hold, sell and transfer certain global cryptocurrencies and stablecoins.

For both our token loyalty program and our buy, hold and sell Mercado Pago feature, we rely on third party service providers to perform several functions in connection therewith.

Such service providers (“SPs”) provide our customers token and crypto-assets exchange services (whereby customers can buy and sell tokens and certain crypto-assets) as well as tokens and crypto-assets custody services.

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We, in turn, provide a platform that acts as an interface for our customers to access the SPs’ services.

A disruption in our relationship with the SPs or in any of the services provided by them to users could adversely affect our customers’ confidence in our loyalty token program, crypto-assets offerings through the SPs and on our business.

A disruption in our relationship with the SPs or in any of the services provided by them to users could adversely affect our customers’ confidence in our loyalty program, crypto-assets offerings through the SPs and, by extension, our business.

Our SPs rely on computer software, hardware and telecommunications infrastructure and networking to provide services to our customers related to the token and crypto-assets exchange and custody services.

These computer-based services are subject to disruption, delay and/or failure, which could cause our users to lose access to our Mercado Pago platform or to the SPs’ services.

Any such technical issues could negatively affect our customers’ confidence in our loyalty token program and the crypto-assets offering through the SPs and on our business.

The SPs maintain the cryptographic private keys which allow access to the digital wallets where our customers’ token and crypto-assets are held in custody.

In the event that those private keys are lost, destroyed, unable to be accessed or anyway compromised and no back up of such private keys exists, the SPs will not be able to access the tokens or crypto-assets held on behalf of our customers in their custody.

The SPs’ failure to safeguard the crypto-assets owned by our customers may result in losses to our customers, which could adversely affect our customers’ confidence in our crypto-assets and on our business.

In addition, the SPs’ failure to maintain necessary controls or safeguard against improper transactions due to process or control oversight could lead to sanctions and reputational harm for the Company.

The regulatory environment concerning digital assets, including cryptocurrencies and stablecoins, is uncertain and evolving.

Changes in laws and regulations regarding such assets, services that involve a partnership with a custodian and blockchain infrastructure providers, as well as the perception of the market regarding this type of asset, may negatively impact our ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.

Natural disasters, climate change, geopolitical events, global health epidemics or pandemics and catastrophic events could materially adversely affect our financial performance

Any such technical issues could negatively affect our customers’ confidence in our loyalty program and the crypto-assets offering.

In addition, the SPs maintain the cryptographic private keys that allow access to the digital accounts where our customers’ tokens and crypto-assets are held in custody.

While we have taken steps to make our program and these offerings secure, tokens and digital assets in the custody of various other custodians have in the past been hacked or lost.

In the event that those private keys are lost, destroyed, unable to be accessed or in any way compromised and no back up of such private keys exists, the SPs will not be able to access the tokens or crypto-assets held on behalf of our customers in their custody.

The SPs’ failure to safeguard the crypto-assets owned by our customers may result in losses to our customers, which could adversely affect our customers’ confidence in our tokens and crypto-assets and negatively affect our business.

In addition, the decentralized and pseudonymous nature of digital assets raises novel compliance risks and challenges;

the SPs’ failure to maintain necessary controls or safeguard against improper transactions—for example, with sanctioned parties— due to process or control oversight could lead to regulatory penalties and reputational harm for the Company.

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The market perception and regulatory environment concerning digital assets, including cryptocurrencies and stablecoins, are uncertain and evolving.

Jurisdictions where we operate may enact legislation subjecting us to additional money transmitter or other regulations in connection with our token loyalty program and crypto-assets exchange services or may require us to obtain licenses or regulatory authorizations in connection with these activities.

Any changes to, or failure to comply with, these laws and regulations, or any laws or regulations affecting services that involve a partnership with a custodian and blockchain infrastructure providers, may negatively impact our token loyalty program and the ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.

Natural disasters, climate change, geopolitical events, global health epidemics or pandemics, transportation disruptions and catastrophic events could materially adversely affect our financial performance

The occurrence of one or more natural disasters, such as hurricanes, tropical storms, floods, fires, earthquakes, tsunamis, cyclones, typhoons;

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global health epidemics or pandemics or other contagious outbreaks (such as COVID-19 and its variants);

transportation disruptions that affect transportation and warehousing providers (for instance, labor disputes and work stoppages);

and catastrophic events, such as war, civil unrest, terrorist attacks or other acts of violence, including active shooter situations, acts of vandalism or terrorism, labor or trade disputes, and similar events in countries in which we operate, in which our users are located, or in other areas of the world could adversely affect our operations and financial performance.

Such events could result (whether directly or indirectly) in physical damage to, or the complete loss of, one or more of our facilities, loss or spoilage of inventory, limits on our ability to receive the inventories of third parties efficiently and ship orders to customers, business interruption, the lack of an adequate work force in a market, the unavailability of our platforms to our users, changes in the purchasing patterns of consumers and in consumers’ disposable income, the temporary or long-term supply chain and logistics disruption, the disruption of critical infrastructure and communication systems, banking systems, utility services or energy availability.

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Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.

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The expansion of our business may also result in increased regulatory oversight and enforcement, as well as licensing requirements.

In addition, our operations in most of the countries where we operate are subject to risks related to compliance with the U.S.

Anticorruption

Our operations in most of the countries where we operate are subject to risks related to compliance with the U.S.

Foreign Corrupt Practices Act (“FCPA”) and other applicable U.S.

and other local laws prohibiting corrupt payments to government officials and other third parties.

Any changes to, enforcement of, failure, or perceived failure to comply with these regulations, or the enactment of new regulations, could result in lawsuits, civil or criminal penalties, or fines against the Company or its subsidiaries, forfeiture of significant assets, an outright or partial restriction on our operations, additional compliance and licensure requirements, an adverse impact on our business, results of operations or financial position, or may otherwise force us to change the way we or our users do business, which could adversely affect the operations and reputation of our businesses in those jurisdictions.

