MELI US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of our operations in conjunction with our audited consolidated financial statements and the notes to those statements included elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this report.

The discussion and analysis of our financial condition and results of operations has been organized to present the following:

•a brief overview of our company;

•a review of our financial presentation and accounting policies, including our critical accounting policies and estimates;

•a discussion of our principal trends and results of operations for the years ended December 31, 2022, 2021 and 2020;

•a discussion of the principal factors that influence our results of operations, financial condition and liquidity;

•a discussion of our liquidity and capital resources and a discussion of our capital expenditures; and

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•a discussion of the market risks that we face.

For discussion on results from 2021 compared to 2020, please refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021.

Certain monetary amounts included elsewhere in this document have been subject to rounding adjustments. Accordingly, figures shown as totals and percentages in certain tables may not be the arithmetic aggregation of the figures that precede them.

Business Overview

We are the largest online commerce ecosystem in Latin America based on unique visitors and orders processed, and we are present in 18 countries: Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador. Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline.

Through our e-commerce platform, we provide buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform in Latin America.

We offer our users an ecosystem of six integrated e-commerce services and digital financial services: the Mercado Libre Marketplace, the Mercado Pago Fintech platform, the Mercado Envios logistics service, the Mercado Ads solution, the Mercado Libre Classifieds service and the Mercado Shops online storefronts solution.

The Mercado Libre Marketplace, is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through our website and mobile app. This platform enables us (when we act as sellers in our first party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods.

To complement the Mercado Libre Marketplace and enhance the user experience for our buyers and sellers, we developed Mercado Pago, an integrated digital payments solution. Mercado Pago was initially designed to facilitate transactions on Mercado Libre’s Marketplaces by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. Now, Mercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. Our digital payments solution enables any MercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, and Peru and is available to process and settle transactions on our Marketplace in Ecuador.

Beyond facilitating Marketplace transactions, over the years we have expanded our array of Mercado Pago services to third parties outside Mercado Libre’s Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America. Today, Mercado Pago’s digital payments business not only allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits, but it also enables users to transfer money in a simple manner to each other through the Mercado Pago website or on the Mercado Pago app. Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline (“O2O”) products and services.

The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services we offer are an integral part of our value proposition, as they reduce friction between buyers and sellers, and allow us to have greater control over the full user experience. Sellers that opt into our logistics solutions are not only able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices, but are also eligible to access shipping subsidies to offer free or discounted shipping for many of their sales on our Marketplaces. In 2020, we launched Meli Air with a fleet of dedicated aircraft covering routes across Brazil and Mexico, with the aim of improving our delivery times. We have also developed a network of independent neighborhood stores and commercial points (known as “Meli Places”) to receive and store packages that are in transit using our integrated technology. Meli Places network allows buyers and sellers to pick-up, drop-off, or return packages with a better experience, reducing the travel distance for all parties. As of December 31, 2022, we offer our shipping solution directed towards deliveries in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, Peru and Ecuador and we also offer free shipping to buyers in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay and Peru.

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Mercado Credito, our credit solution available in Argentina, Brazil, Mexico and Chile, leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.

Our asset management product, which is available in Argentina, Brazil and Mexico, is a critical pillar to build our alternative two-sided network vision. It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.

As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil in 2021 and in Mexico in 2022. This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and exchange and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet.

Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Internet. Through our advertising platform, MercadoLibre’s brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products. Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion.

Through Mercado Libre Classifieds, our online classified listing service, our users can also list and purchase motor vehicles, real estate and services in the countries where we operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and not final value fees. Our classifieds pages are also a major source of traffic to our platform, benefiting both the commerce and fintech businesses.

Complementing the services we offer, our digital storefront solution, Mercado Shops, allows users to set-up, manage and promote their own digital stores. These stores are hosted by Mercado Libre and offer integration with the rest of our ecosystem, namely our Marketplaces, payment services and logistics services. Users can create a store at no cost, and can access additional functionalities and value added services on commission.

Reporting Segments and Geographic Information

Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments are Brazil, Argentina, Mexico and Other Countries (including Chile, Colombia, Costa Rica, Ecuador, Peru and Uruguay). Although we discuss long-term trends in our business, it is our policy not to provide earnings guidance in the traditional sense. We believe that uncertain conditions make the forecasting of near-term results difficult. Further, we seek to make decisions focused primarily on the long-term welfare of our company and believe focusing on short-term earnings does not best serve the interests of our stockholders. We believe that execution of key strategic initiatives as well as our expectations for long-term growth in our markets will best create stockholder value. A long-term focus may make it more difficult for industry analysts and the market to evaluate the value of our Company, which could reduce the value of our common stock or permit competitors with short-term tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.

The following table sets forth the percentage of our consolidated net revenues by segment for the years ended December 31, 2022, 2021 and 2020:

Year EndedDecember 31,

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The following table summarizes the changes in our net revenues by segment for the years ended December 31, 2022, 2021 and 2020:

(in millions, except percentages) (in millions, except percentages)

Net Revenues:

Description of line items

Net revenues

We disaggregate revenues into four geographical reporting segments. Within each of our segments, the services we provide and the products we sell generally fall into two distinct revenue streams: “Commerce” and “Fintech.”

The following table summarizes our consolidated net revenues by revenue stream for the years ended December 31, 2022, 2021 and 2020:

Year EndedDecember 31,

(in millions)

Revenues from commerce transactions are mainly generated from:

•marketplace fees that include final value fees and flat fees for transactions below a certain merchandise value;

•first-party sales;

•shipping fees, net of the third-party carrier costs (when we act as an agent);

•ad sales up-front fees;

•classifieds fees; and

•fees from other ancillary businesses.

Final value fees represent a percentage of the sale value that is charged to the seller once an item is successfully sold and flat fees represent a fixed charge for transactions below a certain merchandise value.

Revenues from first-party sales are generated when control of the good is transferred, upon delivery to our customers.

Shipping revenues are generated when a buyer elects to receive an item through our shipping service, net of the third-party carrier costs (when we act as an agent).

Through our classifieds offerings in vehicles, real estate and services, we generate revenues from up-front fees. These fees are charged to sellers who opt to give their listings greater exposure throughout our websites.

Revenues from advertising services provided to sellers, vendors, brands and others, through performance product ads and display advertising, are recognized based on the number of clicks or impressions.

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Fintech revenues correspond to our Mercado Pago service, which are attributable to:

•commissions representing a percentage of the payment volume processed that are charged to sellers in connection with off Marketplace-platform transactions;

•commissions from additional fees we charge when a buyer elects to pay in installments through our Mercado Pago platform, for transactions that occur either on or off our Marketplace platform;

•commissions from additional fees we charge when our sellers elect to withdraw cash;

•interest, cash advances and fees from merchant and consumer loans granted under our Mercado Credito solution;

•commissions that we charge from transactions carried out with Mercado Pago credit and debit cards; and

•revenues from the sale of mobile points of sale products and insurtech fees.

Although we also process payments on the Marketplace, we do not charge sellers an added commission for this service, as it is already included in the Marketplace final value fee that we charge.

When more than one service is included in one single arrangement with the same customer, we recognize revenue according to multiple element arrangements accounting, distinguishing between each of the services provided and allocating revenues based on their respective estimated selling prices. When the Company finances the transactions directly, the financing component is separated from the revenue amount and is recognized over the financing period using the interest method.

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the years ended December 31, 2022, 2021 and 2020, no single customer accounted for more than 5.0% of our net revenues.

The functional currency for each country’s operations is the country’s local currency, except for Argentina, where the functional currency is the U.S. dollar due to Argentina’s status as a highly inflationary economy. Our net revenues are generated in multiple foreign currencies and then translated into U.S. dollars at the average monthly exchange rate. Please refer to “Summary of significant accounting policies” in Note 2 to our audited consolidated financial statements for further detail on foreign currency translation.

Cost of net revenues

Cost of net revenues primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, fraud prevention fees, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges and depreciation and amortization.

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues which are classified as a cost of net revenues. These taxes represented 7.5%, 8.0% and 8.2% of net revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

Product and technology development expenses

Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff, depreciation and amortization expenses related to product and technology development, certain tax withholding related to export duties, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.

Sales and marketing expenses

Our sales and marketing expenses consist primarily of costs related to marketing our platforms through online and offline advertising and agreements with portals, search engines and other sales expenses related to strategic marketing initiatives, charges related to our buyer protection program, the salaries of employees involved in these activities, chargebacks related to our Mercado Pago operations, branding initiatives, marketing activities for our users and depreciation and amortization expenses.

We carry out the majority of our marketing efforts on the Internet. We enter into agreements with portals, search engines, social networks, ad networks and other sites in order to attract Internet users to the Mercado Libre Marketplace and convert them into registered users and active traders on our platform.

We also work intensively on attracting, developing and growing our seller community through our customer support efforts. We have dedicated professionals in most of our operations that work with sellers through trade show participation, seminars and meetings to provide them with important tools and skills to become effective sellers on our platform.

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Provision for doubtful accounts

Provision for doubtful accounts consists of the current expected credit losses on our financial assets, mainly loans receivable.

General and administrative expenses

Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of non-employee directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, impairment losses from digital assets, travel and business expenses, as well as depreciation and amortization expenses. Our general and administrative expenses include the costs of the following areas: general management, finance, treasury, internal audit, administration, accounting, tax, legal and human resources.

Other income (expenses), net

Other income (expenses) consists primarily of interest income derived from our investments and cash equivalents, interest expense and other financial charges related to financial liabilities and foreign currency gains or losses.

