Hello everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended December 31st, 2014. I am Martín de los Santos, VP of Finance and Head of Investor Relations for MercadoLibre. Our Senior Manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperín, Executive Officer, and Osvaldo Giménez, Executive Vice President of Payment, will be available during today's Q&A session. This conference call is also being broadcast over the Internet and is available through the investor relations section of our website. I remind you that management might make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and product 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, we are cautioned not to place undue reliance on those forward-looking statements. Our actual results may differ materially on those discussed on this call for a variety of reasons, including those described in the forward-looking statement and risk factors sections of our 10-K and other filings with the Securities and Exchange Commission, which are available on our investor relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of these measures to the nearest comparable GAAP measures can be found on our fourth quarter 2014 earnings press release available on our investor relations website. Let me turn the call over to Pedro.
Thanks, Martín. Good afternoon, everyone, and welcome to our fourth quarter and fiscal year 2014 earnings call. As we close out fiscal 2014 and report fourth quarter earnings, I'd like to start by once again outlining the sizable business opportunity that the digital landscape in Latin America represents for our company. As MercadoLibre continues to perform both financially and operationally, meeting or exceeding our key performance indicators, we do so buoyed by the way in which e-commerce continues to develop throughout our region. According to Forrester Research, many of the large markets where we operate grew at about 20% in dollars this past year, and are forecast to sustain similar levels of growth over the next five years. That level of compounded growth rapidly scales into a sizable addressable market for e-commerce throughout Latin America in the near future.
Moreover, as shown by those numbers, e-commerce growth remains strong, both short and long term, thus generating not only the appropriate tailwinds that explain the results I will walk you through now, but more importantly, sustained new opportunities for us to pursue. Ours is an industry that shows healthy signs and ample room to expand and to have many profitable years ahead. Secular trends such as the adoption of mobile Internet, increasing demand for online financial services, growing interest on the part of traditional retailers and brands to find technology partners to aid them in their digital strategies, and increased consumer familiarity and preference for shopping online all advance the cause further and are all promising trends which fuel the growth in the region I am referring to.
As an early mover in Latin America, we remain the leading brand and the premier e-commerce destination within the markets that we serve, positioning us incredibly well to capture significant portions of this multi-pronged opportunity. As such, we are excited that our company is already benefiting from these secular trends and continues to perform and grow at positive levels. We are even more excited about the opportunities that lie ahead in 2015 and beyond. Before going into detail on the quarter, I'd like to quickly mention a few major highlights for 2014 overall that underscore how the market potential I just referenced has translated into strong business results for the company. Registered users surpassed 120 million by end of the year 2014. For the first time, our total units sold in one year crossed the 100 million mark, driving $7 billion of gross merchandise volume.
Total payment transactions surpassed 46 million, leading to total payment volume above $3.5 billion, which amounts to half of the gross merchandise volume transacted on our platform. Items shipped through Mercado Envios reached 15 million. All of these effects translated to a top line that for the first time exceeded half a billion dollars, experiencing local currency growth of 81% year-over-year or 54% year-over-year, excluding our Venezuelan operations. This success points to the sustained momentum of our business and to the success we are having in transforming our marketplace to meet the increasing sophistication and needs of our users around liquidity, service, reliability, and mobility.
More specifically, as we have been making advances in enhancing the quality and number of services we offer our growing user base in the areas of payments, shipping, logistics, and advertising, our users are quickly adopting these solutions at an increasing pace, confirming that we are pushing our ecosystem in the right direction. With that in mind, let's take a look at how we ended 2014 with positive momentum in the fourth quarter that carries over into 2015. These upcoming key performance indicators represent quarterly results versus the same prior year period. Registered users were up 22%, now at 120.9 million, adding 5.7 million new users during the period. Successful items grew 27%, reaching 29 million items sold. Gross merchandise volume grew 85% in local currencies, reaching $1.8 billion. Total payment transactions grew 58% to 14.2 million. Total payment volume grew 107% in local currencies to $1.1 billion.
Revenue growth in local currencies was 109% year-on-year. Excluding our Venezuelan operations, revenue growth in local currencies came in at 70% year-on-year. Despite currency devaluations, revenues in US dollars grew 20% year-over-year. Excluding our Venezuelan operations, revenues in US dollars grew 40% year-over-year. Such strong growth, despite tough macro conditions in most of the region, reinforces the continued success of our enhanced marketplace model. We are confident that our focus on aggressively promoting transactions that use at least one of our value-added services is resonating with our users who think of our ecosystem as a de facto means of participating in e-commerce in a safe and trusted manner. As a consequence of this, we have seen advances in the adoption of enhanced marketplace features in larger markets, with payments, shipping, and financing solutions making significant strides in Brazil, Argentina, and more recently, Mexico.
