In the harbour area where you start the game there are numerous arm wrestling matches held. Just win 5 of these matches. They get progressively harder if you arm wrestle the same opponent so I'd recommend visiting a few. There are 4 arm wrestle spots, the easiest are the two closest to the water, and the one in the back alley behind those other two arm wrestling spots. The only other location is on a roof top but they are much harder to win against.