Good day, everyone, and welcome to the Mercadolibre's Fourth Quarter 2008 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over Mr. Pedro Arnt. Please go ahead, sir.

Welcome, everyone, to Mercadolibre's earning release conference call for the quarter and year ended on December 31, 2008. Company management presenting today are Marcos Galperin, Chief Executive Officer; Nicolas Szekasy, Chief Financial Officer; and Hernan Kazah, Chief Operating Officer. This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our website. Before handing the conference over to Marcos and Nicolas and Hernan, I remind you that during the course of this conference call, we will discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter and year end 2008 earnings press release available on our Investor Relations website. In addition, management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and products and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable, in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Our actual results may differ materially from those discussed in this call for a variety of reasons, including those described in the forward-looking statements and risk factor sections of our 10Q, 10K and other filings with the Securities and Exchange Commission which are available on our Investor Relations website. With that disclaimer, let me hand the microphone over to Marcos. Marcos?

Good afternoon and thank you to all who have joined us today for this call. I will begin the call by providing some qualitative comments about our outlook and discussing some of the highlights from the fourth quarter and full year 2008. I will then turn the call over to Nicolas who will speak in greater detail about our financial performance. Hernan Kazah will also say a few words today since as many of you are aware from our release, he will soon be stepping into the role of CFO. After our prepared remarks, we will be available for your questions. All in all, fiscal year 2008 was a very good year for us. We grew our business on a number of fronts and despite the global economic turmoil in the latter months of the year, still produced a very solid fourth-quarter and only moderately felt the impact of the macro economy on our business. While we continue to carefully monitor the impact of the tougher environment and our very focused on running our business in the most cost-efficient manner possible, we also continued to believe that industry and regional factors largely dampened the impact of the global economic slowdown on our business. These favorable factors include the continued adoption of the Internet across Latin America and the growth rate of broadband and PC penetration in the region as well as a the less severe economic slowdown forecast for Latin America when compared to other parts of the world. In addition to these larger trends, we were encouraged by the growth in number of holiday shoppers that visited our site this year. We believe that this trend was due in part to our improved selection of available goods, but also due to consumers’ increased propensity to bargain hunt in 2008.…

Thanks, Marcos. I would like to use the rest of this call before taking questions to go into more detail on our Q4 and full year 2008 financial performance. All growth rates mentioned in my remarks represent year over year comparisons. Overall, Q4 was a good quarter in which we generated revenue growth and continue to deliver year over year economies of scale in our operating expenses. These resulted in healthy margins, solid bottom-line growth and excellent cash flows, in spite of the tough economic environment. Specifically for the fourth quarter, net revenues grew 24% to 33.4 million, gross profit margin was healthy 81%; income from operations was 11.2 million, operating income margin 33%, and net income was 7.9 million. The key factors driving revenue growth in the quarter were the addition of 1.7 million new confirmed registered users, bringing the total to 33.7 million users of MercadoLibre, and the acceleration in the growth rate of successful items to 22%. Also continued growth of ASPs in local currencies driving strong year over year growth of GMV and TPV in local currencies ahead of unit volume growth, solid performance in our classifieds and advertising businesses, and higher interest rates charged to MercadoPago users that are buyer financing options. These positive trends were partially offset by a negative foreign exchange effect in the q quarter as the US dollar strengthened in relation to local currencies. If you excluded the impact of currency rate changes and calculated Q4 2008 top line using Q4 2007 exchange rates, the year over growth would have been 45%. Foreign exchange accounted for $5.6 million less revenue than in Q4 of 2007. Specifically, our marketplace gross merchandize volume grew 14% to $523.7 million while its ForEx neutral growth was 32%. Our total payment volume decreased 3% to 55.3…