To fulfill our commitment to the applicable regulations in a sustainable and effective manner and to prevent and control anyone in our ecosystem from making or offering improper payments or anything of value that could be perceived as a bribe, or that is intended to obtain an improper benefit or preferential treatment for us, we have an Anti Corruption Policy and a risk-based Anti-Corruption Program designed to prevent, detect and remedy acts of corruption.

Any changes to, enforcement of, failure, or perceived failure to comply with these regulations, or the enactment of new regulations and legislation, could result in lawsuits, civil or criminal penalties, or fines against the Company or its subsidiaries, forfeiture of significant assets, an outright or partial restriction on our operations, additional compliance and licensure requirements, an adverse impact on our business, results of operations or financial position, or may otherwise force us to change the way we or our users do business, which could adversely affect the operations and reputation of our businesses in those jurisdictions.

We have been and we expect that we will continue to be involved in disputes or regulatory inquiries that arise in the ordinary course of business, the number and significance of which has increased as our business has expanded.

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Internet Services Regulation

There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, data security, data localization, online privacy, cryptocurrencies, artificial intelligence and machine learning (e.g.

There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations or legislation relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, data security, data localization, online privacy, cryptocurrencies, AI and ML (e.g.

in relation to risk analysis) governing anti-money laundering, taxation, reporting obligations, consumer protection and businesses.

This uncertainty could negatively affect our users’ perception and use of our services, and could result in significant expense should we have to defend cases in an unclear legal environment.

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Privacy and User Data Protection

We are subject to laws relating to the collection, use, storage and transfer and, in general, the processing of personal data about our providers, employees and, principally, our users.

We expect that these regulations will increase both in number and in the level of stringency, in ways we cannot predict, including with respect to evolving technologies such as cloud computing, artificial intelligence and machine learning, and blockchain technology.

Should we fail to comply with these laws, which apply to processing of all personal data, including the interactions with third-parties, transfers of information amongst our employees in the course of their work for us, our subsidiaries, and other parties with which we have commercial relations, we may be subject to significant penalties and negative publicity, which would adversely affect us.

We are subject to laws and regulations that govern the collection, use, storage, transfer and, in general, the processing of personal data about our providers, employees and, most importantly, our users.

We expect that these regulations will increase both in number and in the level of stringency, in ways we cannot predict.

This includes emerging challenges posed by new and evolving technologies such as cloud computing, AI and ML, and blockchain, which introduce novel methods for processing and analyzing data.

Should we fail to comply with these laws and regulations, which apply to processing of all personal data, including the interactions with third-parties, data transfers among our employees in the course of their work, our subsidiaries, and other parties with which we have commercial relations, we may be subject to significant penalties and negative publicity, which may adversely affect us.

In addition, the adoption and use of AI and ML introduces compliance challenges by potentially exposing us to situations where our customers’ personal data is inferred, reprocessed, or repurposed in ways that may not aligned with regulatory expectations.

Such challenges could negatively impact our operations, financial performance, and stakeholder trust.

Consumer Protection

Government and consumer protection agencies have in the past received a substantial number of complaints against us.

Government and consumer protection agencies have in the past received complaints against us from users of our ecosystem.

These complaints are small as a percentage of our total transactions, but they could become large in aggregate (absolute) numbers over time.

As far as taxation and the digital economy is concerned, many taxing jurisdictions and international organizations are moving towards the implementation of changes to tax laws and policies in order to address so-called base erosion, profit shifting and other tax challenges arising from the digitalization of the economy.

These discussions aim to support and guide tax reforms that may impact e-commerce and internet based companies, including reforms related to corporate income taxation and also to value added taxes.

In addition, we have a complex corporate structure, with entities that are subject to taxation in multiple jurisdictions, and the management of that structure and the transactions among our entities creates potential tax exposures for us in multiple jurisdictions, including the United States as well as the jurisdictions where our subsidiaries operate.

These changes in tax regimes may impact e-commerce and internet based companies, including reforms related to withholding regimes, corporate income taxation, indirect taxes and also to value-added taxes.

In addition, the Organization for Economic Co-operation and Development reached agreement among various countries to implement a minimum 15% effective tax rate on certain multinational enterprises, commonly referred to as Pillar Two.

Certain countries in which we operate are actively considering adopting parts of the Pillar Two framework.

The governments of Spain and Brazil passed laws adopting the framework in December 2024.

See "Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of operations - Income tax" for further information.

We are continuing to evaluate the impact of these proposed legislative changes as new guidance becomes available.

Legislative changes could impact our effective tax rate and tax liabilities.

In addition, Brazil is currently undergoing a tax reform to replace several local taxes with a dual VAT system.

The new system will become effective in 2026 and will face a transitional period until 2033, with the progressive charging of the new taxes and the extinction of the ones currently in place, as well as the implementation of the split payment system.

Furthermore, we have a complex corporate structure, with entities that are subject to taxation in multiple jurisdictions, and the management of that structure and the transactions among our entities creates potential tax exposures for us in multiple jurisdictions, including the U.S.

as well as the jurisdictions where our subsidiaries operate.

Further, any changes to, suspension or revocation of, any tax incentive regimes or other tax benefits that we may receive, including tax benefits under the Argentina knowledge-based economy promotional regime and under the Brazilian social security contribution regime and ICMS (Imposto sobre Circulação de Mercadorias, Serviços de Transporte Interestadual, Intermunicipal e Comunicação) tax incentive benefits, could have a material adverse effect in our business, results of operation and financial position.

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We may receive scrutiny from various governmental agencies under competition laws in the countries where we operate.

Some jurisdictions also provide private enforcement actions for competitors or consumers to assert claims of anti-competitive conduct.

Other companies or governmental agencies may allege that our actions violate antitrust or competition laws, or otherwise constitute unfair competition.

For instance, COFECE launched a market study on barriers to competition on the Mexican e-commerce market and issued preliminary findings, conclusions and recommendations regarding different business practices deployed by marketplace operators in Mexico, including MercadoLibre.