We have also invested more aggressively in marketing, given our increased confidence in the optimized experience we can offer users and the trends we are seeing in longer-term customer value. During the fourth quarter, we saw the positive effects of increased marketing spend on both customer acquisition and engagement from existing customers, improvements which have had an immediate impact on our top-line results. We also continue to maintain our dedication to product development, since we are a technology company first and foremost. In that spirit, in Q4, we purchased beVision, a 131-person Argentine software focused on software development services in cloud and mobile, as well as business services. This welcome addition grows our development headcount over 25% by adding a talented additional pool of engineers. Let's take a look at some of our strategic initiatives and how they have advanced during the quarter.
As I mentioned earlier, our vision of an enhanced marketplace is coming to fruition, especially in our largest, not to mention most competitive market, Brazil. Our initiatives around payments, shipping, user experience, and customer experience are all paying off, helping to drive major growth across the platform. Payments penetration on the MercadoLibre platform continues to see significant growth, with Brazil leading the way with Mercado Pago accounting for nearly 80% of all GMV in that market. That's a 30 percentage point jump year-over-year and 7 percentage point increase since the third quarter of 2014. Continued growth of payments penetration on our platform is thanks to a number of factors, perhaps none more important than the success of our interest-free financing initiative. As a reminder, this initiative consists of a new interest-free listing type that we began to offer earlier this year.
The response has been overwhelmingly positive from both sellers and buyers, given that Brazilian consumers have become increasingly accustomed to interest-free financing in the world of offline retail. During the fourth quarter, this new interest-free listing type already represented 18% of all listings and one-third of all gross merchandise volume in Brazil, demonstrating its high adoption and conversion rates. We have been so pleased with the success of this format and its ability to drive Mercado Pago adoption that during the last quarter, we launched the same listing type in Mexico. Also driving Mercado Pago adoption in Brazil has been an increase in the number of listings required to use it to make a purchase. As you recall, during the third quarter, we required that all items listed above BRL 500 be paid for using Mercado Pago.
We continued to see the positive effects of this policy during the fourth quarter. This requirement, in turn, helps guarantee a safe, seamless, and more efficient transaction for buyers and sellers of these higher ticket items. Another key component of our enhanced marketplace is our shipping solution, Mercado Envios, which continues to grow at an incredibly fast pace, demonstrating how this service, combined with Mercado Pago, helps a truly differentiated buying and selling experience in our major markets. In the fourth quarter, Mercado Envios accounted for 35% of items sold on our platform in Brazil and 14% in Argentina. We are pleased to report that during the fourth quarter, we launched Envios in Mexico, and that it is already gaining traction.
The success of Mercado Envios also helps drive Mercado Pago penetration on our platform, given that it is the only available way in which an item can be paid for through Mercado Pago and shipped through Mercado Envios. Therefore, users elect to pay through Mercado Pago in order to take advantage of the convenience, transparency, and lower prices offered by Mercado Envios. With both of these services, we are eliminating friction and improving the user experience for both buyers and sellers. We also continue to enhance our marketplace by improving vertical experiences for our users across categories like fashion and auto parts, increasing diversification of product mix away from consumer electronics. Among those vertical experiences, we also include our classifieds pages, which remain an important part of our business and a major driver to traffic to our site.
We are also pleased to report that another important component of the enhanced marketplace we are building, our official stores initiative, continued to grow at a fast pace, enhancing the selection of quality products on our platform, as well as the Mercado Libre brand. By the end of the fourth quarter, we had 545 active official stores across seven different countries. While these stores currently account for a small portion of our GMV, their success is proving the value of Mercado Libre as a sales and distribution channel for other large retailers and brands as we continue to prioritize and support such sellers on our platform. A final component of the enhanced marketplace is a differentiated customer service experience. With our investments and efforts in this area, we once again saw NPS rise and our contact rate fall during the fourth quarter, both to record levels.
With payments, shipping, vertical experiences, official stores, and best-in-class customer service, our enhanced marketplace combines the user experience of a third-party online retailer with the price and selection of a marketplace business. We look forward to continuing to build out this enhanced marketplace in Brazil, Argentina, and Mexico while expanding these features to other markets in which we operate. Let's take a look at some of our other initiatives beyond the enhanced marketplace. From a technology standpoint, we continue to see positive momentum as we transition from a desktop-centric to a multi-platform company with greater emphasis on mobile and tablet usage. These days, fewer than half of our users access the site only through desktop. This is a promising trend as conversion is higher for users who access Mercado Libre through more than one platform. Mobile continues to penetrate our platform and bring new users.
