Noticed you kept your midterm guidance unchanged, although there were some management changes with Diego stepping down and some other people that were hired. Just any update on sort of that review? Could there be future changes to the guidance? Do you think everything is in place that you need to continue to grow and scale the business from here? Thank you.
Pedro Arnt: Sure, Tito. So, let me start with Argentina, given that it’s topical. First of all, as we’ve stated throughout, we’ve always taken a long-term view on Argentina, and this is a market that we’ve remained committed to throughout. We actually think that the removal of uncertainty after the election and I think potential for a more stable economy bodes well for our merchants in Argentina going forward. If you look at some of the slowdown in the business, although it has continued to grow through the tough macro and the devaluations, potentially gets reversed if we see that economy rebounding. So when we look mid-term, we see more positives than negatives to emerge out of Argentina. From a devaluation perspective, really, the impact will depend on how fast our merchants reprice.
So you could see a growth in TPV to adjust to a new level of peso to dollar. We remind you that most of our merchants are global merchants that have an underlying dollarized cost to what they offer in Argentina. And equally important, as Diego mentioned earlier, from a financial perspective, our exposure to the Argentine peso is fully hedged. So, all in all, when we look at Argentina going forward, despite shorter-term dislocations that might occur, if there is a strong devaluation, the more important trends are mid-term. We think it bodes well for that market. Our merchants have the ability to reprice over time, and our Argentine peso exposure is almost entirely hedged. On guidance and cost; as mentioned in the prepared remarks, we continue to invest behind strengthening the foundational pieces of our business.
There’s a lot of work that’s going on now that was already going on, and there’s also additional work of scoping where else we can strengthen. We mentioned our increased partnerships with globally significant banks, with national banks. I think the more appropriate time to finally conclude on whether we need to change guidance or not is not now. For now, we’ve reiterated our midterm guidance and our underlying belief is that with the incremental gross profit that can flow through the P&L from our continuous growth of the business and the way we’re seeing things trend towards the end of the year, will suffice to reinvest back into the business where necessary. But once we reiterate annual guidance for next year, we’ll have even more detail on that front.
Tito Labarta: Okay. That’s great. That’s helpful color. Maybe just one quick follow-up on — back on Argentina. Just to understand the impact of the inflation accounting, just to understand, is that something — is that related to the operations of the business or was that related more to the bond that you guys bought? Just how would that impact the results going forward?
Diego Cabrera Canay: So — hi, Tito. The inflation adjustment is required by IFRS for hyperinflationary countries, which is the case of Argentina. It’s a non-cash adjustment, if you want. Basically, you need to restate revenues, cost and everything based on current prices and then divide them by the new exchange rates that appear from time to time. This particular quarter, we have, as you probably remember, the valuation of the official exchange right after the primary elections. And that was the main driver of that loss that you see in the P&L. That will continue or not, depending on how prices in Argentina and the valuations occur. What is important to note that this is a non-cash adjustment.
Pedro Arnt: And picking up on that, let me just complement more on the actual financial exposure and instruments. And you will see significant disclosure in the accompanying presentation. What happened in the third quarter is the following. The U.S. dollars that we invested in Argentina generate an inter-company loan that sits on the Argentine balance sheet in U.S. dollars. That actual position is fully hedged. So, at maturity, there is a derivative instrument that entirely protects that investment. In the interim period before maturity, the bond, which has the derivative actually trades at mark-to-market. And during the second quarter, there was some dislocation between the mark-to-market value of the bond and the actual derivative.
That is the loss that you will see and the gain that you will see disclosed in the package. So the U.S. dollar liability generates an exchange impact on the P&L and the value of the bond almost entirely offsets that loss. But it wasn’t a perfect hedge from an accounting perspective because it’s mark-to -market. What’s really important to say is that at maturity, the bond is a perfect hedge to the investments made in Argentina. And the outcome of the election actually generates greater certainty that those hedges and those bonds will be honored.
Tito Labarta: Okay. Great. Thanks Pedro and Diego. And best of luck Diego, on your new role on your future endeavors.