For more information, see “Item 1.

Business—Government Regulation—Mexico”.

We may be subject to private claims, lawsuits, regulatory and government investigations, other proceedings and orders involving allegations that our actions may violate antitrust or competition laws, or otherwise constitute unfair competition.

For instance, on February 13, 2024, the Mexican antitrust authority (Comisión Federal de Competencia Económica or “COFECE”) notified MercadoLibre, S.A., de C.V., Institución de Fondos de Pago Electrónico of its preliminary findings, conclusions and recommendations regarding competition in the e-commerce sector in Mexico, including proposed corrective measures on marketplace operators that include Mercado Libre and that, if confirmed, could require us to change certain aspects of some of our business practices in Mexico, including obligations to interoperate with independent logistics companies, which may affect the overall functioning of our logistics service.

This preliminary report is the result of a general market study on barriers to competition in the e-commerce market, launched by COFECE in 2022 and will now be taken to a subsequent stage of the process where MercadoLibre, S.A., de C.V., Institución de Fondos de Pago Electrónico and other affected entities may submit their views and additional evidence.

The preliminary report and additional submissions will be analyzed by COFECE’s full board of commissioners, in accordance with applicable laws and procedures, and the plenary will issue a final report that is expected to be issued the first half of 2025.

The final report may be subject to a special constitutional appeal before a specialized Mexican court, and subsequent judicial decisions may be further appealed and may reach the Mexican Supreme Court.

This additional judicial stage may take several years until a final decision is reached.

The outcome of these proceedings and the impact that any final corrective measures may have on certain aspects of some of our business practices, is uncertain.

We cannot assure you that they will not adversely affect our business, operation results and/or financial conditions.

Private claims have been brought against us, and this may continue to occur in the future, for potential breaches of antitrust or competition law and/or unfair competition.

Contractual agreements and/or our business practices with buyers, sellers, or other companies could give rise to regulatory action, antitrust investigations or litigation.

Such claims and investigations, even if without foundation, typically are very expensive to defend, involve negative publicity and substantial diversion of Management time and effort, and could result in significant judgments against us.

Such claims and investigations, even if without foundation, typically are very expensive to defend, involve negative publicity and substantial diversion of our management's time and effort, and could result in significant judgments against us.

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Banking, Money Transmission and Domestic or Cross-Border Electronic Funds Transfer

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We are subject to regulation in Brazil, Argentina, Mexico, Chile, Peru, Colombia and Uruguay, that require or would require us to obtain licenses or regulatory authorizations to operate certain services provided by Mercado Pago and that would subject us to additional regulatory requirements.

As an authorized or licensed payment services provider, electronic money institution, lender and/or money transmitter in certain jurisdictions where we operate, we are subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements and inspection by regulatory agencies.

Any changes to, or failure to comply with, money services laws or regulations or any tax regulations, or if we engage in an unauthorized banking or financial business, could result in liability, inability to continue doing business with residents of certain countries, changes to our business or regulatory status.

As an authorized or licensed payment services provider, electronic money institution, lender, issuer of credit, debit or prepaid card, acquirer and/or money transmitter in certain jurisdictions where we operate, we are subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements and inspection by regulatory agencies.

Any of these changes could result in making the service less attractive to users, decreasing the speed of trade on the Mercado Libre Marketplace, increasing our financial costs or change our financial model, which would further harm our business and results of operations.

Even if we are not forced to change our Mercado Pago business, we could be required to obtain licenses or regulatory approvals.

Even if we are not required to change our Mercado Pago business, we could be required to obtain licenses or regulatory approvals.

Anti-Money Laundering

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Because laws and regulations differ in each of the jurisdictions where we operate, as we roll out and adapt our business in other countries, additional verification and reporting requirements could apply.

These regulations’ requirements, as well as any future regulation and any additional restrictions, could raise our costs significantly and reduce the attractiveness of the Company.

Failure to comply with anti-money laundering laws could result in significant criminal and civil lawsuits, penalties, and forfeiture of significant assets.

These regulations’ requirements, as well as any future regulation and any additional restrictions, could raise our costs significantly and reduce the attractiveness of the Company if failure to comply with anti-money laundering laws results in significant criminal and civil lawsuits, penalties, and forfeiture of significant assets.

As a U.S-incorporated entity, MercadoLibre is subject to U.S.

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subsidiaries are required to comply not only with local, but also with U.S.

sanctions in the same way that MercadoLibre is required to comply with such sanctions.

sanctions in the same way that MercadoLibre is required to do so.

OFAC has the authority to impose civil penalties for violations of U.S.

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A number of jurisdictions where we operate have enacted legislation regulating shipping services.

If we fail to comply with shipping services laws or regulations, or if we engage in an unauthorized shipping business, we could be subject to liability, forced to cease doing business with residents of certain countries, or to change our business practices or to become a postal entity.

If we fail to comply with shipping services laws or regulations, or if we engage in an unauthorized shipping business, we could be subject to liability, required to cease doing business with residents of certain countries, or to change our business practices or to become a postal entity.

Any change to our Mercado Envios business practices that makes the service less attractive to customers or prohibits its use by residents of a particular jurisdiction could decrease the speed of trade on the Mercado Libre Marketplace, which would further harm our business.

Even if we are not forced to change our Mercado Envios business practices, we could be required to obtain licenses or regulatory approvals that could be very expensive and time consuming, and we cannot assure that we would be able to obtain them in a timely manner or at all.

Even if we are not required to change our Mercado Envios business practices, we could be required to obtain licenses or regulatory approvals, which could be a very expensive and time consuming process, and we cannot assure that we would be able to obtain them in a timely manner or at all.

Sale, Storage and/or Transportation of Goods and Services

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This regulatory uncertainty may lead us to engage in administrative and judicial proceedings to dispute claims for fraudulent activities committed by sellers, vendors or third-party carriers and losses incurred by buyers when purchasing items through our platform, which may give rise to high litigation or settlement costs and other liabilities, including reputational harm.