Income tax

We are subject to federal and state income tax in the United States, as well as foreign taxes in the multiple jurisdictions where we operate. Our tax obligations consist of current and deferred income taxes incurred in these jurisdictions. We account for income taxes following the liability method of accounting. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of our deferred tax assets will not be realized. Therefore, our income tax expense consists of taxes currently payable, if any (given that in certain jurisdictions we still have net operating loss carry-forwards), plus the change in our deferred tax assets and liabilities during each period.

The following table summarizes the composition of our income taxes for the years ended December 31, 2022, 2021 and 2020:

Year Ended December 31,

Current:

U.S. $ 12 $ — $ —

Deferred:

Equity in earnings of unconsolidated entity

Equity in earnings of unconsolidated entity consists primarily of earnings and losses related to our share in our equity investment.

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Critical Accounting Policies and Estimates

The preparation of our audited consolidated financial statements and related notes require us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management has discussed the development, selection and disclosure of these estimates with our audit committee and our board of directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our audited consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates in conjunction with our audited consolidated financial statements and the notes thereto and other disclosures included in this report.

For an analysis of our Critical Accounting Policies and Estimates please refer to Note 2 “Summary of significant accounting policies” to our audited consolidated financial statements included elsewhere in this report.

Allowance for doubtful accounts

For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent, and other relevant factors, we estimate the lifetime expected credit loss allowance based on a collective assessment. The lifetime expected credit losses are determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio’s loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform to the portfolio segment. The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. Probability of default models (“PDs”) are estimated using a survival methodology; these PDs are constructed using individual default information through time, taking into account the expected future delinquency rate (forward-looking models) using, since 2022, three probability-weighted macroeconomic scenarios (base, optimistic and pessimistic) following the increased complexity and possible outcomes of the global, regional and domestic macroeconomic performance, so that the models include macroeconomic outlook or projections and recent performance, instead of using one scenario as prior years. With this model, we estimate marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default. The exposure at default is equal to the receivables’ expected outstanding principal, interest and other allowable balances. We estimate the exposure at default that the portfolio of loans would have in each possible moment of default, meaning for each possible scenario mentioned above. For credit cards we estimate an amortization scheme based on historical information. Also, since 2022, we have used a one month credit conversion factor (“CCF”) estimated according to our terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using Work-out and Chainladder approaches. This percentage depends on days past due, type of product and country, and is estimated by measuring an average of historical recovery rates from defaulted credits. The measurement of CECL is based on probability-weighted scenarios (probability of default for each month), in view of past events, current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions. Considering a hypothetical increase in the probability of default of 10%, we would have recognized an increase in our allowance for doubtful accounts for loans receivable of approximately $25 million.

We believe that the accounting estimate related to allowance for doubtful accounts on loans receivable a critical accounting estimate because it requires Management to make complex assumptions and scenarios to estimate the CECL.

Legal contingencies

In connection with certain pending litigation and other claims, we have estimated the range of probable loss and provided for such losses through charges to our consolidated statement of income. These estimates are based on our assessment of the facts and circumstances and historical information related to actions filed against the Company at each balance sheet date and are subject to change based upon new information and future events.

From time to time, we are involved in disputes that arise in the ordinary course of business. We are currently involved in certain legal proceedings as discussed in “Item 3—Legal Proceedings,” and in Note 15 to our audited consolidated financial statements. We believe that we have meritorious defenses to the claims against us, and we will defend ourselves accordingly. However, even if successful, our defense could be costly and could divert Management’s time. If the plaintiffs were to prevail on certain claims, we might be forced to pay material damages or modify our business practices. Any of these consequences could materially harm our business and could have a material adverse impact on our financial position, results of operations or cash flows.

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Income taxes

We are required to recognize a provision for income taxes based upon taxable income and temporary differences between the book and tax bases of our assets and liabilities for each of the tax jurisdictions in which we operate. This process requires a calculation of taxes payable under currently enacted tax laws in each jurisdiction and an analysis of temporary differences between the book and tax bases of our assets and liabilities, including various accruals, allowances, depreciation and amortization. The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in our consolidated balance sheet. We also assess the likelihood that our net deferred tax assets will be realized from future taxable income. To the extent we believe that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we establish a valuation allowance. As of December 31, 2022, we had a valuation allowance on certain foreign net operating losses and foreign tax credits based on our assessment that it is more likely than not that the deferred tax asset will not be realized. To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our “Income tax expense” line in our consolidated statement of income. Please refer to Notes 2 and 14 to the audited consolidated financial statements for additional information regarding income tax.

Recent accounting pronouncements

See Item 8 of Part II, “Financial Statements and Supplementary Data” and Note 2, “Summary of significant accounting policies-Recently Adopted Accounting Standards and Accounting Pronouncements Not Yet Adopted”.

Results of operations

The following table sets forth, for the years presented, certain data from our consolidated statements of income. This information should be read in conjunction with our audited consolidated financial statements and the notes to those statements included elsewhere in this report.

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Statement of income data

Year Ended December 31,

Operating expenses:

Product and technology development (1,099) (590) (353)

Provision for doubtful accounts (1,073) (435) (133)

Other income (expenses):

Interest income and other financial gains 265 138 103

Interest expense and other financial losses (*) (321) (229) (107)

Foreign currency losses, net (198) (109) (43)

Net income before income tax expense 780 241 81

Equity in earnings of unconsolidated entity — (9) —

Net income (loss) $ 482 $ 83 $ (1)

(*)Includes $49 million of loss on debt extinguishment and premium related to the 2028 Notes repurchase recognized in January 2021. See Note 17 “Loans payable and other financial liabilities” of our audited consolidated financial statements for further detail.

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Year Ended December 31,

Operating expenses:

Product and technology development (10.4) (8.4) (8.9)

Provision for doubtful accounts (10.2) (6.2) (3.4)

General and administrative (6.3) (6.6) (8.2)

Income from operations 9.8 6.2 3.2

Other income (expenses):

Interest income and other financial gains 2.5 2.0 2.6

Interest expense and other financial charges (3.0) (3.2) (2.7)

Foreign currency losses, net (1.9) (1.5) (1.1)

Net income before income tax expense 7.4 3.4 2.0

Income tax expense (2.8) (2.1) (2.1)

Equity in earnings of unconsolidated entity — (0.1) —

Net income (loss) 4.6 1.2 —

Principal trends in results of operations

Net revenues

Our net revenues maintained its growth trajectory during the year 2022, specifically related to the growth of our fintech solution services (mainly credits business and off-platform transactions through Mercado Pago) and the increase in our gross merchandise volume. The year’s financial results reflect our ongoing commitment to deliver sustainable and profitable growth. During the year we made tactical adjustments to our operations that align with the current macroeconomic outlook, such as slowing our originations of credits business mainly in Brazil, while preserving our long-term strategy. Hence, we have continued to invest moderately in growing volumes for groceries and first party retail assortment. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of operations— Net Revenues” section in the current document for further detail on net revenues trends for the year ended December 31, 2022.

The continued execution of our long-term strategies in Commerce and Fintech has enabled us to deliver rapid growth in gross merchandise volume, total payment volume and net revenues, alongside record quarterly operating results and strong cash generation.

As a consequence of the COVID-19 pandemic, governments in Latin America imposed total or partial lockdowns and curfews in March 2020, some of which were subsequently extended, modified or rescinded based on the evolution of the COVID-19 pandemic. On balance, the effect of such measures on consumer behavior has resulted in revenue growth for our business. However, it is uncertain how consumer behavior will evolve in the future, and how and whether that will impact our revenues.

We continue to monitor the progress of the COVID-19 pandemic, the related macroeconomic instability in the countries where we operate and global macroeconomic factors (including inflation, increased interest rates, global supply chain constrains, and global economic and geopolitical developments). However, we may not be able to predict the negative impacts that the COVID-19 pandemic and the current macroeconomic conditions may have on our business in the future.

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Gross profit margins

Our gross profit margin is defined as total net revenues minus total cost of net revenues, as a percentage of net revenues.

Our gross profit trends are directly affected by our net revenues, as stated above, and our cost of net revenues. In this sense, our main cost of net revenues is composed of cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, fraud prevention fees, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges and depreciation and amortization. This cost structure is directly affected by the level of operations of our services, and our strategic plan on gross profit is built on factors such as an ample liquidity to fund expenses and investments and a cost-effective capital structure.

In the future, our gross profit margin could decline if we continue growing our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend.

For the years ended December 31, 2022 and 2021, our gross profit margins were 49.0% and 42.5%, respectively. The increase in our gross profit margin resulted primarily from the decrease in our shipping operating and carrier cost, cost of sales of goods and collection fees, as a percentage of net revenues.

Operating income margins

Our operating margin is defined as income from operations as a percentage of net revenues.

Our operating margin is affected by our operating expenses structure, which mainly consists of our employees’ salaries, our sales and marketing expenses related to those activities we incurred to promote our services, provision for doubtful accounts mainly related to our loans receivable portfolio and product development expenses, among other operating expenses. As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product development, sales and marketing and human resources in order to promote our services and capture long-term business opportunities. As a result, we may experience decreases in our operating margins.

For the year ended December 31, 2022, as compared to the year ended December 31, 2021, our operating margin increased from a margin of 6.2% to a margin of 9.8%. This increase was mainly explained by our improvement in cost of revenues margins, partially offset by an increase in provision for doubtful accounts, as a percentage of net revenues.

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Other Data

The following table includes seven key performance indicators, which are calculated as defined in the footnotes to the table. Each of these indicators provides a different measure of the level of activity on our platform, and we use them to monitor the performance of the business.

Given the evolution of our business, as from January 1, 2021, we no longer disclose “Number of confirmed new registered users during period” since Management no longer considers this indicator relevant to measuring the level of activity on our Mercado Libre Marketplace platform.