Looking at more than just the numbers, we have made significant strides towards being a successful mobile company, equipping all of our development teams with mobile developers during the past quarter. Included in this focus on mobile is Mercado Pago. During the quarter, we took several big steps forward with new initiatives in the mobile payment space, including our Mercado Pago digital wallet mobile app, an in-app SDK that allows native apps to charge users through Mercado Pago, and a pilot of our mobile POS solution in Brazil, similar to credit card processing and business solutions available in the U.S. Innovation from Mercado Pago was not limited to mobile, however. During the quarter, we also launched a new platform in which Mercado Pago is seamlessly integrated with other e-commerce sites. In other words, Mercado Pago processes the payment, but the user never realizes it.
We also continue to grow our off-platform payments processing businesses by continuing to onboard large clients such as Sony Store and AliExpress in Mexico. In addition to successfully executing across all of our major strategic initiatives, we drove growth in the fourth quarter through more traditional routes. Pricing adjustments in Brazil, Argentina, and Chile led to better monetization as we capture some of the added value we are generating for our sellers. We also helped drive Q4 growth through successful execution of Black Friday and Cyber Monday sales, working with large retailers to offer promotions across the site. Finally, our advertising business experienced high growth thanks to great results from a new ad format we have called Product Ads.
These ads are more contextual and have more interesting content for users browsing the site, serving as a direct product listing for advertisers that lead to better conversion and therefore better monetization for MercadoLibre. That wraps up my review of our strategic initiatives. With that, let's take a look at our consolidated financial highlights for the fourth quarter. Let me remind you that our year-over-year results continue to be affected by the devaluations of the Venezuelan currency during Q2 2014. Due to this, I will call out all results on an as-reported consolidated basis in local currencies so as to exclude the impact of foreign exchange fluctuations and also excluding our Venezuelan operations. Net revenues were $161.4 million, accelerating to 109% growth in local currencies, with 20% growth in U.S. dollars. Excluding Venezuela, net revenues grew 70% in local currencies and 40% in U.S. dollars.
Income from operations was $45.2 million, down 13% in U.S. dollars year-over-year, but increasing 107% in local currencies and 4% in local currencies excluding Venezuela. Net income before income and asset tax expense was $50 million, down 10% year-over-year in U.S. dollars, but growing 105% in local currency and 8% in local currency excluding Venezuela. Net income was $34.2 million, falling 16% year-over-year in U.S. dollars, growing 76% in local currencies, and falling 7% in local currencies excluding Venezuela, resulting in earnings per share of $0.76. Taking a look at our top line, total revenues saw year-on-year acceleration in local currencies while sustaining the growth rates delivered in prior quarters in U.S. dollars despite currency headwinds. Marketplace revenues accelerated to 115% growth year-over-year in constant dollars due to improved monetization, higher local currency ASPs in some markets, and an acceleration in items sold.
Excluding Venezuela, marketplace revenues also accelerated, growing 16% year-over-year. Brazil, in particular, posted strong growth in underlying metrics, accelerating items sold growth to its highest level in the past two years, a year-on-year growth of 33% versus 29% in the third quarter, driving Brazil marketplace revenue growth of 46% in BRL. Likewise, non-marketplace revenues also experienced some of its strongest growth in the last couple of years, accelerating in both U.S. dollars and constant currencies for the third consecutive quarter. This growth was driven by a number of factors, including financing revenues accelerating to local currency growth north of 90% year-on-year, driven largely by our new interest-free financing listing type in Brazil.
Mercado Pago processing revenues, which posted close to 60% year-over-year growth in local currencies, thanks to a greater number of clients onboarded and increased usage of Mercado Pago in existing off-platform clients, particularly strong growth in advertising revenues, classified revenues, which accelerated to 53% year-over-year growth in local currencies, including our recent acquisition of Portal Inmobiliario in Chile and Mexico, and revenues from Mercado Envios, our shipping solution. As a consequence of the strong marketplace and non-marketplace revenue growth I just outlined, total revenues showed the strongest year-over-year constant dollar growth for a quarter in several years. Total revenues grew 109% in constant dollars and 70% in constant dollars excluding Venezuela. In dollar terms, much of this growth was offset by currency devaluations, with total revenue growth in U.S. dollars remaining flat at 20% year-over-year and accelerating slightly to 40% year-over-year excluding Venezuela.