Our policies prohibit the sale, storage and/or transport of certain items (both on our platform and/or in our fulfillment centers and/or through third party carriers providing services to Mercado Libre) and we have implemented various actions to monitor and remove unlawful goods and services from our marketplaces, which we continually work to improve.

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However, we are aware that certain goods, such as alcohol, tobacco, firearms, animals, adult material and other goods that may be subject to regulation by local or national authorities of various jurisdictions have been traded by users on the Mercado Libre Marketplace in complete infringement to our policies, bypassing our various security efforts and measures to go undetected.

We have at times been and may continue to be subject to fines for certain users’ sales of products that have not been approved or infringe laws dictated by the government.

We have at times been—and may continue to be—subject to fines for certain users’ sales of products that have not been approved or infringe laws dictated by the applicable government.

We are also aware that certain goods expressly excluded from our shipping services pursuant to our policies were stored in our fulfillment centers and/or delivered through third-party carriers providing services to our users.

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Any costs that we incur as a result of this liability or asserted liability could have a material adverse effect on our business, results of operations and financial condition.

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It may be difficult to enforce judgments rendered against us in U.S.

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We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms

We have received in the past, and anticipate that we will receive in the future, complaints alleging that certain items listed or sold through the Mercado Libre Marketplace or Mercado Shops or using Mercado Pago, or delivered by Mercado Envios infringe third-party copyrights, trademarks and/or other intellectual property (“IP”) rights.

Content owners and other IP rights owners have been active in defending their rights against online companies, including us.

Our user policy prohibits any content or sale of goods that may infringe third-party IP rights and we may, proactively or at the request of any IP right owner who enrolls in our Brand Protection Program, remove listings based on infringements to our policies, as well as sanction any user who infringes third-party IP rights.

Further, through our Mercado Libre Anti-Counterfeiting Alliance, we partner with IP rights owners to enhance Mercado Libre’s proactive removals and to pursue criminal enforcement against repeat offenders.

Despite these measures and our efforts to prevent IP infringements, we are not able to prevent all IP rights infringements and some IP rights owners may consider our efforts insufficient.

Mercado Libre was included on the United States Trade Representative’s (“USTR”) Notorious Markets List for 2020 and also on the European Commission’s 2020 Counterfeit and Piracy Watch List.

Although we were removed from both watchlists in 2022, we anticipate that we may continue to be nominated or included in these and/or any other similar watchlists.

We have also received, and anticipate that we may continue to receive, legal claims from content and IP owners alleging violations of their IP rights and also from users affected by listing takedowns and account restrictions, which could result in substantial monetary awards, penalties or costly injunctions against us, as well as adversely affect our reputation.

It is also possible that new laws and regulations may be adopted with respect to intermediaries’ liability or mandatory out-of-court procedures to solve any disputes related to intermediaries’ liability that could have a material adverse effect on our operations.

Content owners and other IP owners have been active in asserting their rights against online companies, including us.

Our user policy prohibits any content or sale of goods that may infringe third-party IP rights and we may, proactively, or at the request of any IP owner who enrolls in our notice and takedown mechanism, the Brand Protection Program, remove listings based on violations of our policies, as well as sanction any user who infringes third-party IP rights.

Despite these measures and our efforts to combat IP infringement, we are not able to prevent all misappropriation, violation or infringement of IP rights—and some IP owners may consider our efforts insufficient.

Mercado Libre was included on the United States Trade Representative’s Notorious Markets List for 2020 and also on the European Commission’s 2020 Counterfeit and Piracy Watch List.

Although we were removed from both watchlists in 2022, and we were not included again since then, we anticipate that we may continue to be nominated or included in these and/or any other similar watchlists.

We have also received, and anticipate that we may continue to receive, legal claims from content and IP owners alleging violations of their IP rights and also from users affected by listing takedowns and account restrictions, which could result in substantial monetary damages awards, penalties or costly injunctions against us, as well as adversely affect our reputation.

It is also possible that new laws and regulations may be adopted with respect to intermediary liability or mandatory out-of-court procedures to resolve any disputes related to intermediary liability that could have a material adverse effect on our operations.

It is also possible that third parties could bring claims against us for defamation, libel, invasion of privacy, negligence, or other theories based on the nature and content of the materials disseminated through our platforms, particularly by our users.

Other online services companies are facing several claims for this type of liability.

If we are held liable or potentially liable for information carried on or disseminated through our platforms, we may have to pay monetary damages, be subject to enforcement actions, injunctions, fines or penalties, and it may have an adverse impact on our business model, including our level of exposure to liability.

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Our IP rights are pivotal to our continued growth and success.

These rights are safeguarded through a combination of copyright, trademark, patent designs, trade secret laws, and contractual measures.

With the rapid expansion of our business in recent years, we’ve witnessed a concurrent rise in infringements on our IP rights, notably on social media platforms.

This includes issues such as unauthorized domain registrations, deceptive apps, and counterfeit or fraudulent websites.

While we have undertaken measures to defend our IP rights, there’s no guarantee that these actions, or any future efforts, will effectively deter technology misappropriation, safeguard against the dilution of our trademarks, or prevent third parties from creating similar or competing technologies.

These rights are safeguarded through a combination of copyright, trademark, patent, trade secret laws, and contractual measures.

With the rapid expansion of our business in recent years, we have witnessed a concurrent rise in infringement on our IP rights, notably on social media platforms.

This includes issues such as unauthorized domain name registrations, deceptive apps and counterfeit or fraudulent websites.

While we have undertaken measures to defend our IP rights, there is no guarantee that these actions, or any future efforts, will effectively deter misappropriation, safeguard against the dilution of our trademarks, or prevent third parties from creating similar or competing technologies.

Our trademark portfolio is owned by MercadoLibre, Inc.

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There are no material intellectual property assets jointly owned with any third party.