Year Ended December 31, (*)

Other data:

Depreciation and amortization $ 403 $ 204 $ 105

(*) Figures have been calculated using rounded amounts. Growth calculations based on this table may not total due to rounding.

(1)New or existing user who performed at least one of the following actions during the reported period: (1) made one purchase, or reservation, or asked one question on Mercado Libre Marketplace or Classified Marketplace (2) maintained an active listing on Mercado Libre Marketplace or Classified Marketplace (3) maintained an active account in Mercado Shops (4) made a payment, money transfer, collection and/or advance using Mercado Pago (5) maintained an outstanding credit line through Mercado Credito or (6) maintained a balance of more than $5 invested in a Mercado Fondo asset management account. Management uses this metric to evaluate the size of our community of users who interact with the ecosystem and of which we have the opportunity to generate further engagement. With the changes in our businesses we believe it provides a better indication of our active user base rather than our discontinued registration metric that did not reflect any sort of interaction.

(2)Total U.S. dollar sum of all transactions completed through the Mercado Libre Marketplace, excluding Classifieds transactions.

(3)Number of items that were sold/purchased through the Mercado Libre Marketplace, excluding Classifieds items.

(4)Number of items that were shipped through our shipping service.

(5)Total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions.

(6)Total U.S. dollar sum of all marketplace transactions paid for using Mercado Pago. Management uses this metric to evaluate the performance of our payments services and development of our integrated ecosystem. As from January 1, 2022, we no longer disclose our total volume of payments on marketplace net of shipping and financing fees. Given the growth of our shipping and fintech businesses, management believes that including shipping and financing fees in the calculation of total volume of payments on marketplace results in a more accurate indicator of that performance on a go-forward basis. Consequently, total volume of payment on marketplace for the years ended December 31, 2021 and 2020 have been recast to include shipping and financing fees.

(7)Number of all transactions paid for using Mercado Pago.

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Net revenues

(in millions, except percentages) (in millions, except percentages)

For the year ended December 31, 2022, as compared to the year ended December 31, 2021, the increase in net revenues was primarily attributable to:

a)an increase of $1,173 million, or 25.3%, in Commerce revenues, for the year ended December 31, 2022, as compared to 2021. This increase was generated by an increase of $1,014 million in our commerce services revenues and an increase of $159 million in our revenues from commerce products sales for the year ended December 31, 2022, as compared to 2021. Shipping carrier costs which are netted against Commerce services revenues increased $332 million, from $1,477 million for the year ended December 31, 2021 to $1,809 million for the year ended December 31, 2022; and

b)an increase of 94.3%, in Fintech revenues, from $2,434 million for the year ended December 31, 2021, to $4,729 million for the year ended December 31, 2022. This increase is mainly generated by an increase of $1,224 million in our credits revenues and an increase of $1,055 million in our revenues from fintech services for the year ended December 31, 2022, as compared to 2021.

(in millions, except percentages) (in millions, except percentages)

Brazil

Argentina

Mexico

Other countries

Consolidated

See Note 9 “Segments” of our audited consolidated financial statements for further information regarding our net revenues disaggregated by similar products and services for the years ended December 31, 2022, 2021 and 2020.

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Brazil

Commerce revenues in Brazil increased 23.8% in the year ended December 31, 2022 as compared to 2021. This increase was generated by an increase of $509 million in our commerce services revenues and an increase of $82 million in our revenues from commerce products sales for the year ended December 31, 2022, as compared to 2021. Fintech revenues grew by 81.5%, a $1,165 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $634 million in our credits revenues and an increase of $526 million in our revenues from fintech services.

Argentina

Commerce revenues in Argentina increased 26.8% in the year ended December 31, 2022 as compared to 2021. This increase was generated by an increase of $200 million in our commerce services revenues and an increase of $29 million in our revenues from commerce products sales for the year ended December 31, 2022. Fintech revenues grew 109.6%, a $740 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $328 million in our credits revenues and an increase of $414 million in our revenues from fintech services.

Mexico

Commerce revenues in Mexico increased 38.7% in the year ended December 31, 2022, as compared to 2021. This increase was generated by an increase of $280 million in our commerce services revenues and an increase of $78 million in our revenues from commerce products sales for the year ended December 31, 2022. Fintech revenues grew 134.7%, a $334 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $258 million in our credits revenues and an increase of $72 million in our revenues from fintech services.

The following table sets forth our total net revenues and the sequential quarterly growth of these net revenues for the periods described below:

Quarter Ended

March 31, June 30, September 30, December 31,

(in millions, except percentages)

Percent change from prior quarter 5% 16% 4% 12%

Percent change from prior quarter 4% 24% 9% 15%

Percent change from prior quarter (3%) 35% 27% 19%

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The following table sets forth the growth in net revenues in local currencies, for the years ended December 31, 2022 and 2021 as compared to the same periods in 2021 and 2020, respectively:

Changes from

Total Consolidated 59.7 % 93.9 %

(*) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next. See also the “Non-GAAP Measures of Financial Performance” section for details on FX neutral measures.

(**) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2020 and applying them to the corresponding months in 2021, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next. See also the “Non-GAAP Measures of Financial Performance” section for details on FX neutral measures.

(***) Average inter-annual inflation rate in our Argentine segment for the years ended December 31, 2022, 2021 and 2020 were 70.7%, 48.1% and 42.7%, respectively. This effect was partially offset by an average inter-annual depreciation of the Argentine peso of 38.7%, 36.6% and 45.3% for the years ended December 31, 2022, 2021 and 2020, respectively. See also "Item 1A. Risk Factors - Risk related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls".

Cost of net revenues

(in millions, except percentages) (in millions, except percentages)

For the year ended December 31, 2022 as compared to the year ended December 31, 2021, the increase in cost of net revenues was primarily attributable to: i) a $418 million increase in shipping operating costs; ii) a $253 million increase in collection fees, which was mainly attributable to our Argentine, Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; iii) a $221 million increase in sales taxes; iv) a $205 million increase in other fintech costs mainly related to higher funding costs related to our credits business; v) a $118 million increase in cost of sales of goods mainly in Brazil, Argentina and Mexico; and vi) an $82 million increase mainly related to hosting and site operation fees. This increase was partially offset by a decrease of $57 million in our shipping carrier costs as changes on a carrier agreement in 2022 required the principal accounting under revenue recognition guidance applied in 2021 to be changed in 2022.

Product and technology development

(in millions, except percentages) (in millions, except percentages)

As a percentage of net revenues 10.4% 8.4% 8.4% 8.9%

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For the year ended December 31, 2022, the increase in product and technology development expenses as compared to the year ended December 31, 2021, was primarily attributable to: i) a $340 million increase in salaries and wages mainly related to the increase of 46% in our product and technology development headcount; ii) a $101 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets; and iii) a $62 million increase in other product and technology development expenses mainly related to certain tax withholding in connection with intercompany export services billing duties.

We believe that product development is one of our key competitive advantages and we intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base.

Sales and marketing

(in millions, except percentages) (in millions, except percentages)

For the year ended December 31, 2022, the increase in sales and marketing expenses as compared to the year ended December 31, 2021 was primarily attributable to: i) a $65 million increase in our buyer protection program expense; ii) a $62 million increase in online and offline marketing expenses principally in Brazil and Mexico; iii) a $59 million increase in salaries and wages; iv) a $17 million increase in sales expenses; and v) an $11 million increase in chargebacks.

Provision for doubtful accounts

(in millions, except percentages) (in millions, except percentages)

As a percentage of net revenues 10.2% 6.2% 6.2% 3.4 %

For the year ended December 31, 2022, as compared to the year ended December 31, 2021, the provision for doubtful accounts increased mainly due to a combination effect generated by higher originations of loans during 2022, particularly, consumers and credit cards portfolio, and an increase of the non-performing ratio of the total portfolio relating to the over-90-day bucket in comparison with the previous years. The combination of writing off delinquent loans at 360 days for a portfolio that has an average duration of two to three months and the slowdown in originations from the third quarter of 2022 means that delinquent loans from prior periods have greater weight in our portfolio as of December 31, 2022.

General and administrative

(in millions, except percentages) (in millions, except percentages)

As a percentage of net revenues 6.3% 6.6% 6.6 % 8.2 %

For the year ended December 31, 2022, the increase in general and administrative expenses as compared to the year ended December 31, 2021 was primarily attributable to: i) a $79 million increase in salaries and wages, mainly related to our Argentine segment where the average annual inflation rate during 2022 was higher than the local currency depreciation (See also "Item 1A. Risk Factors - Risk related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls") and the increase of 27% in general and administrative headcount in our Argentine segment ; ii) a $55 million increase in other general and administrative expenses and certain tax withholding in connection with intercompany export services billings duties ; iii) a $17 million increase in temporary services primarily related to administrative workers; iv) a $16 million increase in tax, legal and other fees; and v) a $13 million increase in depreciation and amortization expenses.

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Other income (expense), net

(in millions, except percentages) (in millions, except percentages)

As a percentage of net revenues -2.4 % -2.8% -2.8% -1.2%

For the year ended December 31, 2022, the increase in other income (expense), net as compared to year ended December 31, 2021 was primarily attributable to: i) a $92 million increase in financial expenses mainly attributable to higher level of indebtedness during 2022, mostly in Brazil, which was partially offset by lower loss on debt extinguishment and previously derived from the discount related to our convertible debt., related to the 2028 Notes repurchase recognized in January 2021; and ii) an $89 million increase in our foreign currency loss mainly due to the acquisition of our own common stock in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate (refer to Note 25 of our audited consolidated financial statements for further detail), and higher foreign exchange losses from our Brazilian subsidiaries. This increase was partially offset by a $127 million increase in interest income and other financial gains from our financial investments as a result of higher interest income due to higher float and rates in Brazil.