Thank you and good afternoon. I wanted to take this opportunity to introduce myself to those of you who might have not interacted directly with me yet and to let everyone know that I'm very pleased to take on this new role with MercadoLibre. As those of you who might have met over the past 10 years know, I have been with the company since the very beginning when it was not more than a business plan on Marcus’s notebook in mid-1999. I consider it an honor and a pleasure to be part of such a terrific story. I look forward to my new responsibilities with the same energy and commitment as I did back then when we are forming the company and going through the initial round of financing. With the help of Nicolas, who is staying on with us during the transitional period, as well as with the assistance of the rest of our highly competent team, we expect that the transition in the role of CFO will be seamless. In a similar fashion (inaudible) new role, I will be assisting Stelleo Tolda as he takes on the role of the COO. All of us are very solidly committed to working very closely together as we have to ensure that we continue to manage the company in the best possible manner to make the most of the significant opportunities before us and drive long term sustainable growth. I look forward to speaking with many of you personally in the future. I reiterate my enthusiasm and commitment to my new role. And now we would be pleased to answer your questions. Operator?

(Operator instructions) We will take the first question from Imran Khan with JP Morgan. Imran Khan – JP Morgan: Yes, hi. Thank you for taking my questions. And Nicolas, good luck with your new adventure. Two questions, first question about Brazil, and I'm not sure if you talked about it during the call. It seems like Brazil gross merchandize volume was down on an year-on-year basis, and I was trying to better understand even if we adjust for FX Brazil came in slightly below, trying to understand why, what happened there? And secondly, take rate defined as auction revenue divided by the gross merchandize volume seems like declined sequentially, could you please help us to understand that? Thank you.

Imran, this is Nicolas. Brazil GMV in US dollars fell, but… Imran Khan – JP Morgan: The revenue, sorry, the revenue. Auction revenue was 10 million compared to 11 million a year ago?

Yes. We saw growth in Brazil in successful items and we saw growth in Brazil in GMV in local currency but when we converted to dollars the year over year result was a decline. So you are right with that. It is mostly a matter of ForEx, when we measure Q4 of 2008 versus Q4 of 2007. And the second part of the question, which is, take rate, yes, the take rate for the marketplace grew year over year. Your question was sequentially versus Q3, right? Imran Khan – JP Morgan: Yes.

It declined gradually overall. I would say one of the factors that we had as far as the site downtime was that we gave some credit back to his our users during Q4 and that was a one-time impact. That is what probably makes the difference versus Q3. Overall we believe that the take rate is at a healthy level and probably in this type of environment, we won't be doing much pricing, but we don't expect the take rate to change downwards also. So I hope that’s basically the answer. Imran Khan – JP Morgan: A follow-up question quickly, what is the local currency revenue for Brazil in the fourth quarter on a year-on-year basis and what was that in Q3 of 2008 on a year-on-year basis, so that we just have a comparison about what the trend is?

What was the Q4 – can you say that again? Imran Khan – JP Morgan: Q4 local currency revenue growth for Brazil compared to Q3 2008?

I don't have it here in front of me but you can do the math. Brazil has been growing GMV on successful items below the average for the full company. So that is what we can tell you now. Imran Khan – JP Morgan: But it seems like the Brazil growth rate decelerated even in local currency pretty sharply. I am just trying to understand that because if I look at the members, right, on a reported basis Brazil’s revenue was closer to 50% in Q3 and fourth quarter was negative 10% so, yes, the assets were negative, but I'm trying to understand how much is like…

The exchange rate in 2007, don't have the exact numbers but in Q3 and Q4 were very similar. They were in order of 1.5, 1.6 reals per dollar. And in Q3 it was pretty much at that level, the same level as in the prior year, and all of the devaluation happened as of October and it was a very steep devaluation of close to 50%. Exchange rate went from 1.5, 1.6 to 2.3, 2.4. So I would say that all of the ForEx effects happened in Q4 and we didn't see almost any ForEx effect in Q3.

Operationally—Imran, this is Marcos, we have got very healthy growth in terms of successful items and local currency GMV in Brazil when we exclude the site outrage in October and November. Imran Khan – JP Morgan: Okay, thank you.

Thank you.