The most valuable intellectual property owned by us are the “Mercado” trademark family portfolio, namely, Mercado Libre and Mercado Pago, among others, its related domain names (TLDs and ccTLDs) and software developments.

The most valuable intellectual property owned by us is the “Mercado” trademark family portfolio, namely, Mercado Libre and Mercado Pago, among others, and related domain names ("TLDs" and "ccTLDs"), as well as our proprietary software.

We pursue the registration of our IP and other intangible assets in each country where we operate.

However, we may not have sufficient protection or such protection might not be granted to us by the appropriate regulatory authority in every country where our services are available online.

Thus, our ability to protect our brands and our products and services against third-party infringers may be compromised and we could face claims by third-party IP owners.

Any claims relating to these issues, whether meritorious or not, could cause us to enter into costly litigation or settlements, potentially including royalty arrangements, awards of monetary damages or orders limiting our ability to sell our products and services.

We may also be required to enter into licensing agreements, which may be on terms that are unfavorable to us and some of the licenses may be not be available to us at all.

If any of these claims against us are successful, we may also have to modify some of our brand identifiers and/or domain names in certain countries or stop offering certain features, functionalities, products or services in certain jurisdictions.

Any of these circumstances could divert the attention of management and adversely affect our business, results of operations and financial situation.

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We pursue the registration of our intangible assets in each country where we operate.

However, we may not have effective protection or it might not be granted to us by the appropriate regulatory authority in every country where our services are available online, meaning our ability to protect our brands against third-party infringers would be compromised and we could face claims by third-party trademark owners.

Any claims relating to these issues, whether meritorious or not, could cause us to enter into costly royalty and/or licensing agreements.

If any of these claims against us are successful we may also have to modify our brand name in certain countries.

Any of these circumstances could adversely affect our business, results of operations and financial situation.

We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties.

Our licensees may take actions that could affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, results of operations and financial condition.

Though our license agreements contain customary restrictions on our licensees, and we exercise oversight over our licensees’ use of our IP, our licensees may take actions that could affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, results of operations and financial condition.

Further, many of our agreements with our customers and partners, the terms of which often survive termination or expiration of the applicable agreement, require us to defend such parties against certain intellectual property infringement claims and indemnify them for damages and losses arising from certain intellectual property infringement claims against them, which have in the past resulted, and could in the future result, in increased costs for defending such claims or significant damages if there is an adverse ruling in any such claims.

These defense costs and indemnity payments could materially and adversely affect our results of operations, financial condition, business and prospects.

Such customers and partners may also discontinue the use of our products and services as a result of injunctions or otherwise, which could result in loss of revenue and adversely affect our business.

Our Company extensively utilizes open source software (“OSS”), presenting significant intellectual property challenges.

In 2022, we established the OSPO (Open Source Program Office) to oversee OSS compliance, contribute to open source project development, and implement company-wide policies.

In 2022, we established the OSPO (Open Source Program Office) to oversee OSS compliance, contribute to open source project development, and implement company-wide OSS usage policies.

Despite the implementation of OSPO, we cannot guarantee that all of our employees accurately use and integrate OSS tools.

As a result, given the high level of OSS consumption in our Company, we cannot guarantee that our use of OSS software will not inadvertently infringe upon third-party intellectual property rights or fully comply with pertinent OSS licenses.

The integration of Artificial Intelligence (“AI”) tools into our operations presents significant IP challenges.

Determining IP ownership for AI-generated content remains ambiguous, which may potentially lead to infringement claims.

Using third-party AI tools raises concerns about the origin of data and algorithms, which may lead to IP infringements that could inadvertently implicate us.

AI tools might also unintentionally access or use copyrighted materials, heightening our exposure to IP disputes.

As AI tools continue to evolve, ensuring protection against IP infringements becomes progressively more challenging.

In addition, we cannot guarantee that our employees will not disclose any Company software to the open source software community.

From time to time, companies that use OSS have faced claims challenging the use of OSS and/or demanding compliance with open source license terms.

We could be subject to suits by parties claiming non-compliance with open source licensing terms.

Moreover, these licenses may subject us to certain unfavorable conditions, including requirements that we offer our products that incorporate, are based on or that link to OSS for no cost, that we make publicly available the source code for any of our proprietary software that we create based upon, or that incorporates, links to or otherwise uses the OSS, or that we license such software under the terms of the particular open source license.

The integration of AI tools into our products and services presents significant IP challenges.

Determining IP ownership for AI-generated content remains ambiguous in some jurisdictions, which may potentially lead to infringement claims by third parties.

AI tools might also unintentionally access or use third party IP or generate outputs which may contain or be substantially similar to third-party material protected by intellectual property rights, including patents, copyrights or trademarks, heightening our exposure to IP disputes.

Using third-party AI tools raises concerns about the origin of content, which may lead to IP infringements that could inadvertently implicate us.

Inventions or works of authorship created through the use of AI/ML may be based or rely on, or contain, materials that were used in the training of such AI/ML technologies and which are identical or similar to third-party intellectual property, which could further limit our ability to obtain intellectual property protection in such inventions or works of authorship.

In addition, AI tools may access our confidential information, including personal data.

Moreover, there is a risk that an employee may input confidential information, including material non-public information, trade secrets or personal identifiable information, into AI/ML applications, resulting in such information becoming accessible by third parties, including our competitors.

As AI tools continue to evolve, ensuring protection against IP infringement and avoiding risks related to leaks of confidential information becomes progressively more challenging.

Such challenges could also affect our consumers’ and the public’s perception of our Company.

As our Company’s business grows and our reliance on OSS and AI tools increases, the potential risk of facing IP claims becomes more pronounced.

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Any delay or problem with operating or upgrading our existing information technology infrastructure could cause a disruption in our business and adversely impact our financial results

Our ability to operate our business on a day-to-day basis largely depends on the efficient operation of our information technology infrastructure and our cloud providers, the largest of which is Amazon Web Services.

We have been and continue to be susceptible to hacks into our systems or other security breaches by unauthorized third parties.

