FTA between S’pore, Paraguay comes into effect under deal on lower tariffs with South American bloc

SINGAPORE - A free trade agreement between Singapore and South American economic bloc Mercosur entered into force for the Republic and Paraguay on Feb 1, said Singapore’s Ministry of Trade and Industry (MTI).

This is Singapore’s first FTA with a founding member of Mercosur (the Southern Common Market), founded by Argentina, Brazil, Paraguay and Uruguay.

The Mercosur-Singapore FTA (MCSFTA) is Singapore’s 29th FTA, and Mercosur’s first trade deal with a South-east Asian country.

The MCSFTA will enter into force for Singapore and Uruguay on March 1, following the completion of Uruguay’s ratification procedure, MTI also said.

Ratification procedures are ongoing for Argentina and Brazil.

“The MCSFTA aims to deepen economic integration between Singapore and the four South American economies by facilitating greater trade flows through lowered tariff rates,” MTI said in a statement on Feb 3.

For Singapore traders and investors, the FTA will also provide more transparent access to and predictable investment conditions in Mercosur, which in 2025 had a combined gross domestic product of nearly US$3 trillion (S$3.8 trillion) and a population of more than 295 million.

The FTA will foster cooperation between Singapore and the four-nation bloc in areas such as trade facilitation, entrepreneurship, digitalisation, sustainable development, food supply security and development of small and medium-sized enterprises, MTI said.

Nearly 200 Singapore companies are already doing business in the bloc in sectors such as oil and gas, agribusiness, digital solutions, manufacturing, hospitality, logistics and infrastructure.

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

Negotiations for the

trade deal were launched in July 2018

.

Following four years of negotiation, the MCSFTA was concluded on July 22, 2022, and then signed on Dec 7, 2023, by Singapore’s Foreign Minister Vivian Balakrishnan and ministers from the founding member states at the 63rd summit of heads of state and associate states of the bloc.

Under the agreement, Mercosur states will immediately offer tariff-free access for around 20 per cent of products, and gradually eliminate import tariffs on about 96 per cent of products over 15 years.

MTI said: “This marks a significant increase in tariff-free market access, up from less than 15 per cent of Singapore’s exports to the Mercosur markets currently.”

In 2025, Singapore’s total goods trade with Mercosur amounted to $11.9 billion, accounting for over 30 per cent of the Republic’s trade with Latin America.

Businesses will also enjoy simplified and expedited Customs procedures for express shipments.

Both sides have committed to expediting the release of perishable goods within the shortest possible time, which is especially important for exporters of agricultural products such as dairy and fresh produce.

Singapore exporters can also enjoy flexible rules of origin for their goods to qualify for preferential tariffs when imported by the founding Mercosur states.

Singapore businesses are also assured of fair and non-discriminatory treatment when competing for government contracts.

“This gives companies an equal opportunity to gain access to Mercosur government procurement markets,” said MTI.

Service suppliers can expect equal treatment with their Mercosur counterparts in various sectors, including computer, research and development, and construction services.

Trade in services with the four-nation bloc reached $7.3 billion in 2023, representing 35 per cent of Singapore’s total services trade with Latin America.

The MCSFTA also includes Singapore’s first investment agreement with the founding states of the bloc, providing investors with enhanced stability and predictability through the provision of clearer market entry conditions.

One of the chapters in the agreement deals with facilitating cooperation between the two sides in capacity-building to support the growth, competitiveness and internationalisation of micro, small and medium-sized enterprises, or MSMEs.

MTI said Singapore and Mercosur will exchange information relevant to MSMEs, explore avenues for collaboration, and help MSMEs develop entrepreneurial skills.

The MCSFTA chapter dealing with e-commerce will promote digital trade facilitation, including electronic authentication and paperless trading.

The chapter also seeks enhanced trust in the digital economy, such as through stronger online consumer protection and minimising unsolicited commercial electronic messages.

Singapore and Mercosur have also agreed to cooperate in various areas relating to e-commerce, including cybersecurity.

In the chapter dealing with competition, the two sides have committed to adopting or maintaining competition laws that prohibit anti-competitive business conduct so that businesses can enjoy fair competition.

The progress on the MCSFTA comes on the heels of the bloc’s FTA with the European Union in January. The deal between the 27-nation EU and Mercosur creates one of the world’s largest free trade areas after 25 years of tricky negotiations.

Experts hailed the EU-Mercosur deal as sending a powerful message at a time of tariff threats, global uncertainty and protectionism.