Total revenue local currency growth was strong across all our major markets, reaching 61% for Brazil, 97% for Argentina, 21% for Mexico, and 253% in Venezuela. Before I walk you through the rest of our P&L, I'd like to remind you that Forex changes drive margin changes. These effects were particularly prominent during the fourth quarter, especially due to the strong devaluation of Venezuela, as well as devaluations across all of the other currencies in which we operate. In fact, EBIT margin would have remained almost the same year-over-year if measured in constant currencies. With that clarification and moving down our P&L, gross profit grew 16% year-over-year in the fourth quarter to $103.7 million. Gross profit margin was 70.5% of revenues versus 73.1% in the fourth quarter of 2013 and 70.7% in the third quarter of 2014.
Lower gross margins year-over-year were driven primarily by a 194 basis points contraction, primarily related to tough comps in sales tax for our Brazilian operations. Since last year, we were benefiting from changes in tax planning strategies that drove efficiencies in this line item. Additionally, another 162 basis points of gross margin contraction relates to collection fees from Mercado Pago, as payment volume continues to show strong growth both on and off our platform. These effects were somewhat offset by 65 basis points of scale in customer support and 20 basis points in site operations. Operating expenses grew 48% year-over-year, reaching $68.5 million, representing 42.4% of revenues versus 34.4% in the same quarter last year, and 38.8% in the third quarter.
Several effects compounded to drive such a big difference in OpEx margins, including the major devaluation of Venezuela, tough comps from the year before, and an increase in long-term retention plan compensation due to the recent positive performance of our stock price. Let me break down OpEx for you. Sales and marketing grew 44% year-over-year to $33.4 million, or 20.7% of revenues versus 17.2% for the same period last year and 19.9% last quarter. This 349 basis point contraction in margin year-over-year is due primarily to 389 basis points of marketing expenses as we focus more aggressively on customer acquisition given our increased confidence in lifetime value of our users and our shifting focus towards lower ROI mobile and special events promotional marketing activities.
It's worth noting that in 2014, our marketing costs were especially weighted towards the fourth quarter and distributed less evenly across the entire year than they were during 2013. On a full year basis, the contraction in these marketing costs was only 102 basis points of margin. We also experienced an 84 basis point margin contraction in costs related to our buyer protection program as we offer buyers increased coverage on their purchases as one of our fundamental trust-building and seller retention tools. All of these effects were partially offset primarily by an improvement of 98 basis points in chargebacks, thanks to improved results from our fraud prevention efforts. Furthermore, we experienced a 51 basis point improvement in bad debt expenses, aided by the penetration of payments throughout our platform.
Product development expenses grew 66% year-over-year to $16 million, representing 9.9% of revenue during the fourth quarter versus 7.2% in the same period last year and 9.2% in the third quarter of 2014. Contraction in product development is largely attributable to a contraction of 173 basis points of margin coming from salaries and wages as we continue to hire talent for our engineering pool, having organically grown the number of engineers by nearly 60% last year. Another 75 basis points of margin contraction are attributable to our long-term retention plan compensation. In addition to salaries and wages, there were 91 basis points of contraction related to technology consulting and third-party technology-related services. General and administrative expenses grew 41% year-over-year to $19.1 million, representing 11.8% of revenues versus 10% a year ago and 9.7% in the third quarter of 2014.
This growth was almost entirely attributable to salaries and wages, where we had 141 basis points of margin contraction, which were due to long-term retention plan increments as our stock appreciated from approximately $105 to $128 over the accountable period. As a result of all this, operating income from the quarter was $45.2 million, or 28% of revenues, versus 38.7% in the fourth quarter of 2013 and 31.9% in the third quarter of 2014. Below operating income, we saw $4.9 million in financial expenses, a majority of those corresponding to interest accrual on our convertible bond. Further down, interest income was $4.4 million, up 90% year-on-year due to higher interest rates on larger invested amounts, which came from proceeds from our convertible bond and our increased stored balance in Mercado Pago.
Our Forex line is positive $5.3 million due to the appreciation of U.S. dollar balances held by our subsidiaries, the majority of which took place in Brazil. Net income before taxes totaled $50 million, down 10% year-over-year and representing 31% of revenues versus 41.5% during the fourth quarter of last year. Income tax expense was $15.8 million in the fourth quarter, representing a blended tax rate of 31.6%, up from 26.8% in the fourth quarter of last year. The year-on-year increase results mainly from a higher tax rate in Argentina due to the expiration of the software development tax law in September. I'd like to note that we're booking the quarter as if the software law does not apply to us, though we have presented our applications for similar benefits under the new law.
