Last year, Singapore was the sixth main destination for Brazilian exports (Art: TUTU)
During the Mercosur summit, held at the end of July in Asunción (Paraguay), the end of negotiations on a free trade agreement between the bloc and Singapore was announced. For the International Relations Council, the Federation for Trade in Goods, Services and Tourism of the State of São Paulo (FecomercioSP), this is another step on the path of modernization and the search for greater international involvement of Mercosur. It is worth mentioning that this agreement will be Mercosur’s first agreement with a country in Southeast Asia, a region with the highest rates of economic and population growth in the world.
The negotiations were concluded after six rounds, which began in 2019. From now on, the process of legal verification of the agreement begins, in order for it to be signed and approved by the legislative authority and come into force. The Council on International Relations emphasizes the modernity of treaties by covering topics such as electronic commerce, services, investment and public procurement – not just limited to tariff issues.
In an official note, Mercosur emphasizes that “Singapore is one of the main suppliers of capital in the world, with great investment potential, whose sovereign funds are among the top ten in the world.”
The agreement covers the following points: national treatment and market access; rules of origin; trade defense; bilateral protective measures; sanitary and phytosanitary measures; technical barriers to trade; customs procedures and trade facilitation; services; movement of individuals; e-commerce; investments; public procurement; intellectual property; competition; micro, small and medium enterprises; legal transparency; and general, final and institutional provisions.
current of trade
According to Mercosur, the trade flow between the economic bloc with Singapore was approximately 7 billion US dollars in 2021. In terms of exports, agricultural products, ferroalloy, pork and beef, and iron minerals stand out. In imports, insecticides, integrated circuits, medicines and ships. In addition, Singapore’s direct investment in South and Central America and the Antilles reached USD 127 billion in 2020.
Singapore, a tropical island located in Southeast Asia, more precisely at the southern end of the Malay Peninsula, has about 5.5 million inhabitants. The city-state has built an environment favorable for entrepreneurship, with a low tax burden and a skilled workforce, integrated into global foreign trade chains, with a complete infrastructure. Singapore ranks first in the Heritage Foundation’s global ranking of economic freedom, and second in the world in Doing Business, a World Bank study that measures the ease of doing business in 190 countries.
Effects of the agreement for Brazil
For the Council on International Relations, there is no doubt that, among the Mercosur countries, Brazil will be the main beneficiary of the agreement.
Last year, according to the Secretariat of Foreign Trade (Secex), Singapore was the sixth main destination of Brazilian exports, which reached 5.8 billion USD, and the 43rd main origin of our imports – which reached 842.7 million USD, generating trade a surplus of almost 5 billion USD.
In terms of services trade with the city-state, Brazil exported USD 522 million in 2019, while importing USD 137 million. In both exports and imports, the categories “other business services”, “transportation” and “travel” stand out.
An impact study carried out by Secex points out that the agreement could lead to an increase of R$ 28.1 billion in Brazil’s gross domestic product (GDP), accumulated between 2022 and 2041. In the same interval, investments would increase by R$ 11.1 billion R$, exports would increase by R$ 21.2 billion, and imports would earn R$ 27.9 billion.
The agreement is positive for the country. FecomercioSP is constantly advocating for the opening of trade, lower import tariffs and greater international inclusion of the Brazilian economy, so trade agreements like this one are on the right track. Mercosur has several such agreements – and the existing ones are signed with countries of little economic importance.
In recent years, Brazil has worked for Mercosur to advance trade negotiations. Negotiations have already been concluded with the European Union, the European Free Trade Association and now Singapore, with an agreement with Chile already in force. Negotiations with Canada and South Korea are still ongoing; and the start of negotiations with Vietnam and Indonesia.
Click here to learn more about the Council on International Relations.