Brazil & Mercosur should close trade deal with Asian wealth leader Singapore

RIO DE JANEIRO, BRAZIL – By year-end, Brazil-led MERCOSUR is expected to sign a free trade agreement with Singapore, the country with the world’s 3rd highest per capita GDP in purchasing power parity and one of the largest export centers in Asia, with the 5th largest global port.

Brazil’s trade with Singapore has been growing significantly. In 2020, the country ranked 12th among the main destinations for Brazilian exports. This year it climbed to 8th place, ahead of countries such as Germany and Mexico.

“The agreement should represent an increase in trade with Singapore and an important gateway for Brazilian products among Asian countries,” said Pedro Miguel da Costa e Silva, Ministry of Foreign Affairs’ Secretary of Bilateral and Regional Negotiations in the Americas.

The negotiations have been going on for at least two years and should lead to the formal signing of the agreement by the end of the year, according to the Ministry of Foreign Affairs.

Currently, Brazil exports mainly manufactured products to Singapore, such as petroleum fuel or mineral fuel oil, which account for 60% of exports. In second place are crude petroleum or mineral oils (16% of sales). Chicken, pork and beef also play an important role in exports.

Together, these products totaled almost US$ 3 billion in sales to Brazil in 2020, closing in surplus. This year, Brazilian exports reached US$2.5 billion between January and June alone. Foods, such as chicken, pork and beef, are part of the ranking of the most traded product categories to Singapore.

The Brazilian trade balance as a whole closed the first semester this year with a positive balance of US$37.5 billion, a record in the historical series started in 1997. The result was almost 70% higher than in the same period last year, due to the resumption of economic activity in many countries and the dynamic agribusiness, the main driver of Brazilian foreign sales. By year-end, Brazil should post a record US$105.3 billion surplus.

“Agribusiness and industry have much to gain from this type of trade agreement, which establishes a significant reduction in import tariffs, thereby making products more competitive,” Silva says.

Other agreements are being negotiated. Brazilian and other MERCOSUR countries’ diplomats are involved in reaching agreements with Canada, South Korea and Lebanon. Of these, the closest to a conclusion may be Canada.

However, the pandemic has disrupted negotiations in general. According to experts familiar with the negotiations, the suspension of travel and in-person meetings has delayed the processes. Now, a new acceleration phase is expected as vaccination progresses in all countries.

From a trade perspective, negotiations with Canada and South Korea are considered more important. “With Lebanon, there is an important cultural and human factor, since the Lebanese immigration was remarkable in Brazil and today many Brazilians live in Lebanon,” Silva points out.

However, there is still no forecast on the conclusion of negotiations in the short term. The agreement with Canada is expected to advance in the second half of this year and in 2022.

In 2020, Canada was the 5th largest destination for Brazilian exports, with over US$4 billion in purchases, mostly gold (44%) and metals, such as aluminum oxide, as well as sugar and coffee.

A free trade agreement should enable more agribusiness products to be shipped. “As always, one of the delicate points in negotiations is the agribusiness issue, a sector in which we are highly competitive, but talks are progressing,” Silva says.

For the full picture, see our Mercosur EU Trade Deal: Complete Guide.