Singapore has signed a free trade agreement (FTA) with the MERCOSUR trade bloc which consists of Brazil, Paraguay, Argentina, and Uruguay under the MERCOSUR-Singapore Free Trade Agreement (MCSFTA) on 8 December 2023. This is Singapore’s first FTA with these individual countries and the bloc’s first such deal with a South-east Asian nation.
Upgraded relationship between Singapore and MERCOSUR
MERCOSUR is a Latin American bloc that represents the 8th largest economy in the world, with a combined GDP of US$2.7 trillion and a combined population of 272 million people. In 2022, merchandise trade between Singapore and MERCOSUR accounted for 45% (S$13.8 billion) of Singapore’s total trade with the 33 independent economies in the Latin American region.
Over 100 Singaporean companies are based in the MERCOSUR markets. These businesses operate across diverse sectors such as oil and gas, agri-business, digital solutions, manufacturing, hospitality, logistics, and infrastructure. Examples include Changi Airports International, Wilmar International Limited, and SEA Group. Simultaneously, there are more than 100 MERCOSUR companies registered in Singapore.
Given the substantial business presence and ongoing commercial engagement between Singapore and the MERCOSUR nations, the newly signed MCSFTA is poised to create an even more conducive environment for mutually beneficial business opportunities and economic cooperation.
The MCSFTA will deepen economic integration between Singapore and the four South American economies by facilitating greater trade flows through lowered tariff rates, establishing transparent and predictable investment conditions, and fostering cooperation in areas such as trade facilitation, entrepreneurship, digitalisation, sustainable development, security of food supply and SME development.
Key highlights of the FTA
- Trade in goods
- Gradual reduction of import tariffs for approximately 96 % of products over the next 15 years.
- Immediate tariff-free access for 25 % of products.
- Focus on simplifying custom procedures, competition law enforcement, e-commerce, and cybersecurity.
- Trade in services
- develop a more favourable business environment to grant market access for businesses in R&D services, construction, and IT services.
- Rules of origin
- Singapore-based exporters will enjoy flexible rules of origin for goods to qualify for preferential tariffs when imported by a MERCOSUR member.
- Government regulation
- Non-discriminatory and fair treatment for Singapore companies competing for government contracts in MERCOSUR markets.
- Equal opportunity for MERCOSUR-based companies in Singapore government contracts.
- MSMEs
- Facilitate the expansion of MSMEs to both jurisdictions through cooperation in capacity building.
- E-commerce
- Promote paperless trading and digital trade facilitation.
- Strengthen trust in the digital economy through enhanced online consumer protection.
Next steps: approval and ratification
After signing, the next crucial steps involve gaining approval from the Parliaments of Singapore and the Mercosur member countries. Once approved, the agreement will undergo ratification, paving the way for its entry into force and the initiation of a new era of economic cooperation between Mercosur and Singapore.
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