Investing in Sustainable Amazon Forest Entrepreneurship

Luis Fernando Laranja:

Hello. My name is Luis Fernando Laranja. It’s my pleasure to participate in this TEDx Amazon Investor Coalition. I’m a founding partner of two companies. One is [company name unclear] Amazônia, and the second is Kaete Investments. And I will present here in the next minutes my experience in the investment scenario of the Amazon and I will present this with two different hats. The first hat is the hat of the entrepreneur. And I will tell you a little bit more about the history of [company name unclear] Amazônia. And the second hat is the Kaete Investments hat.

It is the investor hat, and I will tell you about our experience as an investor in Amazon in the last few years. But first of all I think that it’s important to have some basic idea about what we are talking about when we talk about Amazon. And when we talk about the Amazon, we are talking about a territory that represents more than half of the Brazilian territory: around [percentage unclear] of the Brazilian territory is comprised by the Amazon and we are talking about the land where there are 25 million people living so it’s a huge area, a lot of people living there.

Another thing that I consider important is to define which Amazon we are talking about, because as you saw, the Amazon is huge and we have different kinds of Amazon. Here we have three pictures, and these pictures represent the Amazon. We can talk about beef cattle, a huge herd [phrase unclear]. We can talk about soybean plantations. We can talk about Brazil nut collection and we can talk about several other activities, and all these activities are in the Amazon. So we are not talking about a homogeneous scenario. I will start talking about my first experience in the Amazon I moved to the Amazon.

I used to work as a professor at university of sao paulo. So I quit my career and I moved to the Amazon. It was around 20 years ago and I moved there to create a company and the company [company name unclear] Amazônia. So I will tell you a little bit more about my experience in Amazon as an entrepreneur. And all these pictures here are about the history of an entrepreneur in the Amazon. This company was a Brazil nut processing company. Brazil nut is a native fruit from the Amazon. You can see the huge tree here in this picture.

This is a Brazil nut tree. And so we process Brazil nut. Transforming the nut into some healthy and very tasteful food. And I will tell you a little bit more about this experience and I will highlight one aspect that I understand is absolutely important: that’s innovation, investment in research and development and that what we did in Amazônia. We developed a lot of research to transform that nut in very unique products. So the original pillars of our business were high-quality products, fair trade, a very interesting experience with the local communities from the Amazon and especially the Indigenous community.

You can see. Here in your on your left a guy that’s part of Indigenous communities in Amazon that who was a supplier of [company name unclear] Amazônia. And so we really care about the effective involvement of local community in this business. I will tell you a little bit more about that. So these are the products we developed after several years of research we developed a Brazil nut extra virgin oil, and we spent three years together with the university of sao paulo doing research to find, to define, and to create this Brazil nut extra virgin oil.

We have [product wording unclear], Brazil nut meal, shelled Brazil nuts, Brazil nut butter. So a lot of different products, very unique products, with exotic taste with strong appeal for the gastronomy. A strong health appeal, a strong connection with Amazon conservation because once we buy Brazil nuts from local communities, we were supporting the conservation of the huge tree, the Brazil nut tree in the Amazon. So these are the products. And I always say that the secret or the competitive advantage we could create at that time was due to the connection of these two very different worlds.

I mean, the old tradition of the Amazon, of the Amazon people of collecting that Brazil nut, associated with a very sophisticated science-based knowledge. So it was a privilege for me. To connect these two worlds. And I feel I feel very comfortable and very privileged because, as I said I worked for the university for several years I did my career my traditional career in university. I’m a graduate in veterinary medicine I have a master’s degree in agronomy. I have a PhD in veterinary science. I have a postdoctoral in animal science. And so I had the opportunity to develop research in the university and so I was able to connect with the research in the university.

So that was a huge opportunity. I had to connect these two different worlds. And I think this was a very strong asset we had in the history of [company name unclear] Amazônia. Well, this environmental and social impact is obvious. We used to buy Brazil nuts from more than 400 [number unclear; likely 400] families located in the Amazon. Historically, we pay a premium price for that community on average, 50 percent over the market price. Of course we demand a high quality product because we had to develop this very sophisticated product like the Brazil nut oil.

