Latin American and Singapore businesses should take note of this development, and where possible, take advantage of the significant trade opportunities and economic growth that this trade agreement will generate.

On July 22, 2021, Singapore Minister of Trade and Industry Gan Kim Yong, together with his counterparts from the member states of the Pacific Alliance―Mexico, Chile, Colombia and Peru―announced the conclusion of negotiations of the Pacific Alliance-Singapore Free Trade Agreement (PASFTA).

Singapore will become the first Asian-Pacific associate state of the Pacific Alliance once the agreement is signed, which is expected to happen by the end of the year. This is an important milestone in the economic integration between the Pacific Alliance’s region and the Asia-Pacific region and is a crucial development for the necessary economic reactivation of the two regions.

The ministers of trade agreed that the PASFTA represents an interest in the economic integration of the regions and the improvement of their commercial relationship, attracting investments and expanding access to goods and services. In particular, the PASFTA will enhance trade and deepen cooperation in areas such as the digital economy, energy, technology, urban solutions, customs, maritime services and infrastructure.

Latin American and Singapore businesses should take note of this development, and where possible, take advantage of the significant trade opportunities and economic growth that this trade agreement will generate.

The Pacific Alliance: Main Objectives and Members

The Pacific Alliance is a trade agreement between Chile, Colombia, Mexico and Peru, created in 2011 and officially signed in 2013. It has two main objectives: (1) to promote the development of member states with deeper economic integration and (2) to become a platform for member states to enhance trade with the Asia-Pacific region in a coordinated way.

The achievements of the Pacific Alliance in its first 10 years include: (1) eliminating 92 percent of all tariffs among the four member states and continuing to liberalize services and investment markets; (2) facilitating the flow of people and talent across borders by removing short-term and business visa requirements; and (3) establishing an integrated stock exchange, known as the Mercado Integrado Latinoamericano (MILA).

As of 2021, there are 59 nations with observer status in the Pacific Alliance. Observer nations work on strategic issues with member states and have agreed to the principles and objectives set forth in the Framework Agreement of the alliance. In addition, an observer nation may request to become a candidate for membership in the Pacific Alliance if it has a free trade agreement with at least half of the member states. An observer nation may further request to be considered an associate state. Singapore is now expected to become the first associate state by the end of 2021 once the formal agreement is signed during the Pacific Alliance Summit scheduled to take place in Colombia this coming December.

What Does It Mean for Singapore to Be an Associate Member?

As an associate member, Singapore will have access to the eighth-largest exporter in the world (i.e., the Pacific Alliance region), with a combined population of 230 million, a per capita gross domestic product of US $19,000 and annual exports totaling US $627 billion.

Singapore’s access to the Pacific Alliance through the PASFTA will enhance the economic partnership already existing between the two regions with the Trans-Pacific Strategic Economic Partnership Agreement, the Peru-Singapore FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. In particular, the PASFTA is the first free trade agreement between Singapore and Colombia.

Businesses from the member states in Latin America can benefit from the significant trade opportunities and economic growth that the PASFTA will bring to the Pacific Alliance region. The benefits will be generated not only by the opportunity to access the Singapore market but also by the potential access to the Asia-Pacific region. In particular, the possible access to the countries signing the Regional Comprehensive Economic Partnership, which provides access to 30 percent of the world population and about 30 percent of the global GDP, will be of great benefit to the Latin American businesses.

As businesses from Singapore and the Pacific Alliance navigate growth and transformation prospects to tackle these challenging times, they must consider the strategic opportunities that the expansion or investments in the Pacific Alliance region can provide. Likewise, exporters and investors stand to enjoy a myriad of benefits like tariff concessions, preferential access to particular sectors and faster entry into markets, among other beneficial agreements.

For More Information

If you have any questions about this Alert or other matters pertaining the PASFTA, please contact Eduardo Ramos-Gómez, Rosa M. Ertze, Ramiro Rodriguez, Miguel de Leon Perez, Lucia Orozco, Luis Duhart, any of the attorneys in our International Group, any of the attorneys in our Latin America Business Group, any of the attorneys in our Mexico Business Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.