Income tax

(in millions, except percentages) (in millions, except percentages)

As a percentage of net revenues 2.8 % 2.1 % 2.1 % 2.1%

During the year ended December 31, 2022 as compared to the year ended December 31, 2021, income tax expense increased mainly as a result of higher income tax expense in Argentina, as a consequence of higher pre-tax gains in our Argentine segment in 2022, as well as higher deferred tax liabilities in the U.S. due to temporary differences related to retained earnings from certain Brazilian Variable Interest Entities ("VIEs"). This tax expense was partially offset by lower income tax expense in Brazil as a consequence of higher deferred tax assets from certain entities in this segment in 2022 and higher deferred tax assets in Mexico recognized during 2022 as a result of the partial reversal of certain tax valuation allowance in our Mexican segment according to projected taxable gains for upcoming years.

Our effective tax rate is defined as income tax expense as a percentage of net income before income tax expense.

The following table summarizes the changes in our effective tax rate for the years ended December 31, 2022, 2021 and 2020:

Year endedDecember 31,

Our effective tax rate for the year ended December 31, 2022 as compared to 2021, decreased largely as a result of (i) the one-time loss on debt extinguishment related to 2028 Notes repurchase recognized during the first quarter of 2021, which was considered as non-deductible expense; and (ii) the deferred tax assets in Mexico that were recognized during 2022 regarding the partial reversal of certain tax valuation allowances in one subsidiary in Mexico according to projected taxable gains for upcoming years. This decrease in our effective tax rate was partially offset by (i) pre-tax losses in another subsidiary in Mexico which were included in the valuation allowance; (ii) higher deferred tax liabilities in the U.S. due to temporary differences related to retained earnings from certain Brazilian VIEs; and (iii) a higher foreign exchange loss due to the purchase of our own shares in the Argentine market that is considered a non-deductible expense.

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The following table sets forth our effective income tax rate related to our main locations for the years ended December 31, 2022, 2021 and 2020:

Year endedDecember 31,

The increase in the effective income tax rate in our Argentine segment during the year ended December 31, 2022 as compared to 2021 was mainly related to taxable foreign exchange gains accounted for local tax purposes which are not recorded for accounting purposes since, under U.S. GAAP, Argentine operations’ functional currency is the U.S. dollar due to the highly inflationary status of the country.

The decrease in our Brazilian effective income tax rate for the year ended December 31, 2022 as compared to 2021, was mainly related to the effect of higher non-taxable pre-tax gains and higher deferred tax assets from certain entities in our Brazilian segment.

The increase in our Mexican negative effective income tax rate for the year ended December 31, 2022 as compared to 2021, was mainly driven by the combined effect of higher pre-tax gains and deferred tax assets recognized during 2022 regarding the reversal of certain tax valuation allowance in a Mexican subsidiary according to projected taxable gains for upcoming years.

Deferred Income Tax

The following table summarizes the composition of our deferred tax assets as of December 31, 2022 and 2021:

December 31, December 31,

(in millions, except percentages) (in millions, except percentages)

Operations in other countries 37 4.8 21 4.3

As of December 31, 2022 and 2021 our deferred tax assets, were comprised mainly of (i) loss carryforwards representing 33.6% and 40.2% of our total deferred tax assets, respectively; (ii) U.S. foreign tax credits representing 20.6% and 10.4% of our total deferred tax assets, respectively; (iii) provisions representing 17.3% and 18.5% of our total deferred tax assets, respectively; and (iv) allowance for doubtful accounts representing 14.5% and 13.6% of our total deferred tax assets, respectively.

The following table summarizes the composition of our deferred tax assets from loss carryforwards as of December 31, 2022 and 2021:

December 31, December 31,

(in millions, except percentages) (in millions, except percentages)

Operations in other countries 12 4.7 7 3.3

We also assess the likelihood that our net deferred tax assets will be realized from future taxable income. To the extent we believe that it is more likely than not that some portion or the total deferred tax assets will not be realized, we establish a valuation allowance.

As of December 31, 2022 and 2021, our valuation allowance amounted to $360 million and $262 million, respectively.

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The following table summarizes the composition of our valuation allowance as of December 31, 2022 and 2021:

December 31, December 31,

(in millions, except percentages) (in millions, except percentages)

U.S. foreign tax credits and deferred tax assets 161 44.7 52 19.7

Argentine operations 6 1.7 3 1.0

Operations in other countries 13 3.6 10 4.1

Our valuation allowance is based on our assessment that it is more likely than not that the deferred tax asset will not be realized. The fluctuations in the valuation allowance will depend on the capacity of each country’s operations to generate taxable income or our execution of future tax planning strategies that allow us to use the aforementioned deferred tax assets. To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our tax provision in our consolidated statement of income.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuations of our deferred tax assets or liabilities, or by changes or interpretations in tax laws, regulations or accounting principles.

Segment information

See Note 9 “Segments” of our audited consolidated financial statements for detailed description about our reporting segments.

(In millions, except for percentages) Year Ended December 31, 2022

Brazil Argentina Mexico Other Countries Total

Brazil Argentina Mexico Other Countries Total

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Change from the Year Ended December 31, 2021 to December 31, 2022

Brazil Argentina Mexico Other Countries Total

Net revenues

Direct costs

Direct contribution

(In millions, except for percentages) Year Ended December 31, 2021

Brazil Argentina Mexico Other Countries Total

Brazil Argentina Mexico Other Countries Total

Change from the Year Ended December 31, 2020 to December 31, 2021

Brazil Argentina Mexico Other Countries Total

Net revenues

Direct costs

Direct contribution

Net revenues

Net revenues for the years ended December 31, 2022, 2021 and 2020 are described above in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net revenues”.

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Direct costs

Brazil

For the year ended December 31, 2022, as compared to 2021, the increase in direct costs was mainly driven by: i) a $791 million increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, hosting expenses and other payments costs mainly due to higher funding cost related to our credits business; ii) a $443 million increase in the provision for doubtful accounts mainly due to a combination effect generated by higher originations of loans during 2022, particularly, consumers and credit cards portfolio, and an increase of the non-performing ratio of the total portfolio relating to the over-90-day bucket in comparison with the previous years; iii) $134 million increase in sales and marketing expenses, mainly due to an increase in buyer protection program expenses, online and offline marketing expenses, salaries and wages, chargebacks and other sales expenses; iv) $71 million increase in product and development expenses, mostly attributable to an increase in depreciation and amortization expenses, maintenance expenses mainly related to higher software licenses expenses and other expenses mainly related to certain tax withholding; and v) a $45 million increase in general and administrative expenses, mostly attributable to an increase in other general and administrative expenses mainly related to certain tax withholding, temporary services primarily related to administrative workers, depreciation and amortization expenses, salaries mainly related to new hires and legal and other fees.

Argentina

For the year ended December 31, 2022, as compared to 2021, the increase in direct costs was mainly driven by: i) a $346 million increase in cost of net revenues, mainly attributable to an increase in other payments costs mainly consisting of higher funding cost related to our credits business, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, hosting expenses, shipping operating costs, and cost of sale of goods as a consequence of an increase in first-party sales; ii) a $62 million increase in the provision for doubtful accounts mainly due to a combination effect generated by higher originations of loans during 2022, particularly, consumer portfolio, and an increase of the non-performing ratio of the total portfolio in comparison with the previous years; iii) a $35 million increase in general and administrative expenses, mostly attributable to an increase in other general and administrative expenses principally related to certain tax withholding, office expenses and salaries and wages, mainly related to new hires; iv) a $32 million increase in product and technology development expenses, mostly attributable to an increase in depreciation and amortization expenses, maintenance expenses mainly related to higher software licenses expenses and salaries and wages; and v) a $15 million increase in sales and marketing expenses, mainly due to buyer protection program expenses, salaries and wages and online and offline marketing expenses, partially offset by lower chargebacks.

Mexico

For the year ended December 31, 2022, as compared to 2021, the increase in direct costs was mainly driven by: i) a $219 million increase in cost of net revenues, mainly attributable to increases in shipping operating costs, cost of sale of goods as a consequence of an increase in first-party sales, collection fees due to higher Mercado Pago penetration, hosting expenses and other payments costs due to higher funding cost related to our credits business, partially offset by a decrease in shipping carrier costs, due to a change on a carrier agreement in 2022 that required the principal accounting under revenue recognition guidance applied in 2021 to be changed in 2022; ii) a $129 million increase in the provision for doubtful accounts mainly due to a combination effect generated by higher originations of loans during 2022, particularly, consumer portfolio, and an increase of the non-performing ratio of the total portfolio in comparison with the previous years; iii) a $53 million increase in sales and marketing expenses, mainly due to online and offline marketing expenses, buyer protection program expenses, salaries and wages and other sales expenses; iv) a $22 million increase in product and technology development expenses, mainly attributable to depreciation and amortization expenses; and v) a $17 million increase in general and administrative expenses, mostly attributable to an increase in salaries and wages, mainly related to new hires.

Liquidity and Capital Resources

Our main cash requirement has been working capital to fund Mercado Pago financing operations. We also require cash to fund our credits business, for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to build out our logistics capacity and to make interest payments on our loans payable and other financial liabilities.

We have funded Mercado Pago mainly by selling credit card receivables and through credit lines. Additionally, we have financed our Mercado Pago and Mercado Credito businesses through the securitization of credit card receivables and certain loans through SPEs created in Brazil, Mexico and Argentina. Finally, we obtained funding through our financial institution in Brazil through deposit certificates and financial bills. Refer to Notes 17 and 21 of our audited consolidated financial statements for further detail.