At this moment, ourselves, as well as a majority of the software industry in Argentina, are in conversations with the government to clarify whether the tax holiday will apply retroactively if and when granted. If that is the case, we will recognize those benefits during future quarters. The year-over-year change in the tax rate was also affected by our convertible bonds financial expenses, which are only deductible in the U.S., where we do not generate, as of today, significant revenues, as well an increase in the Venezuelan tax rate. Net income after all this came in at $34.2 million, or 21.2% of revenues, versus 30.3% during the fourth quarter of 2013. This resulted in basic net income per common share of $0.76. Purchases of property and equipment, intangible assets, and payments for businesses acquired, net of cash acquired during the quarter totaled $19.1 million.
For the period ended December 31st, 2014, free cash flow defined as cash from operating activities less payment for the acquisition of property and equipment, intangible assets, and acquired businesses net of cash acquired was $39.4 million versus -$18.7 million in the same period last year. Cash, short-term investments, and long-term investments at the end of the quarter totaled $577.2 million. Wrapping up, we declared our quarterly dividend of $4.5 million, or $0.103 per share payable on April 15, 2015, to shareholders of record as of the close of business on March 31st, 2015. That concludes my financial review of the fourth quarter. Before wrapping up, I'd like to provide a brief update on the current foreign exchange situation in Venezuela.
Earlier this month, the Venezuelan government announced a unification of the SICAD 1 and SICAD 2 foreign exchange systems into SICAD with an initial public foreign exchange price of 12 VEF per USD. In addition, on February 10th, it created the Sistema Marginal de Divisas, or SIMADI, a new foreign exchange market whose rate is published daily by the Venezuelan Central Bank. The first foreign exchange rate was published on February 12th at 170 VEF per USD. At this moment, we are in the process of evaluating the implications of these new regulations on our results and the financial position of our Venezuelan segment during the first quarter of 2015 and beyond.
In order to assist investors in understanding the impact of a Venezuelan devaluation to these rates, in our 10-K, we will include a foreign currency sensitivity analysis that considers an exchange rate of 170 VEF per USD for the full year 2014. In conclusion, looking back at a successful year, we remain committed to executing on the same strategy that we've laid out over the past few quarters, and that we've already seen play out in early 2015, including a focus on the key elements of our enhanced marketplace: payments, financing, shipping, vertical experiences, official stores, and exceptional customer service. Likewise, we will continue to drive payments and financing outside of our platform, as well as accelerate our transition from desktop to a multi-platform focus.
Looking ahead to 2015 and beyond, there is so much opportunity in the Latin American e-commerce space that it is still untapped by and large. While benefiting from the tailwinds of e-commerce's underlying drivers, we must continue to innovate and execute at a fast pace. While maintaining focus on our largest markets, we will also work to launch the full ecosystem of Mercado Pago and Mercado Envios in other markets. We must also take the necessary measures to bring more large retailers and brands onto our platform, providing backend technology and middleware solutions to improve seller integrations and generate greater lock-in of key customers that is necessary to create the critical mass of e-commerce customers that we are looking for. In that spirit, we must continue to build out Mercado Envios, using it to pave the way for future solutions in fulfillment.
We must maintain our focus on acquiring and retaining buyers, balancing short-term profitability for long-term investments in brand loyalty, customer retention, and market share gains. We must continue to innovate in the payment space on, and especially off our platform, with a special focus on mobile. Given the success of consumer financing to date, we also must seize the greater opportunities to generate P&L impact in this space. With that, I'd like to end today's call by stating our continued confidence that MercadoLibre's 2014 results across key financial, performance, and operational metrics are a reflection of the resiliency of demand for our enhanced marketplace solutions. Facilitating e-commerce throughout 12 Latin American countries, we remain the leading operator in these markets, and our core focus during this new year will continue to be guided by the strategic goals we have consistently communicated.
Driving payment and shipping solutions, increasing adoption of mobile commerce, attracting new brands and vendors, tailoring vertical solutions, placing customer experience at the forefront of it all. All this while generating a developer's ecosystem on top of MercadoLibre's open platform. We trust that as we execute on these fronts, our company will be in great shape for many years to come. We'll now take your questions.
