PASFTA’s Entry into Force on 3 May 2025 Enhances Trade between Singapore and Pacific Alliance (Chile, Colombia, Mexico, Peru)

Introduction

On 3 May 2025, the Pacific Alliance-Singapore Free Trade Agreement (“PASFTA“) entered into force for Singapore, Chile and Peru. The PASFTA is an agreement between Singapore and the Pacific Alliance member states, which comprise Chile, Colombia, Mexico, and Peru. The PASFTA will enter into force for the remaining Pacific Alliance member states of Colombia and Mexico upon the completion of their respective ratification procedures.

The PASFTA is a comprehensive free trade agreement (“FTA“) containing 25 chapters, including: (i) trade in goods, services, and investment; (ii) small and medium sized enterprises (“SMEs“); (iii) good regulatory practices for trade and investment; and (iv) electronic commerce. It is Singapore’s first FTA with Colombia and also a first to include a chapter on international maritime transport services. The maritime chapter aims to enhance physical connectivity between Singapore and the Pacific Alliance and facilitate the exchange of best practices and training opportunities.

This Update delves into greater detail on the key benefits and implications of the PASFTA for businesses, investors and consumers.

Background 

Established in 2012, the Pacific Alliance is a progressive and pro-trade economic bloc in Latin America with a strong emphasis on engaging the Asia-Pacific region. Collectively, the Pacific Alliance represents the ninth largest economy in the world and a total population of 235 million. It has a combined Gross Domestic Product (“GDP“) of more than US$2.7 trillion, accounting for around 40% of the total GDP of the Latin American and the Caribbean region.

In 2024, Singapore’s bilateral trade with the Pacific Alliance was S$12.5 billion, accounting for more than a third of Singapore’s total trade with the Latin American and the Caribbean region. About 100 Singapore companies currently operate across the Pacific Alliance markets, in sectors including technology and the digital economy, food trade, infrastructure, and port management and logistics.

The entry into force of the PASFTA, which was signed in 2022, will be a welcome addition to Singapore’s existing FTA partnerships: (i) with Chile and Mexico through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP“); and (ii) with Peru through the CPTPP and the bilateral Peru-Singapore FTA.

Key Benefits

The key benefits of the PASFTA are as follows: 

1. Trade in goods:

• • No tariffs imposed on the majority of tariff lines.
  • Upon ratification, Colombia will reduce or eliminate tariffs on 85.7% of tariff lines.

2. Rules of origin:

• • Businesses can use materials originating in any PASFTA Party to contribute towards a good’s originating status, thereby qualifying exports for preferential tariff treatment more easily, subject to conditions.

3. Customs procedures and trade facilitation:

• • Improved transparency in customs procedures and integrity in customs administrations through simplified customs procedures and enhanced trade facilitation provisions, including for express consignments and perishable goods.

4. Technical barriers to trade:

• • Transparent and non-discriminatory rules for developing technical regulations, including rules that will facilitate the acceptance of the results of conformity assessment procedures from the conformity assessment bodies in any of the PASFTA Parties.

5. Investment:

• • Basic investment protection, including national treatment and most-favoured-nation treatment.
  • Investments will be treated fairly and equitably, and be given protection and security in accordance with customary international law.

6. Trade in services and investments:

• • Core obligations found in the World Trade Organisation (WTO) and other trade agreements, such as national treatment, most-favoured-nation treatment, and market access, in committed sectors.
  • Singapore services suppliers will have preferential market access in: (i) legal services; (ii) construction services; and (iii) tax advisory services.
  • Singapore service providers and companies will enjoy lower operating costs in committed sectors where they need not: (i) establish or maintain a local representative office in the Pacific Alliance; and (ii) appoint individuals of any particular nationality to senior management.
  • Provisions on efficient transfers and payments for cross-border supply of services.

7. International maritime transport services:

• • Strengthened cooperation in maritime transport services between Singapore and the Pacific Alliance through the exchange of best practices and knowledge, and education and training opportunities.
  • Removal of barriers to the supply of maritime transport services.

8. Temporary entry:

• • Singapore business visitors can enter: (i) Chile and Colombia for up to 90 days; (ii) Mexico for up to 180 days; and (iii) Peru for up to 183 days.
  • Singapore investors can enter: (i) Peru for up to 90 days; (ii) Chile and Mexico for up to one year; and (iii) Colombia for up to three years.

9. Telecommunications services:

• • Establishes a pro-competition and market-based regulatory environment and disciplines that prevent anti-competition behaviours.

10. Electronic commerce:

• • Comprehensive commitments on cross-border data flows and location of computing facilities.
  • No customs duties on electronic transmissions.
  • Companies selling products with embedded software will not be obliged to release their source code, except for legal reasons.
  • Safeguards for the protection of personal information.

11. Government procurement:

• • Commitments to core disciplines of national treatment and non-discrimination.
  • Relevant information will be published in a timely manner so that suppliers have sufficient time to obtain the tender documentation and submit a bid.
  • Tenders will be treated fairly, impartially, and with confidentiality.

12. Competition:

• • Maintenance of legal regimes that prohibit anti-competitive business conduct so that businesses can enjoy fair competition.
  • Consumer protection from fraudulent and deceptive commercial activities.

13. Economic and trade cooperation:

• • Agreement to undertake and strengthen economic and trade cooperation activities, particularly in: (i) industrial and services sectors; (ii) innovation, science, and technology; and (iii) trade infrastructure, transport, and urban mobility infrastructure.

14. SMEs:

• • Agreement to explore the promotion of an environment that supports the development, growth, and competitiveness of SMEs.

15. Good regulatory practices:

• • Commitment to achieving a coherent regulatory approach by encouraging transparency and coordination across each government, so that businesses can benefit from an open, fair, and predictable regulatory environment.

Concluding Words

The PASFTA presents comprehensive opportunities that should be catalysed upon by businesses, service providers and investors, especially those with existing interests or potential growth in the Latin American and the Caribbean region.

In particular, the PASFTA presents alternative maritime and shipping trade routes and options, which businesses could leverage on amidst the trade disruptions brought about by the reciprocal tariffs announced by the United States of America (“US“) and the escalating tariff war between the US and the People’s Republic of China. Notably, each Pacific Alliance country borders the Pacific Ocean which is the world’s largest shipping zone.

Businesses can seek to expand their markets and deepen trading relationships with the Pacific Alliance countries through the abundance of avenues presented in the PASFTA.

As mentioned in our 6 May 2025 Legal Update titled “Upgraded AANZFTA Agreement Takes Effect from 21 Apr 2025 to Enhance Trade, Consumer Protection and Sustainability”, companies are highly encouraged to review the PASFTA provisions and consider how best to leverage these opportunities to enhance competitiveness, resilience, and growth across the Pacific.

For further information or tailored advice on how your business can benefit from the PASFTA, please reach out to our Team members set out on this page.