We committed to purchase cloud services for: i) a total amount of $824 million, to be paid within a 5-year period starting on October 1, 2021 and ii) a total amount of $200 million to be paid within a 3-year period starting on September 23, 2022. Please refer to Note 15 of our audited consolidated financial statements for further detail on purchase commitments.

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Further, in connection with the closing of MELI Kaszek Pioneer Corp (“MEKA”)’s initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between our subsidiary, MELI Capital Ventures LLC, and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination.

On April 8, 2022, we signed a 10-year agreement with Gol Linhas Aereas S.A. under which we committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation). Pursuant to the agreement, Gol Linhas Aereas S.A. will provide logistics services in Brazil to Mercado Envios through six dedicated aircraft, two of which have already started operations as of December 31, 2022.

Additionally, we have several committed leases, mainly, related to our fulfillment and service centers, which are one of the most important investments for our Mercado Envios business. In this sense, as of December 31, 2022, we have committed rental expenditures with our lessors for $929 million and $67 million for operating leases and finance leases, respectively. See Note 23 of our audited consolidated financial statements for further detail on leases.

We and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of our suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in our payment policy. Suppliers’ voluntary inclusion of invoices in the SFP does not change our payment terms, the amounts paid or liquidity. We have no economic interest in a supplier’s decision to participate in the SFP and have no financial impact in connection with the SFP. As of December 31, 2022, the program amounted to $206 million, out of which $169 million have been utilized by suppliers and are included in the balance sheet within accounts payable line.

In November 2021, we closed an equity public offering for an aggregate of 1,000,000 shares of our Common Stock at a public offering price of $1,550 per share. The aggregate proceeds of the equity offering were $1,520 million net of issuance costs paid. See Note 22 of our audited consolidated financial statements for additional information regarding our equity offerings.

Finally, on March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”). The interest rates under the Credit Arrangement are based on Adjusted Term SOFR plus an interest margin of 1.25% per annum. Any loans drawn under the Credit Arrangement must be repaid on or prior to March 31, 2025. We are also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125%. As of December 31, 2022, no amounts had been borrowed under the facility. See Note 17 of our audited consolidated financial statements for further detail.

As of December 31, 2022, our main source of liquidity was $3,030 million of cash and cash equivalents and short-term investments, which excludes a $1,219 million investment mainly related to the Central Bank of Brazil Mandatory Guarantee, and consists of cash generated from operations and proceeds from loans.

The significant components of our working capital are cash and cash equivalents, restricted cash and cash equivalents, short-term investments, credit card receivables and other means of payments, accounts receivable, loans receivable, inventory, accounts payable and accrued expenses, funds payable to customers, amounts payable due to credit and debit card transactions and short-term debt.

As of December 31, 2022, cash and cash equivalents, restricted cash and cash equivalents and investments of our non-U.S. subsidiaries amounted to $4,843 million, or 80.4% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments, and our non-U.S. dollar-denominated cash, cash equivalent, restricted cash and cash equivalent and investments held outside U.S. amounted to approximately 78.7% of our consolidated cash and investments. Our non-U.S. dollar-denominated cash and investments are located primarily in Brazil, Mexico and Argentina.

Given the uncertain progress of the COVID-19 pandemic and the macroeconomic instability in the countries where we operate, it is not possible to have certainty around future business development and cash generation. In terms of liquidity and cash management, our relevant sources of funding remain available and credit facilities have been obtained at the geographic segment level.

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The following table presents our cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2022, 2021 and 2020:

Years endedDecember 31,

Net cash provided by (used in):

Net cash provided by operating activities

Cash provided by operating activities consists of net income (loss) adjusted for certain non-cash items, and the effect of changes in working capital and other activities:

(in millions, except percentages)

Net Cash provided by:

Net cash provided by operating activities during the year ended December 31, 2022, resulted primarily from our net income of $482 million, adjustments to net income related to non-cash items of $1,924 million, an increase in funds payable to customers by $1,044 million, a $449 million increase in payables and accrued expenses, which were partially offset by a $1,084 million increase in credit card receivables and other means of payments.

Net cash used in investing activities

(in millions, except percentages)

Net Cash used in:

Net cash used in investing activities in the year ended December 31, 2022 resulted mainly from purchases of investments of $12,694 million, which was partially offset by proceeds from the sale and maturity of investments of $11,023 million, consistent with our treasury strategy of investing part of our available liquidity, principally, in U.S. treasury securities and money market funds. We used: i) $1,701 million in principal loans receivable granted under our Mercado Credito solution; and ii) $454 million in investments of property and equipment (mainly related to our shipping network and information technology assets in Argentina, Brazil and Mexico).

Net cash provided by financing activities

(in millions, except percentages)

Net Cash provided by:

For the year ended December 31, 2022, our net cash provided by financing activities was primarily derived from $17,017 million in proceeds from loans payable and other financial liabilities which was partially offset by $15,933 million in payments on loans payable and other financial liabilities, $148 million related to repurchases of our common stock, and $20 million for the payments of finance lease obligations.

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Debt

Convertible Senior Notes

On August 24, 2018, we issued $800 million of 2.00% Convertible Senior Notes due 2028 and on August 31, 2018 we issued an additional $80 million of notes pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, resulting in an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028 (collectively the “2028 Notes”). The 2028 Notes are unsecured, unsubordinated obligations, which pay interest in cash semi-annually, on February 15 and August 15, at a rate of 2.00% per annum. The 2028 Notes will mature on August 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes.

In January 2021, we signed agreements with 2028 Notes holders to repurchase $440 million principal amount of our outstanding 2028 Notes. The total amount paid amounted to $1,865 million, which includes principal, interest accrued and premium. As of the date of the issuance of this annual report, $439 million of our principal amount of the 2028 Notes remains outstanding.

Please refer to Note 17 to our audited consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions.

Mercado Pago and Mercado Credito Funding

We obtained funding through our financial institution in Brazil through deposit certificates, loans and financial bills, and continued obtaining, through our subsidiaries, certain lines of credit in Argentina and Mexico primarily to fund the Mercado Pago business. Additionally, we continue to securitize certain loans and credit card receivables through our Argentine, Mexican and Brazilian SPEs, formed to securitize loans provided by us to our users and credit card receivables. Please refer to Notes 17 and 21 to our audited consolidated financial statements for additional detail.

Debt Securities Guaranteed by Subsidiaries

On January 14, 2021, we issued $400 million aggregate principal amount of 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and $700 million aggregate principal amount of 3.125% Notes due 2031 (the “2031 Notes” and collectively, the “Notes”). The payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes, is fully and unconditionally guaranteed (the “Subsidiary Guarantees”), jointly and severally, on an unsecured basis, by certain of our subsidiaries (the “Subsidiary Guarantors”). The initial Subsidiary Guarantors were MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., Mercado Pago Instituição de Pagamento Ltda. (formerly known as “MercadoPago.com Representações Ltda.”), MercadoLibre Chile Ltda., MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico (formerly known as “MercadoLibre, S. de R.L. de C.V.”), DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. On October 27, 2021, MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico became an excluded subsidiary pursuant to the terms of the Notes and it was released from its Subsidiary Guaranty. On October 27, 2021, MP Agregador, S. de R.L. de C.V. became a Subsidiary Guarantor under the Notes. On July 1 and October 1, 2022, Ibazar.com Atividades de Internet Ltda. and Mercado Envios Servicos de Logistica Ltda. were merged into eBazar.com.br Ltda, respectively.

We pay interest on the Notes on January 14 and July 14 of each year, beginning on July 14, 2021. The 2026 Sustainability Notes will mature on January 14, 2026, and the 2031 Notes will mature on January 14, 2031.

The Notes rank equally in right of payment with all of the Company’s other existing and future senior unsecured debt obligations. Each Subsidiary Guarantee will rank equally in right of payment with all of the Subsidiary Guarantor’s other existing and future senior unsecured debt obligations, except for statutory priorities under applicable local law.

Each Subsidiary Guarantee will be limited to the maximum amount that would not render the Subsidiary Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of applicable law. By virtue of this limitation, a Subsidiary Guarantor’s obligation under its Subsidiary Guarantee could be significantly less than amounts payable with respect to the Notes, or a Subsidiary Guarantor may have effectively no obligation under its Subsidiary Guarantee.

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Under the indenture governing the Notes, the Subsidiary Guarantee of a Subsidiary Guarantor will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (other than to the Company or a Subsidiary) otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the Notes, (iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Triggering Indebtedness (as defined in the applicable indenture) or the repayment of the Triggering Indebtedness, in each case, that resulted in the obligation of such Subsidiary to become a Subsidiary Guarantor, provided that in no event shall the Subsidiary Guarantee of an Initial Subsidiary Guarantor terminate pursuant to this provision, or (iv) such Subsidiary Guarantor becoming an Excluded Subsidiary (as defined in the applicable indenture) or ceasing to be a Subsidiary.

We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, at any time prior to December 14, 2025 (the date that is one month prior to the maturity of the 2026 Sustainability Notes) and the 2031 Notes, in whole or in part, at any time prior to October 14, 2030 (the date that is three months prior to the maturity of the 2031 Notes), in each case by paying 100% of the principal amount of such Notes so redeemed plus the applicable “make-whole” amount and accrued and unpaid interest and additional amounts, if any. We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, on December 14, 2025 or at any time thereafter and the 2031 Notes on October 14, 2030 or at any time thereafter, in each case at the redemption price of 100% of the principal amount of such Notes so redeemed plus accrued and unpaid interest and additional amounts, if any. If we experience certain change of control triggering events, we may be required to offer to purchase the notes at 101% of their principal amount plus any accrued and unpaid interest thereon through the purchase date.

See Note 17 of our audited consolidated financial statements for additional detail.