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Our systems and our information technology infrastructure are vulnerable to damage or interruption from natural or man-made disasters, power loss, computer viruses, telecommunication and other operational failures, ransomware attacks or any other kind of denial of service related attacks, physical or electronic break-ins, sabotage, intentional acts of vandalism, terrorism, public health crises (including pandemics), extreme weather (including as a result of climate change) and similar events.

The public cloud providers could also decide to close their facilities.

The public cloud providers we use could also decide to close their facilities or be required to suspend the provision of services.

Any steps that we may take to upgrade and improve the stability and efficiency of our information technology may not be sufficient to avoid defects or disruptions in our technology infrastructure, which could cause a disruption in our business and adversely impact our financial results.

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Any errors, defects, disruptions, interruptions, delays or cessation of service could result in significant disruptions to our business that could ultimately be more expensive, time consuming and resource-intensive than anticipated.

We have experienced and will likely continue to experience defects or disruptions in our technology infrastructure, including system interruptions and delays that make our site and services unavailable or slow to respond for periods of time, which could adversely impact our ability to process transactions on our site or fulfill shipments, which could reduce our revenue, adversely affect our reputation with or result in the loss of users and negatively impact our financial results.

In January 2024, we implemented a new version of our enterprise resource planning (“ERP”) software, SAP, as part of a plan to integrate and upgrade our systems and processes.

While we expect this new version to strengthen our internal financial controls, there are inherent risks in implementing any new system, including loss of information and potential disruption to our normal operations.

Any material deficiencies in the design and implementation of this new software could also result in material costs, adversely affect our ability to operate our business and negatively impact our financial reporting and internal controls.

Any of these consequences could have a material adverse effect on our business, results of operations and financial condition.

We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business

A significant risk associated with our business is the secure transmission of confidential information over public networks.

Our business involves the collection, storage, processing and transmission of customers’ personal data, including financial information.

We rely on encryption and authentication necessary to provide the security and authentication technology to transmit confidential information securely.

Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the technology that we use to protect customer transaction data.

We have experienced and will likely continue to experience defects or disruptions in our technology infrastructure, including system interruptions and delays that make our site and services unavailable or slow to respond for periods of time, which could adversely impact our ability to process transactions on our sites, apps or fulfill shipments, which could reduce our revenue, violate applicable regulations, adversely affect our reputation with or result in the loss of users and negatively impact our financial results.

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The techniques used to obtain unauthorized, improper or illegal access to our systems, our data or our customers’ data, to disable or degrade service, or to sabotage systems are constantly evolving, have become increasingly complex and sophisticated, may be difficult to detect quickly, and often are not recognized until launched against a target.

While we may not determine some of these issues as material at the time that they occur and may remedy them quickly, there is no assurance that these issues will not ultimately result in significant legal, financial and reputational harm, including government inquiries and enforcement actions, litigation and negative publicity.

Unauthorized parties have and may continue to attempt to gain access to our systems or facilities through various means, including hacking into our systems or those of our customers, partners or vendors, or attempting to fraudulently induce our employees, customers, partners, vendors or other users of our systems into disclosing usernames, passwords, payment card information or other sensitive information, which may in turn be used to access our information technology systems and those of third parties with whom we partner.

Our users have been and will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails that appear to be legitimate emails sent by Mercado Libre or Mercado Pago or by a user of one of our businesses, but direct recipients to fake websites operated by the sender of the email or misstates that certain payment was credited in Mercado Pago and request that the recipient send the product sold or send a password or other confidential information.

Our information technology and infrastructure, including our source code, and those of third parties with whom we partner have been and may continue to be vulnerable to cyberattacks, security breaches, and third parties may be able to access our customers’ personal or proprietary information and, credit and debit card data that are stored on or accessible through those systems.

Our security measures may also be breached due to human error, malfeasance, system errors or vulnerabilities, or other irregularities.

Our efforts to address undesirable activity on our platform may also increase the risk of retaliatory attack.

Actual or perceived vulnerabilities or data breaches may lead to claims sanctions against us, subject us to investigations or liability, may compromise our reputation, diminish the value of our brands and discourage use of our websites.

We also expect to spend significant additional resources to protect against security or privacy breaches, and may be required to address problems caused by breaches.

In the case of a personal data breach, we may be required to notify the competent authorities (including central banks and other authorities that regulate our fintech business) and/or the data subject.

Additionally, while we maintain insurance policies, we do not maintain insurance policies to reimburse us for losses caused by security breaches.

Some of our systems have experienced past security breaches and, although they did not have a material adverse effect on our operating results or reputation, there can be no assurance of a similar result in the future.

We cannot assure you that our security measures will prevent security breaches or that failure to prevent them will not have a material adverse effect on our business, results of operations, financial condition and reputation.

In addition, any breaches of network or data security of companies we acquire or of our customers, partners or vendors, including parties that provide services to us or to our customers, could have similar negative effects.

We are subject to security breaches, disruption and confidential data theft from our systems, which can adversely affect our reputation and business

A significant risk to our business lies both in the secure transmission of confidential information over public networks and in the continuity of our operations, given our heavy reliance on technology.

We rely on encryption, authentication, data protection, infrastructure and application security hardening, monitoring and response measures to safeguard our systems and securely transmit confidential information.

However, advances in computing capabilities, new discoveries in cryptography or other unforeseen events may compromise the technology we use to protect customer transaction data.

There is no assurance that the security measures we have put in place will be effective in every case, and our response process to incidents may not be adequate, may fail to accurately assess the severity of an incident, may not be fast enough to prevent or limit harm or may fail to sufficiently remediate an incident.

Failures and breaches in security could result in a negative impact for us and for our customers, adversely affecting our and our customers’ businesses, assets, revenues, brands and reputations, disrupting our operations and resulting in penalties, fines, litigation, regulatory proceedings, regulatory investigations, remediation efforts, indemnification expenditures, reputational harm, negative publicity, lost revenues and/or other potential liabilities, in each case depending on the nature of the information disclosed.

