The Latin America and Caribbean region is located far from Japan, on the “other side of the globe. The region is one of the world’s largest food supplies and has experienced rapid economic development in recent years, but it also faces various social issues such as deforestation, social disparities, and high crime.
To solve this problem, startup companies from Japan are now taking up the challenge. The program is supported by JICA and IDB Lab’s “TSUBASA. Through the voices of JICA Director Katsura Miyazaki and selected entrepreneurs, we explore the potential of the region and the appeal of TSUBASA.
The Power of Startups to Solve Global Issues
TSUBASA (Transformational Start Ups’ Business Acceleration for the SDGs Agenda), launched in 2021, is a program that supports startup companies from Japan that take on development challenges in Latin America and the Caribbean. Transformational Start Ups’ Business Acceleration for the SDGs Agenda. The program aims to contribute to solving development issues in the region by combining the innovative technologies and ideas of startups with JICA’s expertise in supporting developing countries and the network, financing, and expertise in promoting innovation of IDB Lab1 of the Inter-American Development Bank Group, the largest international development bank in the region. IDB Lab1, the largest international development bank in the region, has expertise in networking, financing, and innovation promotion.
In recent years, the Latin American and Caribbean region has achieved significant economic development, and I feel that the level of support expected from Japan is gradually becoming more challenging,” said JICA Executive Director Katsura Miyazaki. I feel that the level of support expected from Japan is becoming more and more challenging.
- 1 IDB Lab is an organization that provides financial and know-how support to the private sector as an “innovation lab” for innovative approaches to improving the living standards of people in Latin America and the Caribbean.
Katsura Miyazaki is the Director of JICA. After studying Spanish at university, he joined JICA and was assigned to the Argentina Office, and from October 2022, as Director, he will oversee the Latin America Division, Governance and Peacebuilding Division, Japan Overseas Cooperation Volunteers Secretariat, Emergency Assistance Volunteers Secretariat, and Evaluation Division.
JICA has been working to resolve these issues through ODA schemes and in cooperation with the private sector. JICA has been working to resolve these issues through ODA schemes and in cooperation with the private sector. However, as development issues have become more complex and sophisticated, new needs have emerged. This is where we turned our attention to start-up companies.
We see start-ups as providers of services that use innovative business models and technologies that have never existed in the world before. As development issues in developing countries become more sophisticated, we expect that by collaborating with start-ups, we can create a faster and more dramatic development impact toward solving these issues,” said Miyazaki.
The conservation of the Amazon rainforest, also known as the “lungs of the world,” is an important global issue from the perspective of combating climate change (Photo: Shutterstock/worldclassphoto)
Why Latin America and the Caribbean, and what is the potential of this region?
Located on the “other side of the globe,” Central and South America is geographically distant, and not many Japanese companies have made inroads into the region. Mr. Mitsuru Nakayama, a venture investor in Latin America and founder of B Venture Capital (BVC), a TSUBASA partner, emphasizes the potential of this region.
The Latin America and Caribbean region (33 countries) has a population of about 650 million, comparable to ASEAN, and a nominal GDP of about US$5.4 trillion, 1.6 times that of ASEAN. Brazil and Mexico, which are in a demographic bonus period, are projected to surpass Japan in total GDP by 2050. According to Mr. Nakayama, “In the short to medium term, Brazil is one of the few emerging regions where economic development and development issues are compatible,” and since there are many issues in common with Japan, such as urbanization, aging population, and disaster prevention, opportunities for Japanese companies to utilize their know-how and services are also increasing.
Source: GDP from International Monetary Fund, World Economic Outlook Database (2022); population from World Bank, World Bank Open Data (2022); area from Ministry of Foreign Affairs website
Source: PwC, The World in 2050 (GDP is based on purchasing power parity)
https://www.pwc.com/gx/en/research-insights/economy/the-world-in-2050.html
In recent years, an ecosystem that supports the growth of startups has also been developed, particularly in Brazil, Mexico, and Colombia. 2021 startup investment in Latin America will amount to approximately 2 trillion yen, with Brazil alone surpassing Japan at 1 trillion yen, and numerous unicorn companies have been born in the region. The region has a common cultural foundation in terms of language, religion, and other factors, which means that a successful business in one country may be able to expand horizontally into neighboring countries, making the region a fertile ground for rapid business expansion.