We are presenting the following summarized financial information for the issuer and the Subsidiary Guarantors (together, the “Obligor Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the Subsidiary Guarantors, presented on a combined basis, have been eliminated. Financial information for the non-guarantor subsidiaries, and any investment in a non-guarantor subsidiary by the Company or by any Subsidiary Guarantor, have been excluded. Amounts due from, due to and transactions with the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented in footnotes.

Summarized balance sheet information for the Obligor Group as of December 31, 2022 and 2021 is provided in the table below:

December 31,

(1)Includes restricted cash and cash equivalents of $687 million and $761 million and foreign government debt securities (Central Bank of Brazil mandatory guarantee) of $1,219 million and $602 million as of December 31, 2022 and December 31, 2021, respectively.

(2)Includes Current assets from non-guarantor subsidiaries of $863 million and $287 million as of December 31, 2022 and December 31, 2021, respectively.

(3)Includes Non-current assets from non-guarantor subsidiaries of $410 million and $204 million as of December 31, 2022 and December 31, 2021, respectively.

(4)Includes Current liabilities to non-guarantor subsidiaries of $1,334 million and $726 million as of December 31, 2022 and December 31, 2021, respectively.

(5)Includes Non-current liabilities to non-guarantor subsidiaries of $135 million as of December 31, 2021.

Summarized statement of income information for the Obligor Group for the year ended December 31, 2022 is provided in the table below:

Year Ended December 31,

Income from operations (3) 797

(1)Includes Net revenues from transactions with non-guarantor subsidiaries of $145 million for the year ended December 31, 2022.

(2)Includes charges from transactions with non-guarantor subsidiaries of $641 million for the year ended December 31, 2022.

(3)In addition to the charges included in Gross profit, Income from operations includes charges from transactions with non-guarantor subsidiaries of $366 million for the year ended December 31, 2022.

(4)Includes other income/(expense) from transactions with non-guarantor subsidiaries of $(48) million for the year ended December 31, 2022.

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Cash Dividends

See “Item 5—Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities—Dividend Policy” for more information regarding our dividend distributions.

Our board of directors suspended the payment of dividends on our common stock as of the first quarter of 2018 after reviewing our capital allocation process and concluding that we have multiple investment opportunities that should generate greater returns to shareholders through investing capital into the business as compared to paying dividends. Any future determination as to the declaration of dividends on our common stock will be made at the discretion of our board of directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by our board of directors, including the applicable requirements of the Delaware General Corporation Law.

Capital expenditures

Our capital expenditures (comprised of our payments for property and equipment (such as fulfillment centers), intangible assets (excluding digital assets) and business acquisitions for the years ended December 31, 2022 and 2021 amounted to $455 million and $630 million, respectively.

During the year ended December 31, 2022, we invested $209 million in information technology in Brazil, Argentina and Mexico, and $211 million in our Argentine, Brazilian and Mexican shipping premises and offices.

We are continually increasing our level of investment in hardware and software licenses necessary to improve and update our platform’s technology and our computer software developed internally. We anticipate continued investments in capital expenditures related to information technology and logistics network capacity in the future as we strive to maintain our position in the Latin American e-commerce and fintech market.

We believe that our existing cash and cash equivalents, including the sale of credit card receivables, short-term investments and cash generated from operations, will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations in the foreseeable future.

Non-GAAP Measures of Financial Performance

To supplement our audited consolidated financial statements presented in accordance with U.S. GAAP, we present foreign exchange (“FX”) neutral measures as a non-GAAP measure. Reconciliation of this non-GAAP financial measure to the most comparable U.S. GAAP financial measure can be found in the tables below.

This non-GAAP measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP and may be different from FX neutral non-GAAP measures used by other companies. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. FX neutral non-GAAP measure has limitations in that it does not reflect the impact of foreign exchange as required by U.S. GAAP. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

We provide this non-GAAP financial measure to enhance overall understanding of our current financial performance and its prospects for the future. We believe that FX neutral measures provide useful information to both Management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.

The FX neutral measures were calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022, so as to calculate what our results would have been had exchange rates remained stable from one year to the next. The comparative FX neutral measures were calculated by using the average monthly exchange rates for each month during 2020 and applying them to the corresponding months in 2021. The table below excludes intercompany allocation FX effects. Finally, these measures do not include any other macroeconomic effect such as local currency inflation effects, the impact on impairment calculations or any price adjustment to compensate local currency inflation or devaluations.

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The following table sets forth the FX neutral measures related to our reported results of the operations for years ended December 31, 2022, 2021 and 2020:

Year Ended December 31,

As reported FX Neutral Measures As reported

Year Ended December 31,

As reported FX Neutral Measures As reported

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks arising from our business operations. These market risks arise mainly from the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian Real, Argentine Peso and Mexican Peso due to those segments’ respective share of our revenues and assets, may affect the value of our financial assets and liabilities. Latin American countries in which we operate have been negatively affected by the outbreak of COVID-19, which has generated macroeconomic instability and led to the depreciation of certain Latin American currencies.

We are also exposed to market risks arising from our long-term retention plans (“LTRPs”). These market risks arise from our obligations to pay employees cash in amounts that vary based on the market price of our stock.

Foreign currencies

We have significant operations internationally that are denominated in foreign currencies, primarily the Brazilian Real, Argentine Peso, Mexican Peso, Colombian Peso and Chilean Peso, subjecting us to foreign currency risk, which may adversely impact our financial results. We transact business in various foreign currencies and have significant international revenues and costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services. Our cash flows, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.

We use foreign currency exchange forward contracts and currency swaps to protect our foreign currency exposure and our investment in a foreign subsidiary from adverse changes in foreign currency exchange rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign currency exchange rate movements. We designate these contracts as cash flow or net investment hedges for accounting purposes. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”). Cash flow hedges and net investment hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.

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As of December 31, 2022, we hold cash and cash equivalents in local currencies in our subsidiaries, and have receivables denominated in local currencies in all of our operations. Our subsidiaries generate revenues and incur most of their expenses in the respective local currencies of the countries in which they operate. As a result, our subsidiaries use their local currency as their functional currency except for our Argentine subsidiaries, whose functional currency is the U.S. dollar due to the inflationary environment. As of December 31, 2022, the total cash and cash equivalents, restricted cash and cash equivalents denominated in foreign currencies totaled $3,138 million, short-term investments denominated in foreign currencies totaled $1,491 million and accounts receivable, credit card receivables and other means of payments and loans receivable in foreign currencies totaled $4,812 million. As of December 31, 2022, we had $90 million long-term investments denominated in foreign currencies. To manage exchange rate risk, our treasury policy is to transfer most cash and cash equivalents in excess of working capital requirements into U.S. dollar-denominated accounts in the United States and to enter into certain foreign exchange derivatives, such as currency forwards contracts, in order to mitigate our exposure to foreign exchange risk. As of December 31, 2022, our U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and short-term investments totaled $1,073 million and our U.S. dollar-denominated long-term investments totaled $232 million.

For the year ended December 31, 2022, we had a consolidated loss on foreign currency of $198 million mainly related to higher foreign exchange losses attributable to the acquisition of our own common stock in the Argentine market at a price that reflects the additional cost of accessing U.S dollars through U.S. dollar denominated securities due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate (refer to Note 25 of our audited consolidated financial statements for further detail and see also “Item 1A. Risk Factors - Risk related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls”), and higher foreign exchange losses from our Brazilian subsidiaries. (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations—Other income (expenses), net” for more information).

See Note 2 to our audited consolidated financial statements for further detail on Argentina’s functional currency change.

Foreign Currency Sensitivity Analysis

The table below shows the impact on our net revenues, cost of net revenues, operating expenses, other income (expenses) and income tax, net income and equity for a positive and a negative 10% fluctuation on all the foreign currencies to which we are exposed to as of December 31, 2022 and for the year then ended:

Foreign Currency Sensitivity Analysis

(In millions) -10% Actual +10%

Other income/(expenses) and income tax related to P&L items (381) (354) (331)

(1) Appreciation of the subsidiaries local currency against U.S. Dollar.

(2) Depreciation of the subsidiaries local currency against U.S. Dollar.

(*) Includes cost of net revenues and operating expenses.

The table above shows an increase in our net income when the U.S. dollar weakens against foreign currencies because of the positive impact of the increase in income from operations. On the other hand, the table above shows a decrease in our net income when the U.S. dollar strengthens against foreign currencies because of the negative impact of the decrease in income from operations.

BrazilianSegment

Considering a hypothetical devaluation of 10% of the Brazilian Real against the U.S. dollar on December 31, 2022, the reported net assets in our Brazilian subsidiaries would have decreased by approximately $178 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign currency loss amounting to approximately $31 million in our Brazilian subsidiaries.

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Argentine Segment

In accordance with U.S. GAAP, we have classified our Argentine operations as highly inflationary since July 1, 2018, using the U.S. dollar as the functional currency for purposes of reporting our financial statements. Therefore, no translation effect has been accounted for in other comprehensive income related to our Argentine operations since July 1, 2018. Argentina’s annual inflation rate for the years ended December 31, 2022, 2021 and 2020 was 94.8%, 50.9% and 36.1%, respectively.

We use the Argentina’s official exchange rate to account for transactions in our Argentine segment, which as of December 31, 2022, 2021 and 2020 was 177.16, 102.72 and 84.15, respectively, against the U.S. dollar. Argentina’s annual depreciation of its local currency against the U.S. dollar for the years ended December 31, 2022, 2021 and 2020 was 72.5%, 22.1% and 40.5%, respectively.

Considering a hypothetical devaluation of 10% of the Argentine Peso against the U.S. dollar on December 31, 2022, the effect on non-functional currency net asset position in our Argentine subsidiaries would have been a foreign exchange loss amounting to approximately $16 million in our Argentine subsidiaries.