And next we have Steve Weinstein with Pacific Crest. Steve Weinstein – Pacific Crest: Great. Thank you. I wondered if you could just talk a little bit more about what is happening in Venezuela from revenue standpoint. It looks as though it is a major contributor to growth in the quarter and certainly has a great trajectory. Did you make changes in there, is the market just – I do know if the inflection point is there or something or currency or something going on so we can help understand the trend there and maybe do a better job of forecasting for 2009?

Yes. I would say there are three distinct factors. The first one, along the lines of what you are asking is that Venezuela is a very vibrant marketplace, our growth in metrics there is very strong, has been very strong in 2008, and has been very strong in prior years. So we are extremely satisfied with the evolution of the business there. The second one is that we acquired TuCarro in January and that was a significant business relative to the size of our operation in Venezuela. So for most of this year, in the year over year comparison, that was favorable, and as of Q1 of 2009, we will be comparing apples to apples there. And the third has to do with currency. The reporting in Venezuela, the local currency, financials are converted at the official exchange rate of 2.15 bolivars per dollar and that has not changed throughout 2008, and obviously as we have been discussing the exchange rates in all of the other countries in the region have devalued quite significantly. So in several ways, the revenues of Venezuela in dollar terms look higher relative to the revenues in dollar terms of Brazil, Argentina, Mexico and the other countries. Steve Weinstein – Pacific Crest: How should we think about the organic growth in that business going forward?

I would say so far Venezuela in terms of matrix successful items is the one that we looked at the most has been growing faster than the average for the company. But going forward it is hard to say exactly what is going to happen in each specific market. But it has been a very robust trend and I would say not only 2008 but in the prior years as well. Steve Weinstein – Pacific Crest: Okay, great. Thank you.

.: Robert Ford – Banc of America: Hi, good afternoon everybody. I had quick questions, just trying to understand the foreign exchange items, because when I look at the 4.2 million that you entered in the income statement net, and then the loss that you report on the cash flow statement of (inaudible), how much did you actually incur in the quarter that’s actual cash, it is not just a change in the accounting practice? And then I wasn't sure Nicolas of your comments as to whether or not you were able to repatriate any of the profitability from Venezuela at the controlled FX rate of 2.15, whether you were able to do that are not?

I will start with the second part. The answer is no. We had cumulative positive retained earnings in Venezuela for the first time this year, so we will initiate that process to access dollars at the official exchange rate soon. That is a process that might be lengthy and complex. So in theory we have the right to access those dollars at that rate, but still to be seen how successful we are with that. So that is there. And then I would say most of the line that we described during the first part of that call, most of it is accounting. There are some expenses that were associated with taking funds out of Venezuela, those are cash, those are netted from the gains that we recorded, but again are mostly accounting driven. Robert Ford – Banc of America: And then there was a sharp increase in your funding costs? I think it was Marcos who had mentioned that you had an 80% increase year on year in terms of your funding costs for Pago, but those declined over the course of the fourth quarter. Can you comment a little bit as to how much of the funding costs are for Pago year-on-year going into 2009 and what you are likely to do with your payment terms online?

Yes. The cost of financing increased to approximately on an average 80% during the beginning of Q4 mostly around October and the first half of November. Towards the end of the quarter, they started to go down a little bit and that continued to be the case during January as well. We had increased our pricing for financing to match the increases in costs during Q4, and then as the costs have been coming down, we have been also adjusting downwards our pricing to match that. Robert Ford – Banc of America: And just Nicolas, year-on-year right now how much is the price of financing up in Brazil, is it up 80% like it was or is it…

Now it is approximately 50%, 60% above what it was last year in September. So it came down but still substantially higher than what it was. Robert Ford – Banc of America: If you look at alternative online retailers or brick and mortar offerings because I would have suspected affordability is what folks are looking for net-net, how do you think your offers are comparing to those alternatives?

Bob, this is Marcos. Were you referring to specifically to the financing or are you referring to the offerings in terms of value? Robert Ford – Banc of America: No, value, I have no doubt were the value leadership is, I'm specifically referring to the financing.