Thank you. Ladies and gentlemen on the phone line, if you have a question, please press star then one on your touchtone telephone. If your questions have been answered and you wish to remove yourself from the queue, please press the pound key. Once again, if you'd like to ask a question, please press star then one. Our first question comes from Gene Munster from Piper Jaffray. Your line's open, please go ahead.
Good afternoon, congratulations. A couple questions. First, across the board, it seems that all the initiatives cumulatively are having a profound impact on the business. I'm curious, as we start to look forward, I know you don't give any guidance, but as we start to think about the March, June quarter, are there anything that's kind of changed, whether it's political or macro, that would lead us to believe that something has drastically changed in the momentum of the business? Separately, can you talk a little bit more about the developers that you acquired, the beVision developers, what some of their areas of focus would be? Is it just kind of continuation of the existing development, or are they going to be focused on some new areas? Thanks.
Hi, Gene. This is Marcos. With respect to the first part of your question, we believe our model is very resilient to political changes or even macro changes. As you said, the model is performing very well across the board, despite the fact that there are very different political and economic conditions in the various countries in Latin America where we operate. We believe that the secular trends Pedro was mentioning on the prepared remarks are occurring across the board throughout the region. As far as we can continue to implement our enhanced marketplace with all the additional services that we are implementing, such as greater penetration of Mercado Pago, financing, shipping, et cetera, we will continue to grow at healthy rates, hopefully for many years to come. Perhaps Pedro will give you some light on the second part of your question.
Sure. Hi, Gene. Just a continuation, I think, of Marcos's statement. The company we acquired brings with it engineering talent that we will now deploy on building out this enhanced marketplace vision. Hopefully, it'll give us greater celerity in rolling out some of these things to new countries, and also to be able to push the countries that already have payments, financing, shipping rolled out with new features and enhanced and improved technology on those services. It just allows us to carry out the blueprint that we're seeing be very successful in Brazil and Argentina, and to a lesser extent, Mexico, to other markets, and accelerate in those three large markets.
Great. Just, I guess, a follow-up to the first part of the question, maybe asked slightly a different way. Is there any reason to think that the momentum in the business won't continue into the March quarter or the June quarter?
Well, as you suggested, we don't give any guidance. We will be happy to discuss about the Q1 in May of this year.
Excellent. Thank you.
Welcome.
Thank you. Our next question comes from Ross Sandler from Deutsche Bank. Your line's open, please go ahead.
Hey, guys. Can we talk about the interest-free listings in Brazil? How much has that changed from, I think it was 0 middle of 2014 up to 18% of listings. How much of impact on conversion rate is that having? I know that that's not available for all listings in Brazil, but what %, I guess, of the total listings, where do we cap out at in terms of penetration? How high can that 18% go? Second question is around take rate. Pedro, from what you explained, the merchants are paying the higher take rate now that you've rolled out these interest-free installments. Can you just walk us through how the unit economics work under the typical $100 purchase under the old model versus the interest-free model? Is this one-time uptick in take rate? When do we start to level out?
Will that be 3Q of 2015 when we lap the rollout of interest-free listings? Thanks.
Hi, Ross. This is Osvaldo. Regarding the interest-free financing in Brazil, during the fourth quarter, 18% of the listings had the option of free financing, and those represented 33% of the gross merchandise volume in Brazil. The conversion was nearly twice the average for the Brazilian side. Both these numbers, the listing number and the GMV number, those are averages for the quarter. Since we saw a positive trend during the quarter, we would expect those numbers to be higher in the first quarter.
Great. On the take rate piece, Ross, I think conceptually what we've said is we've, on a marginal basis, so on a per transaction basis, the overall take rates in the new financing system versus the old system are not dramatically different. We've tried to price them marginally similar. What has happened is that the adoption of financing has grown significantly because in the new system, the merchant is bearing that cost, not the buyer. Adoption has been tremendous. It's driven incremental volume on the marketplace, and a lot of these take rate gains are actually coming from volume increases in financing and not different unit economics, which is the way we like to drive take rate. Not so much through pricing, but more through volume.
Okay, great. I guess just we should lap through that, I guess, once the interest-free listings are at a steady state in terms of penetration, four quarters ahead, it'll level out again. Is that the right way to think about it?
I think we need to see what the cadence of that adoption curve going forward is. It's grown very nicely, but hard to predict going forward whether the amount of finance transactions could approach most of Mercado Pago, only half of that. Tough to tell when the run room for growth begins to peter out. I think we'll have to accompany that quarter by quarter. We're also beginning to launch this out in other markets. They won't necessarily have as rapid adoption as Brazil, but there is opportunity to replicate at least part of this success in some other markets. We'll have to wait and see.
