Singapore and South American customs union Mercosur have started negotiations for a free trade agreement (FTA), officials announced on Monday on the sidelines of the 13th Pacific Alliance Summit held in Puerto Vallarta, Mexico.

Mercosur comprises Argentina, Brazil, Paraguay and Uruguay, with a collective market of more than 260 million people and a gross domestic product of US$2.5 trillion (S$3.4 trillion).

Singapore's total trade in goods with the Mercosur countries amounted to $3.97 billion last year, while trade in services amounted to $2.69 billion in 2016.

Singapore's stock of direct investment abroad in the four countries was $1.91 billion as of end-2016.

The launch of the FTA negotiations was announced by Senior Minister of State for Trade and Industry and Education Chee Hong Tat together with Argentina's Vice-Minister of Foreign Affairs Daniel Raimondi, Brazil's Ambassador to Mexico Mauricio Lyrio, Paraguay's Vice-Minister of Foreign Affairs Federico Gonzalez, and Uruguay's Vice-Minister of Foreign Affairs Ariel Bergamino.

Said Mr Chee: "Singapore and Mercosur are committed to fostering closer economic integration. The MSFTA (Mercosur-Singapore FTA) will encourage more trade and reduce barriers for Singapore businesses to explore opportunities in the Mercosur markets.

"It will also facilitate investments from companies in Mercosur that are interested to expand their presence in South-east Asia by using Singapore as a regional hub."

According to a Ministry of Trade and Industry statement yesterday, there were 94 registered companies from Mercosur countries in Singapore and about 68 known overseas affiliates from Singapore to Mercosur as of 2016.

Both Enterprise Singapore and the Economic Development Board have offices in Sao Paulo, Brazil.

Singapore's business interests in the bloc are in the oil and gas, agribusiness, manufacturing, hospitality and logistics sectors.

Singapore companies present in the four countries include Ascott, Changi Airports International, SMRT Corporation, Olam International, Wilmar International and Sunningdale Tech.