In addition, JICA Director Miyazaki points to the presence of the estimated 2.4 million Nikkei community in Latin America, “The trust that has been built up over the years by Nikkei in Latin America is a tremendous value that cannot be found in ASEAN or Africa. JICA has a long history of building relationships with Nikkei communities in various countries through its migrant assistance programs. We believe that TSUBASA’s strength lies in its ability to connect Japanese startups with the local Nikkei community.
Adopted companies talk about the results of their projects and the attractiveness of TSUBASA
TSUBASA will provide the selected startups with approximately 6 months of local commercialization support, including opportunities to connect with leading local partners through the JICA and IDB Lab networks, mentoring in terms of business and development impact, and strong support from the IDB, Additional support may be provided by the IDB after TSUBASA’s support. To date, 8 companies (23 applications) have been selected for 2021 and 11 companies (29 applications) for 2022, each gaining a foothold in the Latin American market.
Thirty-one people participated face-to-face in the September 2023 TSUBASA kick-off event. A lively Q&A session was held on the local business environment surrounding startups and other topics.
One such company is sustainacraft, Inc., which is engaged in forest analysis business in an effort to stimulate decarbonized investments. The company’s CEO, Hiroshi Suetsugu, explains the background of the business. In order to cope with climate change, it is essential to increase the amount of carbon stored in forests, but deforestation is progressing, especially in Latin America. This is because the conversion of land to agriculture and livestock production provides residents with better incomes. For example, it is estimated that about 1 million hectares of forest are lost annually in Brazil alone.
One source of funding for forest conservation and restoration is carbon credits. These are tradable greenhouse gas emission reductions and are attracting attention as a means of decarbonization. On the other hand, it has been pointed out that the amount of greenhouse gases absorbed and reduced has been overestimated. In response to this issue, Sustainacraft has developed a mechanism to ensure the sound functioning of the carbon credit market by utilizing technologies such as satellite remote sensing and data analysis to properly assess the actual status of forests.
Mr. Suetsugu applied to TSUBASA a few months after starting his business. Approaching Latin America, which has many forested areas, was a must, but at the time he did not have a local network. Frankly, I thought it was amazing,” he said. We were able to connect with so many institutions and NGOs involved in environmental conservation in a short period of time, and as a result we were able to find a local partner.
In Brazil, forests are being cut down one after another for pastureland for livestock farming and agricultural land use. Mr. Suetsugu (far right) interacting with a local plantation operator (photo courtesy of Sustaina Craft).
(Singular Perturbations), a developer of proprietary algorithmic crime prediction systems with the vision of “reducing sad experiences around the world,” also joined TSUBASA in 2021. The company has since expanded into the Latin American market.
One of the major social issues in Latin America and the Caribbean is public safety. According to survey data, Latin American cities account for about half of the top 20 most dangerous cities in the world, and there is a growing need to improve public safety and deter crime in a variety of areas, including police agencies, security companies, insurance, travel, and real estate. Cingular Participations has developed Crime Nabi, an application that optimizes security and patrol routes based on a unique crime prediction system, and has decided to collaborate with a Uruguayan startup through TSUBASA.
Mr. Mami Kajita, CEO of TSUBASA, said, “Generally speaking, it is quite difficult for a start-up from abroad to suddenly knock on the door of a police organization or government agency and ask for cooperation. By having TSUBASA as an intermediary, we were able to make appointments easily, and they also helped us with interpretation in situations where English was not spoken. We were able to hear from a variety of businesses and uncover local needs.
After TSUBASA’s support, we conducted a field test in Brazil on cable theft, which resulted in a 69% reduction in the number of crimes. After TSUBASA’s support, the number of crimes was reduced by 69% in a field test conducted in Brazil targeting cable theft, leading to the establishment of a branch office in Sao Paulo, Brazil, in October 2023.
Field verification with the municipal police force of Belo Horizonte, Minas Gerais, Brazil Discussion on the use of crime prediction in surveillance camera operations (Mr. Kajita is second from the left) (Photo courtesy of Cingular Perturbations)
Latin America and the Caribbean is a “blue ocean” open to many companies.
JICA Executive Director Miyazaki describes the appeal of the Latin America and Caribbean region as follows. The Latin American and Caribbean region has a long history of recognizing diverse cultures and building nations. This is also true in business. There is an attitude and system to accept new technologies and products that come in from the outside. Despite the area’s great potential, the fact that few Japanese companies have entered the region makes it a “blue ocean” for companies looking to develop new businesses. There is room for a wide variety of companies to play an active role, so I encourage you to actively apply to TSUBASA.
A new form of development cooperation is about to spread in Latin America and the Caribbean, a region with great business opportunities for startups.
© Source JICA
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