In the second half of 2019, the Argentine government instituted exchange controls restricting the ability of companies and individuals to exchange Argentine Pesos for foreign currencies and their ability to remit foreign currency out of Argentina. An entity’s authorization request to the CBA to access the official exchange market to make foreign currency payments may be denied depending on the circumstances. As a result of these exchange controls, markets in Argentina developed trading mechanisms in which an entity or individual buys U.S. dollar denominated securities in Argentina (i.e. shares, sovereign debt) using Argentine peso, 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, 2022, 2021 and 2020, the spread of the Blue Chip Swap Rate was 94.2%, 96.8% and 66.7%, respectively (see Notes 2 “Summary of significant accounting policies – Argentine currency status” and 25 “Share repurchase program” of our audited consolidated financial statements).

MexicanSegment

Considering a hypothetical devaluation of 10% of the Mexican peso against the U.S. dollar on December 31, 2022, the reported net assets in our Mexican subsidiaries would have decreased by approximately $60 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign currency loss amounting to approximately $20 million in our Mexican subsidiaries.

Interest

Our earnings and cash flows are also affected by changes in interest rates. These changes could have an impact on the interest rates that financial institutions charge us prior to the time we sell our credit card receivables and on the financial debt that we use to fund our Mercado Pago and Mercado Credito’s operations. As of December 31, 2022, Mercado Pago’s funds receivable from credit cards and other means of payments totaled $2,946 million. Interest rate fluctuations could also impact interest earned through our Mercado Credito solution. As of December 31, 2022, loans receivable net of the allowance for doubtful accounts under our Mercado Credito solution totaled $1,736 million. Interest rate fluctuations could also negatively affect certain of our fixed rate and floating rate investments comprised primarily of time deposits, money market funds and sovereign debt securities. Investments in both fixed rate and floating rate interest earning products carry a degree of interest rate risk. Fixed rate securities may have their fair value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall.

As of December 31, 2022, our short-term investments amounted to $2,339 million and our long-term investments amounted to $322 million. Our short-term investments, except for the $1,219 million related to the Central Bank of Brazil mandatory guarantee, can be readily converted at any time into cash or into securities with a shorter remaining time to maturity. We determine the appropriate classification of our investments at the time of purchase and re-evaluate such designations as of each balance sheet date.

Fluctuations of the interest rate could also have a negative impact on interest expense related to our Loans payable and other financial liabilities, as a portion of these instruments is subject to variable interest rates. As of December 31, 2022, our loans payable and other financial liabilities which accrue interest based on variable rates amounted to $2,615 million. See Notes 17 and 21 of our audited consolidated financial statements for further detail. We have entered into swap contracts to hedge the interest rate fluctuation of $842 million notional amount, $362 million of which have been designated as hedging instruments. See Note 24 of our audited consolidated financial statements for further detail on derivatives instruments.

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Equity Price Risk

Our board of directors, upon the recommendation of the compensation committee, approved the 2018 Long Term Retention Plan (the “2018 LTRP”).

In order to receive an award under the 2018 LTRP, each eligible employee must satisfy the performance conditions established by the board of directors for such employee. If these conditions are satisfied, the eligible employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2018 LTRP award, payable as follows:

•the eligible employee will receive a fixed payment, equal to 8.333% of his or her 2018 LTRP bonus once a year for a period of six years starting no later than April 30, 2019 respectively (the “2018 Annual Fixed Payment”); and

•on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2018 Variable Payment”) equal to the product of (i) 8.333% of the applicable 2018 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b) the denominator, equals the 2017 Stock Price, defined as $270.84, which was the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2017. The “Applicable Year Stock Price” shall equal the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date.

Our board of directors, upon the recommendation of the compensation committee, approved the 2019, 2020, 2021 and 2022 Long Term Retention Program (the “2019, 2020, 2021 and 2022 LTRPs”), respectively, under which certain eligible employees have the opportunity to receive cash payments annually for a period of six years (with the first payment occurring no later than April 30, 2020 and 2021 for the 2019 and 2020 LTRPs, respectively, and no later than January 31, 2022 and 2023 for the 2021 and 2022 LTRPs, respectively). In order to receive the full target award under the 2019, 2020, 2021 and/or 2022 LTRPs, each eligible employee must remain employed as of each applicable payment date. The 2019, 2020, 2021 and 2022 LTRP awards are payable as follows:

•the eligible employee will receive 16.66% of half of his or her target 2019, 2020, 2021 and/or 2022 LTRP bonus once a year for a period of six years, with the first payment occurring no later than April 30, 2020 and 2021, and no later than January 31, 2022 and 2023, respectively (the “2019, 2020, 2021 or 2022 Annual Fixed Payment”, respectively); and

•on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2019, 2020, 2021 or 2022 Variable Payment”) equal to the product of (i) 16.66% of half of the target 2019, 2020, 2021 or 2022 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2018, 2019, 2020 and 2021 defined as $322.91, $553.45, $1,431.26 and $1,391.81 for the 2019, 2020, 2021 and 2022 LTRPs, respectively. The “Applicable Year Stock Price” shall equal the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date.

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As of December 31, 2022, the total contractual obligation fair value of our outstanding LTRP Variable Award Payment obligation subject to equity price risk amounted to $157 million. As of December 31, 2022, the accrued liability related to the outstanding Variable Award Payment of the LTRP included in Salaries and social security payable and Non-current other liabilities in our consolidated balance sheet amounted to $58 million. The following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the outstanding LTRP Variable Award Payment subject to equity price risk if our common stock price per share were to increase or decrease by up to 40%:

(In millions, except equity price)

Change in equity price in percentage

(*) Present value of average closing stock price for the last 60 trading days of the year preceding the applicable payment date.

In November 2021, we acquired Kangú Participações S.A. Former Kangú’s shareholders who after the acquisition became the Company’s employees will receive cash payments annually over a three-year period subject to certain performance and stay conditions. The payments will be indexed based on changes in equity price of our Common Stock. As of December 31, 2022, the total contractual obligation fair value of the mentioned payments amounted to $6.6 million.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and accompanying notes listed in Part IV, Item 15(a) of this report are included elsewhere in this report and incorporated herein by reference. This includes the Report of Independent Registered Public Accounting Firm of our successor (PCAOB IDs: 1449) and predecessor (PCAOB ID: 1088) auditors.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure control and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as required by Rules 13a-15(b) or 15d-15(b) under the Exchange Act, as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to Management as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our Management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework updated by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on its evaluation under the framework in Internal Control—Integrated Framework (2013), our Management concluded that our internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of Management’s assessment with the Audit Committee of our board of directors.

The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by Pistrelli, Henry Martin y Asociados S.R.L. (member of Ernst & Young Global Limited), an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting as defined in Exchange Act Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION

Not applicable.

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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K within 120 days of the Company’s fiscal year ended December 31, 2022.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be included under the captions “Compensation Committee Interlocks and Insider Participation” and “Executive Compensation” in the 2023 Proxy Statement, except as to information required pursuant to Item 402(v) of SEC Regulation S-K with respect to pay versus performance, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

Except for the information regarding shares authorized for issuance under equity compensation plans (which is set forth below), the information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K within 120 days of the Company’s fiscal year ended December 31, 2022.

The following table presents information as of December 31, 2022 with respect to equity compensation plans under which shares of the Company’s common stock are authorized for issuance:

Equity Compensation Plan Information

(a) (b) (c)

Equity compensation plans approved by security holders (1) — — 990,497

(1)Represents our Amended and Restated 2009 Equity Compensation Plan which was approved by our stockholders on June 10, 2019.

(2)Pursuant to SEC guidance, this table does not reflect grants of restricted stock made pursuant to our Amended and Restated 2009 Equity Compensation Plan. As of December 31, 2022, there were 7,085 shares of unvested restricted stock outstanding under such plan.

Description of our Amended and Restated 2009 Equity Compensation Plan (the “Amended and Restated 2009 Plan”)

Our Amended and Restated 2009 Plan was adopted by our board of directors on April 24, 2019. The Amended and Restated 2009 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees and non-qualified stock options, restricted stock and other equity-based or equity-related awards to our employees, directors, officers and managers. Incentive stock options and non-qualified stock options are referred to as “stock options,” and together with restricted stock and all other awards are referred to as “awards”. As of December 31, 2022, there were no outstanding stock options to purchase shares of common stock under the Amended and Restated 2009 Plan.

No stock options were granted during the period from January 1, 2007 to December 31, 2022 and there were no stock-based compensation expenses related to stock options for the years ended December 31, 2022, 2021, 2020, 2019 and 2018. There is no stock option award outstanding under the Amended and Restated 2009 Plan. As of December 31, 2022, there were 990,497 shares of common stock available for additional awards under the Amended and Restated 2009 Plan.

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Number of shares of common stock available under the Amended and Restated 2009 Plan. The maximum number of common stock reserved and available for delivery in connection with awards under the Amended and Restated 2009 Plan is 1,000,000 Shares of common stock underlying awards previously granted under the Amended and Restated 2009 Plan that terminate without being exercised, expire, are forfeited or canceled shall again be available pursuant to the Amended and Restated 2009 Plan. The shares of common stock issuable pursuant to any award granted under the Amended and Restated 2009 Plan shall be (i) authorized but unissued shares, (ii) shares of common stock held in the Corporation’s treasury, (iii) shares acquired by the Corporation on any stock exchange in which such shares are traded, or (iv) a combination of the foregoing.

