Deep Dive Brief: Mercado Libre's Origin Story - Part I
How Survival Built Latin America’s Most Formidable Digital Ecosystem
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Understanding Mercado Libre requires understanding something most U.S. investors take for granted: what happens when you try to build an e-commerce business in a place where the basic infrastructure simply doesn’t exist. No reliable payment systems. No trust in online transactions. No logistics networks capable of moving packages reliably across a continent.
The thing is that Mercado Libre not only built a marketplace, but it built the entire economic infrastructure that makes digital commerce possible in Latin America.
This is a story about surviving when 80 competitors didn’t, about making bets that compressed margins by 35 percentage points because they were “the right thing to do for the next 10 years” and about a culture forged in chaos and survival that’s become impossible to replicate.
On this fifteenth edition of the Expanse Stocks’ Deep Dive Brief series, I am excited to tell you the origin story of Mercardo Libre, or Meli as it’s affectionately known by employees and customers:
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The Dot-Com Survivor That Built From the Ground Up
Meli was born in 1999 from the mind of Marcos Galperin. While studying for his MBA at Stanford, Galperin witnessed the dot-com boom firsthand. He saw the explosive growth of eBay and recognized a parallel opportunity in his home continent, a region ripe for disruption but starved of the necessary infrastructure.
With co-founders Hernán Kazah and Stelleo Tolda, Galperin returned to Argentina not to replicate eBay, but to adapt its model for a far more challenging environment. The initial concept was straightforward: an auction model for C2C sales.
But the context was anything but simple. This was the peak of the dot-com bubble, and Latin America was flooded with competitors. “There was something like 80 e-commerce startups in LatAm all pursuing the same or very similar business models,” Marcos Galperin explained in a recent podcast.
Many of these rivals were better funded and growing faster, using the capital at their disposal to acquire users. But here’s where the story gets interesting. While competitors burned through venture capital to acquire users at any cost, Galperin and his co-founders made a different bet. They grew the business at a pace their nascent infrastructure could actually support, prioritizing organic growth over a cash-burning expansion. When the dot-com bubble burst, Meli was one of the only survivors.
This early trial by fire established something critical to understanding the company today: a deep focus on long-term viability over short-term hype. I would even go as far as to say that this survival instinct, this cultural DNA formed when 79 competitors died, is what separates Meli from almost every other e-commerce player globally.
This discipline and long-term thinking did not mean a lack of ambition. On the contrary, the team quickly realized the limitations of the auction model and pivoted toward fixed-price sales, which already accounted for the majority of sales by its 2007 IPO in the Nasdaq. But the true genius of Meli’s evolution lay in its systematic dismantling of the frictions that held back Latin American e-commerce as we’ll see next.
Building What Didn’t Exist
The real genius of Meli’s evolution wasn’t in copying eBay (though they’d probably admit they weren’t particularly innovative in the initial concept). It was in recognizing that to succeed in Latin America, they had to solve problems that simply didn’t exist in developed markets.
🔹 Mercado Pago (2003): The Trust Problem
Try to imagine launching an e-commerce business where nobody trusts online payments, credit card penetration is minimal, and the entire financial system operates on cash. That was Latin America in the early 2000s. Meli’s response was Mercado Pago: an escrow-like payment system that introduced buyer and seller feedback, secure digital wallets, and crucially, trust.
Today, Pago processes payments both on and off the marketplace. It’s evolved into a fintech behemoth that’s arguably become more valuable than the core marketplace business. But it started as a necessary solution to a fundamental infrastructure problem.
🔹 Mercado Envíos (2013): The Logistics Nightmare
For years, shipping on Meli was chaos. Buyers and sellers negotiated delivery on their own, leading to inconsistent experiences and failed transactions. In 2013, Meli launched Mercado Envíos. Initially just aggregating third-party carriers, but with a vision to build something far more ambitious.
Today, Mercado Envíos is a continent-spanning logistics network with fulfillment centers, cross-docking stations, and last-mile delivery fleets. It’s a moat so deep and capital-intensive that even Amazon struggles to compete in the region. The company went from a 60-person team when Ariel Szarfsztejn (more on him later) took it over in 2017 to over 70,000 people today.
This is what separates infrastructure businesses from marketplaces. Anybody can build a website. Building a logistics network across 18 countries with wildly different regulations, currencies, and infrastructure? That’s a decades-long project that compounds in value every year.
Operating in Chaos as a Competitive Advantage
Here’s something most investors miss: Latin America’s volatility has not been exactly a bug for Meli, it’s been an advantage. While foreign competitors struggle with currency fluctuations, regulatory changes, and macroeconomic instability, Meli has developed an “operating in chaos” muscle that makes it uniquely resilient.
This resilience manifests in several ways:
Long-term thinking that borders on irrational - In 2016, Meli had a 30% EBITDA margin. By 2018, after launching free shipping, they were losing 5%. Why would management compress margins by 35 percentage points?
As incoming CEO Ariel Szarfsztejn put it:
“Because we knew it was the right thing to do for people to choose Mercado Libre tomorrow and in the next 10 years.”
Just like Bezos’s Amazon back in the day, this reflects once again the mindset of a true long-term compounder obsessed with customer satisfaction. The market punished the stock short-term, but it was the right strategic decision. One that cemented Meli’s position as the default choice for Latin American consumers.
A professional sports team mentality - Galperin, a former rugby player, describes Meli’s culture as a “professional sports team”, a competitive meritocracy where people take calculated risks knowing the entire team wins or loses together. This isn’t corporate speak, it’s visible in how the company operates. They have a bias for action and an ownership mentality that’s rare in LATAM but also around Silicon Valley.
Pragmatic adaptation - Meli’s history is one of continuous evolution. They identify friction points for users and build solutions, even if it means entering entirely new industries. This pragmatism extends to their competitive strategy, where they’ve successfully defended against giants like Amazon and disruptors like Shopee.
The Next Chapter: A Steward of the Culture
On January 1st, 2026, a new era begins as Ariel Szarfsztejn takes the helm as CEO, with Marcos Galperin transitioning to Executive Chairman. For a founder-led company with such a distinctive culture, this succession is worth paying attention to.
Ariel joined Meli in 2017 in corporate strategy. Within nine months, he was tasked with building out the logistics network, taking a 60-person team to 70,000+ employees and creating what’s now the company’s primary physical moat. He didn’t just manage a P&L, he built an engine from the ground up.
His leadership philosophy centers on two things: people and learning.
He’s obsessed with hiring for cultural alignment and mindset over just skills. He looks for people who are “relentlessly curious and humble,” who have “a bias for execution,” and who “understand that here, at Meli, we are not going to do something and stick with that new thing, but that we will be redoing what we did all the time.”
What strikes me most about Ariel is his ego-less approach to succession.
“Obviously, I am clear that succeeding Marcos is an almost impossible task. My energy is entirely focused on how we ensure the MELI story continues.”
His first 100 days won’t be about making his mark, they’ll be about continuity and amplification of what’s working.
For those of you understanding Spanish, I highly recommend listening to this 30min informal interview with Ariel on the podcast Aprender de Grandes:
Pure gold.
As Galperin steps aside, he will remain as active chairman, ensuring the founder’s mindset stays embedded in strategic decisions.
This structure brings fresh operational leadership combined with enduring institutional wisdom, and it is probably the best-case scenario for a founder transition.
Why This Matters for Investors
Meli’s journey from a “garage-like” startup Amazon style, to digital infrastructure LATAM juggernaut tells us something fundamental about moat creation:
The best moats aren’t built by copying what works elsewhere, but by solving problems nobody else can or will solve.
The company built a whole payment infrastructure because it had to. It built logistics networks because it had to. It developed an operational resilience to chaos because it had to. And in doing so, it created competitive advantages that are nearly impossible to replicate.
The reality is that even if you gave a competitor unlimited capital today, they wouldn’t be able to recreate what Meli has built. The installed base, the network effects, the operational muscle memory from navigating two decades of regional volatility, these aren’t things you can buy or build quickly.
For long-term investors looking for quality compounders, Meli offers a rare mix: dominant market position, consistent and visionary leadership, high-margin recurring revenues, and decades of growth ahead. Valuation doesn’t look stretched as we will dig in Part II of the Deep Dive Trilogy; and honestly, when was the last time you found a true dominant player in an underpenetrated market executing this well?
What’s Next
With this introduction to Meli’s origin story, we are just getting started. In Part II, we’ll unpack Meli’s business model economics, examine the unit economics that drive value creation, and assess whether the company can maintain its returns as scale increases. We’ll also dive into the competitive dynamics: why Amazon struggled, what threats remain, and whether Meli’s moat is as durable as it appears.
Key Takeaways from Part I:
Meli survived the dot-com bust by prioritizing sustainable growth over growth-at-any-cost, establishing financial discipline that persists today
The company’s biggest advantages - Pago and Envíos - were built out of necessity to solve infrastructure problems unique to Latin America
Operating in chaos for two decades created operational resilience that foreign competitors can’t replicate
Leadership has repeatedly demonstrated willingness to sacrifice short-term margins for long-term market position
The CEO transition to Ariel Szarfsztejn shows Meli’s commitment to cultural continuity while maintaining founder involvement through active chairmanship
Thanks for following along,
—Nikotes
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