Since lowering its free shipping threshold, MELI has lost approximately USD 40 billion in market value and seen its operating margin fall from 12.9% to 6.9%. The timing does not prove causation, but it shifts the burden of proof.
On June 6, 2025, Mercado Libre lowered its free shipping threshold in Brazil from BRL 79 to BRL 19, extending subsidized shipping to nearly its entire catalog of new products.
The target was clear: Shopee and its leadership in the low-ticket segment. Mercado Libre chose to compete on its rival’s home turf while carrying a more vertically integrated and capital-intensive logistics structure.
Geography makes the problem worse. A BRL 19 order delivered in Greater São Paulo and another shipped to a remote region generate the same revenue but carry radically different costs. The lower the ticket and the less dense the route, the greater the subsidy as a percentage of the value sold.
Scale can reduce the cost per package. It does not fix an architecture in which every incremental order can increase the total subsidy requirement. The evidence appears in the results themselves: even as shipping cost per unit declined, total shipping expense rose with volume, showing that efficiency per package did not keep pace with the expansion of the aggregate subsidy.
And the battle is not limited to Shopee. Amazon, Shein, Temu, and TikTok Shop are all pressuring the same low-price segment. Since May 2026, Brazil’s federal import tax on purchases of up to USD 50 has been eliminated, restoring competitiveness, particularly for Temu and Shein.
Credit adds a second layer of risk. Provisions for doubtful accounts jumped from USD 603 million to USD 1.24 billion in one year, while the credit portfolio grew by approximately 87%, far faster than revenue. Part of that increase is mechanical, as the expected credit loss model brings forward provisions for a rapidly expanding portfolio. The real risk lies in the mix: more cards, more personal loans, and longer maturities during an adverse interest-rate cycle.
The company describes the margin compression as a long-term investment. It has yet to present a clear and measurable path to restoring profitability without maintaining permanent subsidies.
Preserving share in the lowest-value segment, against competitors with lighter structures or much larger global balance sheets, through recurring subsidies is not a sustainable business strategy.
Much of the USD 40 billion erased from market value reflects investor skepticism about whether these investments in ecommerce and fintech will ever return the capital consumed.