So it was like a fair business with the community. We pay a premium price because we need a special product to develop a very sophisticated added value product. So in summary what’s what’s the secret? If there’s a secret, I? I’ll point out four things. Organization of the production value chain. I mean, to go to the local communities, to organize together with them the logistics the collections, the quality of the products. Second, the practice of the fair trade is absolutely relevant. As I said, logistics,. Especially because we used to sell these products in the main markets of Brazil, that’s located in São Paulo, United States.

So logistics is always very important when we talk about Amazon. And last but not least, added-value products and we could create this added value product because we invest a lot in R&D. Well as a result at that time we created the first Brazilian B Corp. So it was a very pioneer action towards the impact business in Brazil. [company name unclear] Amazônia was, as I said, the first B Corp because of all these attributes I just mentioned to you well. This was the history of an entrepreneur and it was a fantastic experience.

And just to finalize I sold the control of the company to a big group from sao paulo and some people used to say that I’m one of the few guys that could have a an exit of a business in Amazon but that was just a good circumstance. But now I’d like to tell you my a little bit about my experience as an investor so that’s my second hat. It’s the hat of an investor. And so my life as an investor was doing my job in the office in São Paulo. Our main office is located in São Paulo.

Part-time in sao paulo time in the Amazon, and of course part-time travelling to the remote areas in the Amazon. So Kaete Investments is one of the first impact investing asset manager of Brazil. So we have a focus in the Amazon region. We raised the first private fund dedicated to impact investments in the Amazon. At that time we I’m talking about eight years ago nine years ago. We raised [amount unclear] million dollars with different investors. And our mission was to find companies in the region small and medium companies to invest as a private equity investor.

So we created a thesis of anchor companies because it’s not easy to find structured companies in the Amazon that are connected with the conservation of the [phrase incomplete]. So we created this concept of anchor companies. We invested in anchor companies. The anchor companies foster the production chain of high productivity agricultural products and these production chains are linked with smallholder farmers so by supporting this supply chain by giving some opportunities for the smallholder farms to produce and to sell their products we create revenues for these smallholder farmers. And based on these strategies we made arrangements with them to avoid deforestation because.

We have deforestation in the smallholder farmers’ farms, and there’s a strong connection between poverty and deforestation. So by investing in the anchor companies, by fostering the supply chain including the smallholder farmers we create revenue for them, for the smallholder farmers, and as a consequence we could avoid some deforestation in their in their areas. And we invested. In four companies in the region. I will pass through some of the companies we invested just for you to have an idea what kind of business we found in Amazon. We invest in one company that’s processing a fish a native fish processing company.

It was a very interesting experience with a lot of innovation and technology development in this in this business. Here we have the reproduction center, I mean, the hatchery of these regional Amazon fish. Here we have a feed mill, a very sophisticated feed mill, to feed the native fish. Here we have the typical smallholder farmers that were connected with this anchor company and so we developed a network of cooperatives that, by organizing these smallholder farmer they could supply fish for the for the company. And here we have the three different fish we were working with, the very sophisticated product we developed at the end.

The retailers [wording unclear], we sell in São Paulo, [place name unclear], all parts of Brazil. So it was a very interesting history. Here, our second company is [company name unclear]. This company process babaçu nuts. You can see a lot of trees in the back of the picture so these are native trees called babaçu. So by collecting this babaçu coconut these guys can make money and can have a good income. So we include 2,000 families in this [wording unclear]. There’s a lot of R&D in this company because this coconut is transformed in several different products, added-value products.

Like the activated charcoal that is used for water filtration. And today, this company is leader in the Brazilian domestic market of water filtration using a biodiverse asset of the Amazon as a product, as raw products. So, in summary,. What I can tell you about this experience we analyzed during seven years, more than 200 deals. We had five deals approved, three investments done. And a lot of challenges. First, very few investors were interested in investing in the Amazon. It was not easy to raise money at that time. And of course, there.

Are some difficulties in investing money when we are using a regulated fund we must have a professional management. We must have a clear governance. We need to audit the company. So it’s not easy to find business to invest if we when we have a regulated fund. And of course we have a lot of opportunities and I always say that the situation is getting better and better in the Amazon, with communication training local human resources. So the conditions are getting better. What. Can I say about the future invest in the Amazon?

Just one short message: reducing the rate of deforestation is no longer enough. We need to restore the forested Amazon. So planting trees by any way needs to be a good deal. That’s the message. We need to find good deals that are related to planting trees. So that’s that’s the summary of a long history about investment in the Amazon. Thank you very much.