Well, as we’ve discussed in the past, some of the offline retailers, the brick and mortar, the brick and click, have more aggressive financing than what we do. That is why we have process for sometime now, talking with banks to try and offer more aggressive financing. Having said that, in this environment, we believe that that shortcoming that we used to have is a significantly smaller concern to us than what it was in the past. Robert Ford – Banc of America: Great. So are you seeing other channels rollback with some of the zero interest financing and that sort of thing, is that the case?

Well obviously in this environment, I think it is going to be very hard for retailers to – zero financing is never really zero finance. So it is going to be hard for anyone to offer very aggressive financing terms to consumers. Robert Ford – Banc of America: Fair enough. Thank you very much.

Thank you.

And we will move to Stephen Ju with RBC Capital Markets. Stephen Ju – RBC Capital Markets: Good afternoon guys. The buyer market, it seems like the bigger territories are either flat or increase in a ASPs in the fourth quarter on a FX neutral basis, which in this current environment seems to be counterintuitive, can you give some color as to why you think this is happening?

Yes. I think we always expected that ASPs would be increasing in local currencies. We had talked in the past about our partial hedge process. Whenever there are devaluations, some of our products increase in prices in local currency following the devaluation. A typical example would be an (inaudible) for $100 in Brazil that was selling 150 reals before the devaluation and now is selling at 230, 240 reals, that is part of our mix and this hedge is only partial but definitely is in place and is driving local currency sales piece upwards. Stephen Ju – RBC Capital Markets: Okay. Thank you.

And moving on to Scott Devitt with Stifel Nicolaus. Scott Devitt – Stifel Nicolaus: Hi thanks. Two questions please. The first one related to the direct contribution margin in Venezuela, last year our fourth quarter was 64%, this year was 48%, I'm wondering what the underlying driver of that is, is it TuCarro or something else? And then I had a follow-up, thanks.

Yes, I would say two things. TuCarro clearly has to do with this and they are saying is that probably the starting point was too high and not sustainable. When you look at the marketplace margin on average, it is slightly above 40%. So the 64 probably required that we added some personnel there in the operation or that we incurred some additional expenses versus what we're spending last year. So we're very, very happy with 48% and we don't think that we could keep on at the prior levels. Scott Devitt – Stifel Nicolaus: And 48 is a sustainable margin in Venezuela?

It is hard to tell. It's a very efficient operation. Probably over time, when I see less differences amongst the countries, but I think that we would be happy with our margin that can be lower than what it is today and it would still be still a very healthy margin. Scott Devitt – Stifel Nicolaus: Okay, thanks. And I think you mentioned 45% constant currency growth and correct me if I'm wrong but if that’s the constant currency number, could you then give the constant currency revenue growth rate excluding acquisitions in 4Q08 and then get back the same figure for 3Q08?

Yes. We do not break out TuCarro or DeRemate. Just to give you a sense, we believe that what DeRemate added in Q4 is pretty much comparable to what we lost because of the site outrage in terms of the days that we lost and the credits that we had to give out. So probably that did contribute very much. And TuCarro in 2007 for the full-year revenues were approximately $6 million last year, so that gives you a sense of how much it could have been. Scott Devitt – Stifel Nicolaus: Okay, thank you. And just finally could you update us on the tax rate, are we still looking at – is it – I mean we went to a very high rate earlier in 2008 to a much lower rate, are we still targeting 35% as the long term number?

I think that’s a fair assumption. In the first half of 2008, we had a few one time items that drove that rate upwards, and we always believe that we should be below 40% in the medium term. Most of the countries in which we operate are at 35. We have some tax benefits in Argentina that makes the average rate there lower. So if we are capable of doing efficient tax saving, we should be around 35%, that is a fair projection. Scott Devitt – Stifel Nicolaus: Thanks.

And we have Gustavo Oliveira with Citigroup. Gustavo Oliveira – Citigroup: Hello, everyone. My question is again on the take rate on the marketplace, you mentioned that you gave or your are giving some credits back to consumers, is this something that you believe it is going to be temporary just because of the recessionary environment that we are living on or it is something more structural that you are changing your price structures therefore the take rate could be delivered for a much longer time?

