MercadoLibre to invest over $700 million in Brazil as coronavirus boosts e-commerce

MercadoLibre to invest over $700 million in Brazil as coronavirus boosts e-commerce

Latin American e-commerce company MercadoLibre is one of the few firms not scaling back spending amid the coronavirus pandemic and plans to move forward with a planned 4 billion reais ($717 million) investment in Brazil this year, an executive told Reuters on Tuesday.

After seeing a sharp drop in demand in the second half of March, the Argentina-based company reported strong sales in April with an increasing number of consumers shopping online while social distancing measures were in place.

“We might have to redirect some spending to logistics due to the rise in e-commerce demand, but for now the idea is to keep capital expenditure,” said MercadoLibre’s vice president for Latin America, Stelleo Tolda.

He noted that stay-at-home measures led a growing number of smaller vendors to seek digital platforms such as MercadoLibre to continue selling their products and preserve cash flow.

The e-commerce firm has hired 200 direct employees and 2,500 third-party contractors since the second half of March to strengthen its logistics team and cope with a higher volume of deliveries.

Tolda expects that many of the new customers and vendors will continue to use online channels even after lockdowns are over.

“I believe that e-commerce’s stake in total sales will stabilize at a level higher than before the crisis,” he said.

In the first quarter, the company’s net revenue grew by 37.6% from the same period a year ago to $652 million. Only in Brazil, which accounts for 61% of the total, its net revenue climbed by 31.4% in U.S. dollar terms and 55% in Brazilian real terms year-on-year.

Still, MercadoLibre reported a net loss of $21.1 million after taxes in the quarter ended on March 31 compared with a loss of $54 million in the fourth quarter.

Besides new hires, MercadoLibre also plans to open a fourth distribution center this year in Brazil’s northeastern region, according to Tolda. The company is also focused on expanding its financial services unit MercadoPago.

On April 15, the e-commerce group said MercadoPago would extending a 600 million-real ($114 million) credit line to help Brazilian medium and small businesses face the sharp drop in economic activity caused by the new coronavirus crisis.

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