Great. Thanks, guys.
Thank you. Our next question comes from Michelle Moran from Morgan Stanley. Your line's open. Please go ahead.
Thank you. Pedro, I just wanted to ask about the balance sheet a little bit. If I look at your cash and short-term investments, the total there, I think, is around $370. It seems to have come down since the convertible bond issue to the tune of about $120 million. I was wondering if you could parse out where that's gone. I know there was an acquisition a few months ago, and then this most recent one. I don't know if that's in these fourth quarter results. I believe it is. I'm not sure how meaningful that might've been. Also on that acquisition, whether or not there was any other operating impact either on the cost or revenue side this quarter. Secondly, on Brazil, very solid top-line growth there.
When I look at things sequentially, I don't see a significant move in contribution profit. I don't know if it's a lot of the same line items that you walked us through in your prepared remarks that are really impacting Brazil more specifically, or if there's something else going on there, maybe in terms of shipping, perhaps. Thank you.
Just on the first one, on the balance sheet position, to give you a general sense in terms of M&A spend, the number has been. The beVision acquisition is not material at all. It's actually a very cost-efficient acquisition in terms of cost per engineer. The Portal acquisition early on in the year was in the range of $35 million. What you're seeing in terms of the delta in the cash position is actually more driven by the payments business. Either because of just a short-term holding on to more receivables than prior period. Additionally, we are beginning to use some of our cash for Mercado Pago working capital, which improves the profitability of the Pago business slightly. You might see oscillations on a Q-on-Q basis on the cash position, but that's primarily driven by the payments business.
There's some incremental CapEx in terms of office spaces, the majority of that delta is going to be the payments business and either just a short-term weekly dislocation in how many receivables we factored versus prior period or a decision to, in some countries, hold on to a small portion of the receivables, not discount them and not take that additional P&L impact from the discounting. The second question in terms of the cadence or the evolution in profitability for the segment. By and large, a lot of the drivers that explain the consolidated OpEx and COGS movements apply very much to Brazil. Some of the gross margin compression is also driven by taxes on shipping, and that's very pertinent for Brazil.
The biggest drivers in terms of compensation costs and marketing costs also apply for our Brazilian segment. In general terms, what we explained for the consolidated margin evolution, most of that applies for Brazil.
Great. Thank you, Pedro. If I can just follow up on your first answer. If you can tell us, how much of that cash and investments is in Venezuela and Argentina at this point?
Okay. Very quickly. Venezuela, in terms of cash holdings, if we look at balance sheet, it's going to be roughly in the $10 million range at the Q4 exchange rate. It's not a very significant cash holding, and Mercado Pago is not very large in Venezuela. In terms of funds payable to customers on the balance sheet, it's not very relevant there. In terms of Argentina, we don't really hold retained earnings or corporate cash. The entirety is going to be funds payables to customers. We don't disclose the number, but roughly half of funds payables to customer we have matched and localized in Argentina. I can try to get back to you with a specific number. I want to make sure that there's disclosure around that.
It's not going to be a significant portion of that number, again, because we don't hold any of our own retained earnings, and all we hold are funds payables to customers, which we want to have locally so that we don't have currency mismatch.
Yeah.
Really that's the money that belongs to Pago users that we carry the yield on, but that they can withdraw.
That makes sense. Okay, thank you very much.
Thank you. Our next question comes from Marcelo Santos from JP Morgan. Your line is open. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. The first one would be about the tax holiday in Argentina. I understand that the previous one is over, and you made a filing for the new one. Could you give any color, like how it is going for you and for the other companies? Has anybody received any authorization, and what would be a reasonable timeframe to think about this? This is the first question. The second question is about Mexico and shipping and zero interest. Looking at these two new features and looking at the Mexican e-commerce environment, the consumer, how they behave, how do you think will be the attractiveness of these two features versus it is in Brazil where people are very used to paying zero interest and shipping is very well accepted? They are my two questions.
Great, Marcelo. Thanks for the questions. Let me just take advantage and give the answer I was owing Michelle. There's about $30 million in Argentina, which are funds payable to customers. Again, it's a small portion of the overall cash position. The tax holiday in Argentina, just one additional clarification there. Part of the compression that we're seeing in margin driven by salaries and wages in the quarter is driven by the fact that we've accounted for the quarter as if we will not be granted the renewal of the tax holiday. That's about 100 basis points of the margin compression. If we are to be granted retroactively the holiday, the margin structure would have been better this quarter. In terms of where companies stand, most companies have not received confirmation yet, we stand with the majority of the software development companies.