Hello, Gustavo. This is Marcos. These credits were one-time that we gave for Q4. Because of the site outrage, many of our power sellers and a lot of our sellers could not access their My MercadoLibre part of the site for four days. So obviously that had an impact in their ability to follow up on transactions they had received and therefore that impacted our take rate for the quarter. In addition to that, they having issues in their ability to follow up and closing up transactions, we issued credit for the insertion fees and their feature fees that they had paid and we have extended also the duration of their listings; in a way that also implies a credit. But that was something that we did just because of the incident that occurred during Q4, and we have taken the measures, the necessary measures to avoid having a repeat incident like the one we have. Gustavo Oliveira – Citigroup: Okay. That is pretty clear. Thank you.

You are welcome.

And we will take Mark Argento with Craig-Hallum Capital. Mark Argento – Craig-Hallum Capital: Hi, Marcos. Could you talk a little bit more about your ad sales efforts, have you built out the sales force or what is your go to market strategy there?

We have a very small sales force that display ads, but we have launched is more of an automated take out mechanism, which we believe is more scalable and is significantly more strategic for us than our display ad strategy. We believe that this is a very important feature for long-term, but it is still on a better format. The revenues it is contributing are largely immaterial. But basically it enables us to capture share of wallet from large retailers, or even up our power sellers as they open their own sites and will nonetheless like to buy traffic from us given that we are the ecommerce destination in the region. Mark Argento – Craig-Hallum Capital: Okay, that is helpful. And then switching over, in terms of power sellers, vendors selling products on the site, you guys don’t release a metric around number of new sellers, I don't believe on the site, could you talk a little about the trend there, and also any change in terms of the mix of products that’s being sold on the site? You’ve seen a trade down phenomena, people buying and selling different types of products given the economic environment.

We see very healthy growth in our operational metrics. We were very satisfied to see successful items accelerating in Q4 to 22% year-on-year growth despite the site outrage. And typically that metric grows in par with sellers and buyers. They go hand in hand. In terms of category mix, we haven't seen much changes so far. Mark Argento – Craig-Hallum Capital: Thank you.

Thank you.

We will take Tony Tang with the LUSIGHT Research. Tony Tang – LUSIGHT Research: Hi. Thanks for taking my question. First one is regarding your interest expense, so you mentioned in the fourth-quarter actually well you mention a little bit there is a $5 million charge, could you elaborate more in detail how did that rise here, and how should we look at this number in the future?

Yes. We spent $5 million; approximately $3 million out of the five were a one time event at we discounted our stock of receivables that went down from 30 million plus to 2 million. So 2 million were more operational or run rate interest expenses, so that gives you a sense of where we are at excluding the one-time event. Tony Tang – LUSIGHT Research: So which meets this quarter, the first quarter of 2009, so we should see that number coming down around 2 million, is that right?

We don't discuss projections for Q1. Tony Tang – LUSIGHT Research: Okay. Another question for the Pago, the payment volume, if you take FX effect outright, so pretty much the volume is flat quarter over quarter basis, could you characterize it more like how the Pago system will be adapted by users? And then it seems like it is kind of low pace out here, what is the general reaction from the 2009 users, and I know that the tax rate is going up?

So Pago has several issues affecting its performance in Q4 as we mentioned, it is four days of complete site outrage. We took away financing for a week in Brazil where financing is very popular. Then we reintroduced financing at rates that were 80% higher. So obviously the combination of all those issues had a negative impact in the growth rate of Pago during the quarter. Many – all of those issues have been solved and the rate has started to trend downwards, and we expect Pago to continue growing with the business as we move forward. As you know we also have launched an open version of Pago that is available in Argentina, Chile and Colombia, which is still largely a beta version of the product, and we are working to make this version scalable, and once we are satisfied with the quality of the product that we have, we will continue with the roll-out. In the meantime it is growing together with the business. Tony Tang – LUSIGHT Research: When do you see the revenue contribution from outside Brazil in terms of Pago will pick up, do you see that in two, three quarters time or…?