Administration of the Amended and Restated 2009 Plan. The Amended and Restated 2009 Plan is administered by our board of directors or a committee appointed by the board of directors (the body in charge of administering the Amended and Restated 2009 Plan is referred to as the “administrator”). If the common stock is registered under Section 12(b) or 12(g) of the Exchange Act, the board of directors shall consider in selecting the administrator and the membership of any committee acting as administrator the provisions of Rule 16b-3 under the Exchange Act regarding “non-employee directors.” The administrator determines the recipients of awards, the times at which awards are granted, the number of shares subject to each type of award, the time for vesting of each award and the duration of the exercise period for stock options. The administrator additionally has the power and authority to approve forms of award agreements and other related documents used under the Amended and Restated 2009 Plan.

Price, exercise and termination of stock option awards. The exercise price for each share of common stock subject to a stock option is determined by the administrator, and in no event shall the exercise price be less than 100% of the fair market value of the shares of common stock on the date of the grant (or 110% in the case of employees who directly or indirectly own more than 10% of the total combined voting power of all classes of our stock).

Stock options are exercisable on their vesting date, which is determined by the administrator and set forth in the award agreement governing any particular stock option. Vesting dates can be accelerated on the occurrence of a specified event, as provided in an award agreement, or can be accelerated at the discretion of the administrator.

If a stock option expires or is terminated or canceled without having been exercised, it shall become null and void and of no further force and effect. The term of a stock option may not exceed beyond the tenth anniversary on which the stock option is granted (or the fifth anniversary in the case of incentive stock options granted to employees who directly or indirectly own 10% of the total combined voting power of all classes of our stock.) A stock option terminates 30 days after a participant ceases to be an officer, manager, employee or director as a result of a termination without cause, and after 10 days of termination in the case of a termination for cause. Cause includes the conviction of a crime involving fraud, theft, dishonesty or moral turpitude, the participant’s continuous disregard of or willful misconduct in carrying lawful instructions of superiors, continued use of alcohol or drugs that interfered with the performance of the participant’s duties, the conviction of participant for committing a felony or similar foreign crime, and any other cause for termination set forth in a participant’s employment agreement. A stock option terminates three months after the death or permanent disability of a participant, or, if the participant is a party to an employment agreement, the disability of such participant as defined in the employment agreement. Other reasons for termination may be set out in the award agreement.

A stock option will not be considered an incentive stock option to the extent that the aggregate fair market value (on the date of the grant of the incentive stock option) of all stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year is greater than $100,000. No stock option shall be affected by a change of duties or position of a participant (including a transfer to our subsidiaries) as long as the participant continues to be our employee or an employee of our subsidiaries.

Adjustments upon the occurrence of material transactions. In the event we undergo dissolution or liquidation, a reorganization, merger or consolidation in which we are not the surviving entity, or a sale of all or substantially all of our assets (each, a “Material Transaction”), holders of stock options will be given 10-day prior written notice and will decide within those 10 days whether to exercise their respective stock options. Any stock option that is not so exercised will terminate. However, such notice and exercise mechanism would not apply if provision is made in connection with a Material Transaction for assumption of outstanding stock options, or substitution of stock options for new stock options or equity securities, with any appropriate adjustments as to the number, kind and prices of shares subject to stock options.

Transferability. Unless the prior written consent of the administrator is obtained, no stock option can be assigned or otherwise transferred by any participant except by will or by the laws of descent and distribution. Except in the case of an approved transfer, a stock option may be exercised during the lifetime of a participant only by the participant or his/her legal representative if the participant is legally disabled.

Restricted stock. Restricted stock awards are awards of shares of common stock that vest according to the terms and conditions established by the administrator. The administrator may impose whatever restrictions on transferability, risk of forfeiture and other restrictions as it determines. A holder of restricted stock has the rights of a stockholder, including the right to vote the restricted stock. During the restricted period applicable to the restricted stock, it may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered. Except as otherwise determined by the administrator, restricted stock that is subject to restrictions is subject to forfeiture upon termination of a participant’s employment.

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Other awards. The administrator of the Amended and Restated 2009 Plan may grant additional equity-based or equity-related awards in such amounts and on such terms as it shall determine, subject to the terms and conditions set forth in the Amended and Restated 2009 Plan. Each such award shall be denominated in, or shall have a value determined by reference to, a number of shares that is specified at the time of the grant of the award.

Amendment. Our board of directors may modify the Amended and Restated 2009 Plan at any time. The approval by a majority of our stockholders is necessary if required by law or necessary to comply with any applicable laws and regulations. No amendment will affect the terms of any award granted prior to the effectiveness of such amendment, except with the consent of the holder of the award.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information presented under the heading “Certain Relationships and Related Transactions” and “Information on Our board of directors and Corporate Governance” in our 2023 Proxy Statement to be filed with the SEC is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item will be included in our 2023 Proxy Statement to be filed with the SEC and is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)Financial Statements. The following financial statements are included in this report:

Page

Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms 77

Consolidated balance sheets as of December 31, 2022 and 2021 81

Notes to consolidated financial statements 87

(b)Exhibits. The exhibits required by Item 601 of Regulation S-K are set forth under “Index to Exhibits” and is incorporated herein by reference.

ITEM 16. FORM 10-K SUMMARY

None.

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EXHIBIT INDEX

Incorporated by Reference

3.02 Registrant’s Amended and Restated Bylaws. S-1 May 11, 2007

10.02 Management Incentive Bonus Plan of the Registrant. S-1/A July 13, 2007

10.03 Form of Employment Agreements with Officers. S-1/A July 13, 2007

10.05 Amended and Restated 2013 Long-Term Retention Plan 10-Q August 5, 2016

10.06 Amended and Restated 2014 Long-Term Retention Plan 10-Q August 5, 2016

10.07 Amended and Restated 2015 Long-Term Retention Program 10-Q May 6, 2021

10.08 Amended and Restated 2016 Long-Term Retention Program 10-Q May 6, 2021

10.09 Amended and Restated 2017 Long-Term Retention Program 10-Q May 6, 2021

10.10 Amended and Restated 2018 Long-Term Retention Program 10-Q May 6, 2021

10.11 Amended and Restated 2019 Long-Term Retention Program 10-Q May 6, 2021

10.12 Amended and Restated 2020 Long-Term Retention Program 10-Q May 6, 2021

10.14 MercadoLibre, Inc. 2022 Long Term Retention Program 8-K May 9, 2022

10.16 MercadoLibre, Inc. 2019 Director Compensation Program 8-K August 7, 2019

21.01 List of Subsidiaries *

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MERCADOLIBRE, INC.

By: /s/ Marcos Galperin

Marcos Galperin

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

Marcos Galperin

Pedro Arnt

/s/ Mario Vazquez Director February 24, 2023

Mario Vazquez

/s/ Susan Segal Director February 24, 2023

Susan Segal

/s/ Nicolás Aguzin Director February 24, 2023

Nicolás Aguzin

/s/ Nicolás Galperin Director February 24, 2023

Nicolás Galperin

/s/ Emiliano Calemzuk Director February 24, 2023

Emiliano Calemzuk

/s/ Henrique Dubugras Director February 24, 2023

Henrique Dubugras

/s/ Andrea Mayumi Petroni Merhy Director February 24, 2023

Andrea Mayumi Petroni Merhy

/s/ Richard Sanders Director February 24, 2023

Richard Sanders

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of MercadoLibre, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of MercadoLibre, Inc. (the Company) as of December 31, 2022, the related consolidated statements of income, comprehensive income,equity and cash flows for the year then ended, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for doubtful accounts on loans receivable

Description of the matter

As more fully described in Note 2 to the consolidated financial statements, the Company maintains an allowance for doubtful accounts, related to loans receivable, based on Management’s estimate of the current expected credit losses (CECL estimate). This allowance as of December 31, 2022, amounts to 1,112 million U.S. dollars as disclosed in Note 7, which represents a probability-weighted amount, determined by evaluating a range of possible outcomes and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions.

The Company’s CECL estimate is determined based on probability-weighed scenarios of default over the life of the loans receivable. Probability of default models are estimated using a non-parametric method, which estimates the future default rate. The models include a macroeconomic outlook for projections and recent performance. The Company estimates marginal monthly default probabilities for each delinquency bucket, type of product and country. These probabilities of default are combined with a set of Loss Given Default parameters, which depend on days past due, type of product and country, and are estimated by measuring an average of historical recovery rates from defaulted credits using Work-out and Chainladder approaches.

Auditing the CECL estimate was complex and required the application of significant judgment due to the inherent complexity of the models, assumptions and the interrelationship of the variables used in measuring the CECL estimate. Significant assumptions and judgments with respect to the CECL estimate include the forecast of alternative economic scenarios, the probability weighting of those scenarios and the assumptions for definition of default and portfolio segmentation which considers its credit quality. The CECL estimate is a significant estimate for which variations in model methodology, underlying assumptions and judgments could have a material effect on its measurement.

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How we addressed the matter in our audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls related to the CECL estimate. The controls we tested included, among others, controls over the development and review of inputs and models used to calculate the CECL estimate, data completeness and accuracy, economic forecasting, including the probability weighting of the economic scenarios and the governance and oversight over the modelled results.

To test the CECL estimate, our audit procedures included, among others, involving our credit risk modelling specialists to assist in assessing the methodology and assumptions used to estimate CECL and evaluate management’s forecasting methodology; comparing management’s forward-looking information to independently derived forecasts and publicly available information; evaluating the scenario probability weightings used in the CECL models and performing independent recalculations to test the mathematical accuracy of management’s models; evaluating whether the assumptions used were reflective of the credit quality and testing the completeness and accuracy of data used in the measurement of the CECL estimate. We also assessed the adequacy of the CECL estimate financial statement disclosures.

/s/ Pistrelli, Henry Martin y Asociados S.R.L.

PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.

Member of Ernst & Young Global Limited

We have served as the Company’s auditor since 2021.

Buenos Aires, Argentina

February 24, 2023

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