Some have began to receive, I think there's an intent on part of authority to start replying to those applications. Conversations continue to be fluid, that's probably as much as we can comment right now.
Marcelo, this is Marcos. With respect to Mexico, shipping has very strong early start. We are there, partnered with DHL, that has a really good service. We think the potential is great. We're just starting. We're very happy with the early traction.
With regards to free interest in Mexico, I would say that we just launched it towards the end of the quarter, it's still early to tell. I think we are encouraged by the early results, that since penetration in Mexico is lower than it is in Brazil. On the one hand, the result will have a less impact than in Brazil, it should help us to increase the penetration of payments, of Mercado Pago in the marketplace in Mexico.
Okay, thank you very much.
Thank you. Our next question comes from Stephen Ju from Credit Suisse. Your line's open. Please go ahead.
Hey, guys. Congrats on the quarter. This is Nick on for Stephen. Just a quick question on the higher marketing investment. Is this mostly brand or direct response? Could you break down the mix? Are you doing more offline marketing or is it mostly online stuff? Thanks.
Yep. In general terms, there hasn't been any significant change in the investment channels. It's similar to what we had been doing with incremental spend. What we have done more of this year than in the past, and it has been successful, both MercadoLibre, but also the e-commerce industry as a whole, are more concentrated investments around special days, like Cyber Monday or Black Friday, or certain specific industry events. A lot of those happen to come in the fourth quarter holiday season. That's been incremental spend versus other years. In terms of mobile advertising, as we continue to grow mobile as a percentage of the overall business, our marketing spend in mobile is also going up. Now, that's not entirely incremental. Some of that is simply shifting of the portfolio.
There is more spend in the mobile space where the ROI is somewhat different than in previous years. Other than those two data points, by and large, it's same old. The vast majority of it, performance and online. There weren't any significant offline investments during the fourth quarter.
Thank you.
Thank you. We have a follow-up question from Michelle Horn from Morgan Stanley. Your line's open. Please go ahead.
Yes. Thanks for the follow-up. I was just wondering if you can comment a little bit about the competitive environment in Brazil in particular. I think we've been seeing a little bit more headlines around AliExpress and their gains in the market. Just a little bit of an update on what you're seeing there, also considering that some of the traditional competitors are trying to move into the marketplace space. Obviously, you're posting very strong results, but any anecdotal comments you'd make on that would be very helpful. Thank you.
With respect to competition in Brazil, I would say, continues to be a market with lots of participants, and we believe it will continue to be like that for many more years. As always, we look at everyone, try to imitate the things that we like about our competitors, but mostly focus on our model and our business plan. I wouldn't like to focus on any one particular competitor, but I would just like to highlight that some of the players you mentioned are focused in cross-border trade. That is not a market that today we are focused. We do trading. The majority of our transactions are buyers and sellers both located within each one of the countries that we cover.
Although we think and we believe that cross-border trade is a huge opportunity, and if it continues to be unregulated and goods are allowed to flow from China to Latin America, in those markets where that is a possibility, it's obviously also a huge opportunity for us to onboard Chinese sellers onto our platform. We see that as a big opportunity, but that is not a market that we are focused on right now. With respect to the other players, as you mentioned, there are many. Everybody seems to want to create a marketplace these days. We are very happy the way our marketplace is performing and the growth rates we're having, particularly in Brazil. We just know that we will continue to have lots of competitors, and we will just try to execute as best as we can in the coming years.
If I may just to paraphrase, I think the first part of your answer. Essentially someone like AliExpress right now, you don't really view them as being a direct competitor. That may change over time, but as of right now, it's not that relevant.
Right now, we are not focused on having Chinese sellers list on our platform for Brazilian buyers.
Yeah.
That is not a market that we're targeting. We see that it's a market that is growing very rapidly. If it continues to grow and it remain unregulated, obviously it's an opportunity for us.
Okay, great. If I may squeak in a quick one. Maybe I missed it, but I didn't see the % of revenues that was from Marketplace. Pedro, I don't know if that was in there somewhere, either overall or for the different regions. I know it'll be in the K later.
Sure, just one second, and I'll give you the exact number.
Thank you.
Marketplace is at roughly 65%, and the non-Marketplace revenues are at roughly 35%.
Great. Thank you very much.
Thank you. I'm showing no further questions at this time.
Great. Thanks, everyone, and we look forward to giving you another update in a quarter and share with you the progress on our business.
Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.