Sorry, Tony, but I did not understand your question? Tony Tang – LUSIGHT Research: In other words how much of these payment revenue is coming from inside Brazil?

We have a significant portion of our Pago business coming from Brazil. The penetration is higher of our overall revenues for Pago, Brazil represents a higher percentage of our total revenues for Pago than for our marketplace business.

And next we have Tim Hayes with Fidelity Investments. Tim Hayes – Fidelity Investments: Thanks. Hi, guys. Two questions if I could, the first one is, I know you don't like to say much specific, but just from a qualitative perspective, anything you can say about the outlook or how you are thinking about 2009?

So the question is the outlook for 2009? Tim Hayes – Fidelity Investments: Any qualitative comments or thoughts about the year ahead?

Yes. I would say overall what we're seeing for the region in general is looking better than what we see or hear about expectations mostly around the northern hemisphere in the US or Western Europe. The economies in the region have slowed down quite significantly but still there are some expectations of growth. And on top of that, we believe that our growth has substantially much more to do with secular growth in broadband, internet users and things like that. We believe that it is not going to change very significantly this year. So overall we believe that our business should be evolving and I think there is not much more than we want to say at this point, but overall we finished the year with a strong Q4 and we are working hard to have a good 2009 as well. Tim Hayes – Fidelity Investments: Okay. And then in terms of your – the second question is, if the environment proves to be more difficult from a macro perspective than what you are currently expecting, can you talk a bit about the levers that you might use, in other words, from a cost cutting or marketing or advertising spending perspective, what are you likely to cut first if necessary? How would you sort of prioritize things strategically?

We like very much the way in which we finished the year in Q4 with G&A growing 10% year over year, sales and marketing growing more than that, and product development growing substantially more than that. We think that if we continue allocating resources to products that is when we get the best return. And so for that is not a very significant portion of our P&L, so even if we invest there ahead of the growth of revenue, we think that the ROIs is very strong. And then the other levers is continue to invest in marketing, and we think we have opportunities to continue leveraging our discretionary spending, continue leveraging our G&A, infrastructure and sustain high margins even if the economy or the growth is not what we expect. Tim Hayes – Fidelity Investments: Okay. Thank you.

You are welcome.

And we will take our final question from Aquico Wen with Legg Mason. Aquico Wen – Legg Mason: Yes, hi. Thank you. Just a quick question, you had mentioned that the 3 million out of the 5 million interest expense was a one off related to the discounting of receivables, but to the extent that financing (inaudible) particularly Brazil, I would have expected that you would discontinue receivables and therefore should we not expect this kind of charge to be recurring going forward and it will extend the trend financially for the business through this kind of receivables I would expect that to be recurring, right?

Yes, it is definitely a recurring. So… Aquico Wen – Legg Mason: So, it is not a one-off expense, is it?

No, the one-off is 3 million out of the five, so we still have a… Aquico Wen – Legg Mason: The 3 million you mentioned is related to the discounting of receivables, right?

Yes, I think this is a good question to clarify the issue. We had a very – we had built throughout the years a very large receivables position which we sold in Q4 and brought it down from roughly 30 million to 3 million, so that was the – that produced a very large interest expense, and that’s the 3 million that is a one-time, so the 3 million that we current have in account receivables is what we will be discounting on a weekly basis and will produce an interest expense that will vary with according to interest rates in Brazil, but we had a very large receivable asset that we discounted in Q4 and produced 3 million interest expense that’s a one-time.

Before that the first nine months of the year we were spending approximately $300,000 per month on interest for discounting and in November, December, we were spending approximately twice that much for the discounting that we're doing. Aquico Wen – Legg Mason: Okay, all right. Thanks very much. Thanks for clarifying that.

Thank you, and thank you all for taking the time to attend our call and ask the questions. Thank you very much. Bye, bye.

That does conclude today's conference call. Thank you everyone for your participation.