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Singapore signs free trade deal with four-nation Latin American bloc to boost trade, investment

The Straits Times | 8 December 2023

Singapore signs free trade deal with four-nation Latin American bloc to boost trade, investment

by Ovais Subhani

SINGAPORE – Singapore signed a ground-breaking free trade agreement (FTA) with four South American nations on Dec 8.

The deal with Argentina, Brazil, Paraguay and Uruguay – a group known by the Spanish acronym Mercosur – is Singapore’s first trade pact with these states and the bloc’s first such deal with a South-east Asian nation.

In January 2022, Singapore signed an FTA with another Latin American economic bloc called the Pacific Alliance, which comprises Chile, Colombia, Mexico and Peru.

The agreement with Mercosur aims to facilitate greater trade flows through lowered tariffs and by establishing transparent investment conditions, noted Singapore’s Ministry of Foreign Affairs and Ministry of Trade and Industry.

It will also foster cooperation in areas such as trade facilitation – a process that simplifies export and import procedures.

The pact, known as the Mercosur-Singapore Free Trade Agreement (MCSFTA), is expected to engender entrepreneurship, speed up digitalisation and boost sustainable development and food supply security, while also helping small and medium-sized enterprises (SMEs) develop across the five economies.

Foreign Minister Vivian Balakrishnan and ministers from the four Mercosur members signed the agreement at the 63rd Summit of Heads of State of Mercosur and Associate States in Rio de Janeiro, Brazil.

Mr Alvin Tan, Minister of State for Trade and Industry, was also at the event.

The five countries will now work on their domestic ratification processes to bring the new deal into force.

Dr Balakrishnan said: “This signing comes after more than four years of intensive negotiations. The MCSFTA creates a new bridge between South-east Asia and South America, bringing our regions closer together.”

He said in a speech at the summit that the countries will focus on enhancing trade through simplified Customs procedures and increased transparency, so that goods can be cleared more efficiently, as well as on enhancing stability and predictability to raise investor confidence.

They will also work to facilitate digital trade and build up trust in the digital economy, and do so in a way that will give fair opportunities to all countries’ citizens.

Another area of focus will be to deepen cooperation to develop opportunities for SMEs, to help them internationalise and develop entrepreneurial skills in order to remain relevant.

Dr Balakrishnan said that beyond trade and other aspects covered by the agreement, Singapore and Mercosur should also commit to doing more on the green economy and to looking into trade of carbon credits.

Together with the Pacific Alliance deal, Singapore now has substantive FTAs with most of South America, he noted.

Trade and Industry Minister Gan Kim Yong – who was not at the summit – said that the new pact “strengthens Singapore’s growing trade-enabling architecture with Latin America”.

He noted that it will lower business costs for firms here, ease tariff and regulatory barriers and open doors to new business opportunities, such as in e-commerce, agri-trade and government procurement.

Mercosur collectively represents the eighth-largest economy in the world, with a combined gross domestic product of US$2.7 trillion (S$3.6 trillion) and a market of 272 million people.

Merchandise trade between Singapore and Mercosur in 2022 accounted for 45 per cent, or $13.8 billion, of Singapore’s total trade with the 33 independent economies in the Latin American region, while trade in services in 2021 accounted for 40 per cent, or $7.6 billion.

There are around 100 Singapore companies operating in the Mercosur markets, in sectors such as oil and gas, agri-business, digital solutions, manufacturing, hospitality, logistics and infrastructure.

These include Ascott, Changi Airports International, Grupo Kaybee, PSA International, SEA Group, Olam International, Wilmar International and Sakura Tech.

Mr Peter Koh, group chief executive of Oceanus Group, an agri-business company listed here, said the new agreement will not only facilitate more effective cross-border trade, but also contribute to greater food supply resilience.

“This is firmly aligned to our belief that a world of food without borders is a food-secure world,” he said.

Mr Govind Karunakaran, CEO of Grupo Kaybee, which trades products such as textiles, home furnishings and packaged food, said the company has been doing business with Latin America since the 1960s.

“We welcome the signing of the (trade deal) that will provide us with opportunities to grow further trade flows between the Mercosur countries and Singapore.”

 source: The Straits Times