The techniques employed to gain unauthorized, improper or illegal access to our systems, data, or customers' data—such as disabling or degrading services or sabotaging systems—are constantly evolving.

These techniques have become increasingly complex and sophisticated, can be challenging to detect quickly and are often not recognized until actively deployed against a target.

While we may not initially assess some of these issues as material and may address them promptly, there is no guarantee that such incidents will not result in significant legal, financial or reputational harm, including government inquiries, enforcement actions, litigation and negative publicity.

Unauthorized parties have, and may continue to, attempt to gain access to our systems or facilities through various means, including hacking into our systems or those of our customers, partners or vendors.

They may also attempt to fraudulently induce our employees, customers, partners, vendors or other system users to disclose usernames, passwords, payment card information or other sensitive data.

Such information could then be used to access our information technology systems or those of our third-party partners.

Our users have been, and will likely continue to be, targeted by fraudulent “spoof” and “phishing” emails that appear to originate from Mercado Libre, Mercado Pago or another user of our services.

These emails direct recipients to fake websites operated by malicious actors or falsely claim that a payment was credited by Mercado Pago, requesting that the recipient send a product or confidential information, such as passwords.

Our information technology systems and infrastructure, including our source code, as well as those of third parties with whom we collaborate, have been—and may continue to be—vulnerable to cyberattacks and security breaches.

Unauthorized parties may gain access to customers' personal or proprietary information, including credit and debit card data stored on or accessible through these systems.

This access could also disrupt our business operations, including financial, e-commerce and logistics services.

Furthermore, our security measures may be compromised due to human error, misconduct, system malfunctions, vulnerabilities or other irregularities.

Efforts to address undesirable activities on our platform may also increase the risk of retaliatory attacks.

The laws and regulations relating to personal data are constantly evolving as governments continue to adopt new measures addressing data privacy and processing (including collection, storage, transfer, disposal and use) of personal data.

Moreover, the interpretation and application of many existing or recently enacted privacy and data protection laws and regulations are uncertain and fluid, and it is possible that such laws and regulations may be interpreted or applied in a manner that is inconsistent with our existing data management practices or the features of our products and services.

Any such new laws or regulations, any changes to existing laws and regulations and any such interpretation or application may affect demand for our products and services, impact our ability to effectively transfer data across borders in support of our business operations or increase the cost of providing our products and services.

Additionally, any actual or perceived breach of such laws or regulations, including due to vulnerabilities or data breaches, may subject us to investigations and claims and may lead to administrative, civil or criminal liability, as well as reputational harm to our Company and our employees.

We could also be required to fundamentally change our business activities and practices, or modify our products and services, which could have an adverse effect on our business.

We expect to allocate significant additional resources to prevent security or privacy breaches and to address issues caused by any breaches.

In the event of a personal data breach, we may be required to notify the relevant authorities (including central banks and other regulators overseeing our fintech operations) and/or the affected individuals.

Such mandatory disclosures could lead to negative publicity, damage our reputation, devalue our brands and may cause our current and prospective customers to lose confidence in the effectiveness of our data security measures.

The use of AI/ML, including potential inadvertent disclosure of confidential information or personal data, could also lead to legal and regulatory investigations and enforcement actions, or may give rise to specific obligations, including required notices, consents and opt-outs, under various data privacy, protection and cybersecurity laws and regulations in a number of jurisdictions.

While we maintain certain insurance policies, we do not carry insurance that reimburses us for losses caused by security breaches.

Some of our systems have experienced past security breaches that did not have a material adverse effect on our operating results or reputation.

However, there is no assurance that future breaches will have a similar outcome.

We cannot guarantee that our security measures will prevent breaches or that the failure to prevent such incidents will not materially affect our business, operations, financial condition or reputation.

Moreover, any network or data security breaches involving companies we acquire, our customers, partners or vendors—including service providers—could result in similar negative consequences.

We may not be able to secure licenses for technologies on which we rely

We rely on certain technologies that we license from third parties that supply key database technology, operating systems and specific hardware components for our services.

We cannot assure you that these technology licenses will continue to be available to us on commercially reasonable terms.

If we were not able to make use of this technology, we would need to obtain substitute technology that may be of lower quality or performance standards or at greater cost, which could materially adversely affect our business, results of operations and financial condition.

We cannot assure you that these technology licenses will continue to be available to us on commercially reasonable terms, or at all.

If we were not able to make use of this technology, we would need to obtain substitute technology that may be of lower quality or performance standards or be obtained at greater cost, which could materially adversely affect our business, results of operations and financial condition.

Although we generally have been able to renew or extend the terms of contractual arrangements with these service providers on acceptable terms, we cannot assure you that we will continue to be able to do so in the future.

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Risks related to doing business in Latin America

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Further, to the extent corruption, bribery and similar practices continue to exist in the region, international investor perception of the region could be negatively affected, which could in turn negatively affect our business, financial condition and results of operations.

Our employees in Brazil and some of our employees in Argentina, Mexico and Uruguay are currently represented by a labor union and employees in other Latin American countries may eventually become unionized.

We may incur increased payroll costs and reduced flexibility under labor regulations if unionization in other countries were to occur, any of which may negatively impact our business.

Our employees in Brazil and some of our employees in Argentina, Mexico, Chile and Uruguay are currently represented by a labor union, and employees in other Latin American countries may eventually become unionized.

We may incur increased payroll costs or reduced flexibility under labor regulations if unionization in other countries were to occur, any of which may negatively impact our business.

In addition, we could be affected by conflicts between unions which claim representation of our employees that could generate additional payroll costs and labor conflicts.

Although economic and political conditions may differ from one country to another, we cannot assure you that events in one country alone will not adversely affect our business, financial condition or the market value of our common stock.

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Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate.

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Most Latin American countries have historically experienced, and may continue to experience in the future, high rates of inflation, which could lead to further government intervention in the economy, including the introduction of government policies that could adversely affect our results of operations.

