Japanese Engagement with LAC: Post-Boom Prospects

On February 26, the Inter-American Dialogue hosted the president of Mitsubishi Peru, Norihide Tsutsumi, Inter-American Development Bank (IDB) advisor for Outreach and Partnership, Kazushige Taniguchi, and Peterson Institute for International Economics non-resident senior fellow, Monica de Bolle, for wide-ranging discussion of Japan's newest phase of engagement with Latin America and the Caribbean. 

As participants indicated, and as documented in the Dialogue publication, “A New Phase in Japan-Latin America and the Caribbean Relations,” Japan has a deep and long-standing relationship with the Latin American and Caribbean region. Mr. Tsutsumi noted that Mitsubishi opened offices in Mexico, Brazil, and Argentina as early as the 1950s. The company has since opened 15 offices in 12 countries. Mr. Taniguchi remarked on Japan’s 40 years of collaboration with the Inter-American Development Bank.

Panelists recognized the challenges associated with investment in a “post-boom” Latin America. Monica de Bolle described the situation in Brazil as especially “difficult and delicate.” Over the course of 2015 and 2016, the Brazilian economy, which represents 40 percent of the region’s GDP, will shrink by 8.5 percent. As a result of challenging economic conditions, Mitsubishi, like other international firms, has cut back on investment, although it is still actively trading throughout the region.

Participants were nonetheless optimistic about prospects for future economic relations. As Mr. Tsutsumi indicated, Mitsubishi and other Japanese firms are confident in the region’s growth potential. Despite the current investment environment, Japanese companies frequently visit the region to explore opportunities for future investment. Monica de Bolle was confident about prospects future Japanese engagement with Brazil, even as political and economic conditions worsen in the South American nation. “Countries,” she said, “do not remain in crisis indefinitely.” And Japan is well-positioned to promote greater private sector engagement with Brazil, having already worked with the country’s major industrial federations.

Mr. Taniguchi indicated Japanese government support for sustainable and inclusive growth in Latin America in the coming years. In addition to development assistance provided by the Japan International Cooperation Agency (JICA) and financing provided by the Japan Bank for International Cooperation (JBIC), Japan is working with the IDB to invest high quality and sustainable infrastructure including clean energy and a variety of social programs supportive of the region’s most vulnerable populations, such as women and children.

Both Mr. Taniguchi and Mr. Tsutsumi outlined critical steps that can be taken the coming months and years to further strengthen Japan-Latin America and the Caribbean relations. Mr. Tsutsumi called for measures that will facilitate Japanese private sector investment in Latin America, such as new tax treaties along the lines of that recently negotiated by Chile and Japan. Clear interpretation of tax legislation and public private partnership agreements by Latin American governments would also facilitate higher rates of investment by Japanese and other firms. Mr. Taniguchi looks forward to greater JICA and JBIC participation in the IDB’s reformed Inter-American Investment Corporation (IIC). A Japan-LAC Forum in Tokyo in November 2016 will also aim to strengthen private sector linkages.

Although growth is slowing on both sides of the Pacific, Japan would appear committed to continued economic engagement with the region. Recent visits from Japanese Prime Minister Shinzo Abe and Foreign Minister Fumio Kishida suggest as much. Having learned hard lessons while operating in LAC's current economic environment, Mr. Tsutsumi said, Mitsubishi staff is well-prepared for continued engagement.  

Watch the full recording of this event here: