Stanford Business


Alums Build Better Markets in Latin America

Marcos Galperin, MBA ’99, president and cofounder of MercadoLibre, in the San Telmo district of Buenos Aires,
one of the oldest neighborhoods in the city.
Photos by Roberto Westbrook

by Kim-Mai Cutler

Walk into’s offices in Buenos Aires and it’s not too hard to see where their inspiration comes from. The fluorescent yellow walls, open doors, and cubicles are all just a tad similar to the company’s peers 6,000 miles up north in Silicon Valley.

But the resemblances go deeper than office decoration. Without his formative experiences at Stanford’s Graduate School of Business, CEO Marcos Galperin, MBA ’99, says his company—considered the eBay of Latin America—would never have gotten off the ground.

The online auction company is now a dominant player in the region with sites across nine countries including Brazil, Argentina, and Mexico. Every month, the company manages more than 1.2 million transactions attracting 750,000 unique buyers, and it has seen business more than double every year for the last five years. MercadoLibre also manages its own payment service similar to the U.S.’s PayPal.

“MercadoLibre has become synonymous with e-commerce,” said Nicolas Szekasy, MBA ’91, the company’s CFO.

The company had its beginnings when Galperin was an MBA student in the late 1990s. In the center of the internet startup frenzy, he realized that the eBay model was especially suited to the Latin American market. With a widely dispersed population and weak credit penetration, the continent had hugely inefficient markets.

Galperin said it was Professor Jack McDonald’s lectures and guest speakers that compelled him to take a chance. Again and again, local entrepreneurs would visit the class telling stories of how they had taken big risks and wound up with big payoffs.

“I don’t think I would have done what I did in another school. Stanford really encourages you to take risks,” Galperin said. “And in the Bay Area, you have both the intellectual power and the venture capitalists.”

He holed himself up in Stanford’s libraries to hash out a business plan, and when he returned to Argentina, he and cofounder Hernan Kazah, MBA ’99, scoured the alumni network to recruit other Stanford MBAs to run the business from Buenos Aires to Mexico City. The current list of GSB alums managing the company includes five who are originally from Argentina and one each from Brazil and Mexico. Besides those already named, they are Osvaldo Giménez, MBA ’98, vice president of MercadoPago; Ignacio Vidaguren, MBA ’98, vice president of marketing and sales Stelleo Tolda, MBA ’99, vice president, Brazil; and Francisco Ceballos, MBA ’96, vice president, Mexico.

Initially the competition was tough. About 40 competitors vied for the Latin American market, including, run by a group of Harvard MBAs who raised more first-round funding than MercadoLibre’s $52 million.

But MercadoLibre found staying power by focusing on the quality of the site rather than spending millions on advertising to blanket the region. At the time, regular internet access had reached only 3 percent of the region.

Several Argentina-based alumni are on MercadoLibre’s team including, from top, Osvaldo Giménez, MBA ’98, Hernán Kazah, MBA ’99, and Nicolás Szekasy, MBA ’91.

“Our strategy was to market to people who were likely to use the site,” Galperin said. “Our competitors just ran out of money.”

MercadoLibre also took a risk requiring sellers to pay a fee just to list on the site, a move that competitors said would wipe them out. Instead it filtered for sellers who were serious and made listings more credible on the site.

Ironically, the Argentine economic crisis of 2001 and 2002 was a boon to MercadoLibre. People who had access to their financial holdings cut off turned to MercadoLibre to sell their hard assets and introduced new customers to the site.

The team also had to make other adjustments for the Latin American market.

The Argentine market, for example, has a largely cash-only culture, even for transactions involving real estate or automobiles. As a result, MercadoLibre had to accommodate multiple forms of payment, including cash-and-delivery services using bike messengers to carry goods across a city and drop them off only if the correct payment is given on the spot.

To win consumers’ trust, the company developed a payment system that has the buyer paying MercadoLibre instead of the seller. The company only pays the seller once the buyer is satisfied, giving customers extra assurance.

The tweaks paid off: eBay eventually decided to partner with MercadoLibre over DeRemate and now holds a 20 percent stake. It’s unclear whether the company will go public or be sold in the future. Still, it has a long way to go in terms of reaching its potential customer base. Internet penetration is at around 15 percent in South America.

But just like similar companies in the United States, MercadoLibre gets its share of the weird and wacky. A recent ad campaign by the company featured a boy delivering gifts to girls—kisses bought through MercadoLibre. Since the commercials began airing, dozens of kisses have shown up for sale on the site.

And its model has had a huge impact on the way small firms do business. MercadoLibre has given rise to a cottage industry of mom-and-pop outfits that rely solely on the site’s sales for business, hawking everything from furniture to violoncellos, sometimes from isolated rural areas. Although well known for its auction-sale format, nowadays 80 percent of users choose the fixed-price format, and more than 70 percent of the articles purchased are new.

“We’re helping small and medium businesses by making inefficient markets efficient,” Galperin said.

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Several Argentina-based alumni are on MercadoLibre’s team including, from top, Osvaldo Giménez, MBA ’98, Hernán Kazah, MBA ’99, and Nicolás Szekasy, MBA ’91.