Brazil, Argentina and Mexico, which together accounted for 95.5% and 95.2% of our net revenues for 2023 and 2022, respectively, have experienced volatility and significant devaluations in the past.

Brazil, Argentina and Mexico, which together accounted for 95.7% and 95.6% of our net revenues and financial income for 2024 and 2023, respectively, have experienced volatility and significant devaluations in the past.

For the year ended December 31, 2024, the inflation rate in Brazil, Argentina and Mexico was 4.8%, 117.8% and 4.2%, respectively.

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The depreciation of local currencies creates inflationary pressures that may have an adverse effect on our results of operations, including affecting our ability to adjust the price of our services sufficiently to offset the effects of inflation on our cost structures and generally restricting access to the international capital markets.

A high inflation environment would also have negative effects on the level of economic activity, employment and may adversely affect our business and results of operations.

A high inflationary environment could also have negative effects on the level of economic activity, employment and may adversely affect our business and results of operations.

On the other hand, the appreciation of local currencies against the U.S.

dollar may lead to the deterioration of public accounts and the balance of payments of the countries where we operate, and may reduce export growth in those countries.

Because we conduct our business outside the United States and receive almost all of our revenues in currencies other than the U.S.

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Because we conduct our business outside the U.S.

and receive almost all of our revenues in currencies other than the U.S.

dollar, but report our results in U.S.

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dollar strengthens against the foreign currencies of countries in which we operate.

For the year ended December 31, 2023, 52.5% of our net revenues were denominated in Brazilian Real, 22.4% in Argentine Pesos and 20.6% in Mexican Pesos.

For the year ended December 31, 2024, 54.9% of our net revenues was denominated in Brazilian Real, 22.4% in Mexican Pesos and 18.4% in Argentine Pesos.

For the year ended December 31, 2024, Brazil’s exchange rate against the U.S.

dollar increased 27.9%.

Certain of our subsidiaries may be subject to exchange control regulations that might restrict their ability to convert local currencies into U.S.

Brazilian law provides that whenever there is a serious imbalance in Brazil’s balance of payments or reason to foresee a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil.

Further, extensive exchange controls implemented by the Argentine government control and restrict the ability of companies and individuals to exchange Argentine Pesos for foreign currencies and their ability to remit foreign currency out of Argentina.

In recent years, extensive exchange controls implemented by the Argentine government have controlled and restricted 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 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 (e.g.

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, 2022 and 2021, the spread of the Blue Chip Swap was 20.4%, 94.2% and 96.8%, respectively (See Note 2 – Summary of significant accounting policies – Argentine currency status and macroeconomic outlook and Note 25 – Share repurchase program of our audited consolidated financial statements).

The spread decrease was due to the devaluation of the Argentine Peso from 366.45 to 799.95 on December 13, 2023.

As of the issuance date of the audited consolidated financial statements the spread of the Blue Chip Swap was 30.9%.

There can be no assurance that the CBA or other government agencies will not increase such controls or restrictions, make modifications to these regulations or establish more severe restrictions on currency exchange, which could affect the ability to make payments to foreign creditors or providers and dividend payments to foreign shareholders.

These exchange controls and restrictions could materially adversely affect the business, financial condition and results of operations of our Argentine subsidiaries and their ability to comply with their foreign currency obligations, and could significantly impact our ability to receive cash from our Argentine subsidiaries and our ability to meet our obligations, each of which could have a material adverse effect on our Company.

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Our e-commerce transactions in Latin America may be impacted by the weaknesses of secure payment methods

Unlike in the United States, consumers and merchants in Latin America can be held fully liable for credit card and other losses due to third-party fraud.

As secure methods of payment for e-commerce transactions have not been widely adopted in Latin America, both consumers and merchants generally have a relatively low confidence level in the integrity of e-commerce transactions.

Unless consumer fraud laws in Latin American countries are modified to protect e-commerce merchants and consumers, and until secure, integrated online payment processing methods are fully implemented across the region, our ability to generate revenues from e-commerce may be limited, which could have a material adverse effect on our Company.

In addition, while banks and other financial institutions in Latin America have generally granted e-commerce merchants the right to process online transactions, adjustments to the fraud and risk management processes of these banks and financial institutions, including due to concerns about credit card fraud, may negatively impact our payments approval rates.

As a result of these exchange controls, markets in Argentina have developed trading mechanisms to access U.S.

dollars locally or outside Argentina.

Regulations issued by the current Argentine government have partially decreased exchange controls;

however, there can be no assurance that the CBA or other government agencies will not subsequently increase controls or restrictions, make modifications to these regulations or establish more severe restrictions on currency exchange, which could affect the ability to make payments to foreign creditors or providers and dividend payments to foreign shareholders.

These exchange controls and restrictions have in the past materially adversely affect the business, financial condition and results of operations of our Argentine subsidiaries and their ability to comply with their foreign currency obligations, and could significantly impact our ability to receive cash from our Argentine subsidiaries and our ability to meet our obligations, each of which could have a material adverse effect on our Company.

Our transactions in Latin America may be impacted by the weaknesses of secure payment methods

Consumers and merchants in Latin America can be held fully liable for credit card and other losses due to third-party fraud.

As secure methods of payment for digital transactions have not been widely adopted in Latin America, both consumers and merchants generally have a relatively low confidence level in the integrity of these transactions.

Unless consumer fraud laws in Latin American countries are modified to protect merchants and consumers, and until secure, integrated online payment processing methods are fully implemented across the region, our ability to generate revenues may be limited, which could have a material adverse effect on our Company.

In addition, while banks and other financial institutions in Latin America have generally granted merchants the right to process online transactions, adjustments to the fraud and risk management processes of these banks and financial institutions, including due to concerns about credit card fraud, may negatively impact our payments approval rates.

Risks related to our shares

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These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

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In the future, we may issue securities in connection with investments and acquisitions.

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Further, our repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading of our stock.

As of December 31, 2024, we did not have an active share repurchase program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors