The Singapore Sling Meets the Mojito

Brant Hadaway DroneLaw blog
Last month, Singapore welcomed the world’s only high-speed Formula One (“F1”) night race. Under the backdrop of the Grand Prix, Singapore hosted the Seventh Latin Asia Business Forum. Economists are forecasting a healthy growth rate for trade and investment between Latin America and Southeast Asia, specifically Singapore. The potential opportunities for collaboration between the regions are boundless and will drastically increase in the near future.
However, due to inherent cultural differences and geographic barriers between Singapore and Latin America, evaluating risks is not an easy task. This article addresses real issues and challenges that investors and merchants alike must understand to evaluate the risks involved before engaging new and exciting endeavors. This article also discusses the vast opportunities emerging between the two regions.

Building the Singapore-LatAm Bridge

This month, Singapore welcomes the world’s only high-speed Formula One night race. Ferrari’s Fernando Alonso has taken pole position for the Singapore Grand Prix, winning the qualification round for the second time in a row. Nearly 130,000 spectators will be packed in the grandstands and around a race circuit set on Singapore’s busy city streets.

The Grand Prix is not, however, the only source of this month’s excitement in Singapore. Under the backdrop of the race, Singapore is hosting the Seventh Latin Asia Business Forum. With economists forecasting a healthy growth rate for both Latin America and Southeast Asia this year at 4.9 percent and 6.7 percent, respectively, it is clear that these highly vibrant economies should collaborate.

This year, trade between Singapore and Latin America has jumped 23 percent from 2009, to approximately S$18 billion, or USD$13.5 billion. With investment between the regions expected to reach upwards of S$30 billion by year’s end, the potential opportunities for collaboration between the regions are boundless. The Latin Asia Business Forum represents an important initiative which has been implemented to further investment goals. Critically, both regions are headed towards an open and free trade environment. Singapore has already executed multi-party free trade agreements with Latin American nations using the Trans Pacific Partnership, and is in the process of finalizing four bilateral trade agreements with Peru, Costa Rica, Chile, and Panama. Additionally, on September 22, 2010, the opening day of the Latin Asia Business Forum, the Singapore Business Federation signed a memorandum of understanding with the Mexican Business Council for Foreign Trade, Investment and Technology in an effort to enhance trade and commerce between the two nations.

Although these agreements are relatively new, many Singaporean and LatAm firms have already crossed the Pacific. Concha y Toro, a leading global wine company and Chile’s top wine producer and exporter, has successfully boosted its sales within a fast-growing Singaporean market. In fact, this market now represents over 11 percent of Concha y Toro’s total wine exports. Latin America’s other top companies have also set up shop in Singapore, including South America’s top petrochemical company Braskem, Mexico’s national oil company Pemex, and Brazil’s petroleum and mineral ore firm Petrobas.

Singaporean companies have similarly expanded their presence in Latin America. This year alone, Singapore’s Keppel Offshore and Marine, one of the world’s largest offshore and marine groups, secured several oil and gas projects throughout Latin America for upwards of S$170 million. Similarly, Singapore’s SembCorp Marine invested over S$150 million in a new shipyard in Espirito Santo, Brazil. As Singapore’s Minister for Trade and Industry, Lim Hng Kiang, recently stated at the Latin Asia Business Forum; “The growth potential for [the Singaporean and Latin American] regions . . . looks very promising.” On the one hand, Singapore presents a business-friendly environment, strategic location and a highly educated work force. On the other, Latin America offers a strong labor front, a similarly favorable and growing business environment, and a desire to develop into a power player in the global economy. Both regions will play key roles in helping to further their bilateral business interests and promote mutual awareness.

As the trade and investment opportunities grow between Singapore and Latin America, investors and merchants alike must understand the risks involved. Due to inherent cultural differences and geographic barriers between Singapore and Latin America, evaluating risks is not an easy task. Both regions also boast unique political and legal systems. The outcome will be beneficial to both sides as long as all parties are cautious about the risks involved and take the necessary steps to mitigate these risks.