Photo: CSIS
Ryan Berg testified before the House Homeland Security Subcommittee on Transportation and Maritime Security about the emerging risks to U.S. homeland security from port investments from China in the Western Hemisphere.
Chairman Gimenez, Ranking Member McIver, and distinguished Members of the Subcommittee, I am honored to share my views with you on this important topic. CSIS does not take policy positions, so the views represented in this testimony are my own and not those of my employer. In my testimony, I would like to reflect on the soft and hard security risks of Chinese port activity in the Western Hemisphere, the way PRC ports are rewiring the region’s trade routes, the nexus between Chinese ports and transnational organized crime, and how we might develop a methodology for a spectrum of concern regarding Chinese port activity in Latin America.
“[T]he truth of the matter is that the People’s Republic of China is rapidly filling the vacuum created by the departure of American military forces from the isthmus [of Panama]. . . .Their presence adds to the danger of using the Colon Free Zone to purchase restricted technology with dual civilian-military use.”
—Dr. Tomás Cabal, December 7, 1999 at a hearing of the U.S. House Subcommittee on Domestic and International Monetary Policy.1
Concern about the Peoples Republic of China (PRC) advancing in the construction, operation, and even ownership of ports is nothing new. What has changed is the geopolitical and economic contexts. The United States has shaken its post-Cold War stupor. Policymakers are no longer asleep at the switch as strategic rivals set down roots in our shared neighborhood. And the United States is once again exercising its competitive impulses in geographies unaccustomed to this level of U.S. attention.
The rise of Xi Jinping changed everything for competition with the PRC in the Western Hemisphere. Not only does Xi tend to securitize all aspects of the US-China competition, but he also hardened the consensus against the United States as he played to nationalism domestically. 2015 was a watershed year for competition, as it saw the PRC pass its infamous National Security Law. In 2020, the PRC absorbed Hong Kong and passed an analogous 2020 Hong Kong Security Law. This “changed the equation for Chinese companies abroad,” according to a former senior official on the Trump administration’s national security council for the Western Hemisphere.2 In the best of times, distinctions between private and state-owned firms are matters of degree in a communist regime; however, these laws require that Chinese and Hong Kong companies gather information on foreign entities and provide that data upon request to the Chinese Communist Party—tantamount to state-mandated espionage.
Within this context, growing PRC involvement in maritime ports in Latin America and the Caribbean (LAC) presents a serious challenge to U.S. maritime supremacy, freedom of navigation, data security, and supply chain security.
According to a recent analysis by the Council on Foreign Relations, almost 130 ports globally have some degree of PRC ownership.3 Between 2010 and 2019, Chinese companies ploughed $11 billion into overseas ports.4 In roughly the same time period, the Chinese state subsidized its shipping companies to the tune of over $130 billion.5 Almost half of the leading container ports outside of China have some Chinese ownership or operations.6 One distinctive feature: more than half of China’s ports tend to sit on major shipping lanes and strategic chokepoints.7
In the Western Hemisphere, this has meant port terminals in at tleast three locations in Mexico; the Hutchison Ports in the Panama Canal; a recently opened megaport in Chancay, Peru; plans for a deepwater port in St. John’s Harbor, Antigua and Barbuda; and, designs on a port near Punta Arenas in Chile and near the Drake Passage in Argentina.
Chinese state-owned enterprises and black-listed companies often lead the way in construction, operation, and ownership of maritime ports in LAC. For instance, COSCO Shipping is a state-owned shipping and services provider that has a 60 percent ownership stake in the Chancay megaport in Peru. COSCO will also be the exclusive operator of the port, thanks to changes it forced into Peruvian law during port construction. When fully operational, Chancay’s four berths and massive capacity will make it the largest port by twenty-foot equivalent units (TEUs) in Latin America.8
Further south and on the Atlantic Coast, PRC state-owned entity China Merchants Port Holding Company owns 90 percent of the Port of Paranaguá, the second largest port in terms of handling, and also operates it.9 In the Panama Canal, Panama Ports Company, a subsidiary of Hong Kong-based company Hutchison Holdings, has operated two ports at the strategic approaches of the canal—Balboa on the Pacific side and Cristóbal on the Atlantic side—since 1997. Within the Caribbean, China Merchants Port has also acquired a 100 percent stake in the Kingston Freeport Terminal while the PRC has made steady advances on the island of Antigua. Finally, last November, the opening of the new megaport of Chancay in Peru drew attention to the PRC’s advance in the commercial and potential military domains in South America.
Beyond the 2015 and 2020 National Security Laws, the strategic and security concerns of Chinese activity in LAC ports has been exacerbated by China’s military-civil fusion strategy. At its base, military-civil fusion seeks to build the PRC into an economic, technological, and military superpower through blending and integrating military and civil, defense and commercial, enterprises. In other words, the PRC has tied its economic development and increasing engagement with the outside world to its military modernization efforts.10 Military-civil fusion has witnessed the PRC leverage talent in research and development with military goals.
First referenced as a guiding principle in former Chinese leader Hu Jintao’s report to the 17th Party Congress in 2007, military-civil fusion has evolved from an integration approach to an official PRC military strategy in 2015.11 As a major state strategy, military-civil fusion sits alongside other key drivers, such as the Made in China 2025 and Next Generation Artificial Intelligence plans. The United States Department of State says that military-civil fusion is applied most vigorously to dual-use and advanced technologies, such as quantum computing, big data, semiconductors, 5G, advanced nuclear and aerospace technologies, and artificial intelligence.12
Beijing has been known to deploy a range of methods to advance military-civil fusion, including talent recruitment programs, forced technology transfer, intelligence gathering, and theft. In 2021, the United States Department of Defense created a list of “Chinese military companies” operating directly or indirectly in the United States, which was last updated in early January with 134 companies.13
Furthermore, China’s military-civil fusion strategy provides Beijing with an extensive logistical network to project its naval power globally.14 PRC-operated ports exemplify China’s goal of leveraging economic investment as an anchor to support military engagement. The PRC’s dual-use facilities can support both commercial and military operations, from enabling military logistics and intelligence gathering in peacetime, to potentially facilitating naval operations in wartime.15
Ports involve much more than meets the eye. There are several strategic challenges presented by PRC activity in LAC ports: intelligence gathering and the potential for sabotage and adversarial military use.16
Commercial espionage with military implications
Under President Xi Jinping, the PRC has displayed an increasing interest in ensuring the activities of the private sector and state-owned companies serve the interests of the state. There are perhaps few examples that are better than ports, where the PRC is honing an ability to weaponize some of the world’s most sensitive commercial information. The full extent of the PRC’s information gathering campaign is not known. The more rocks investigators turn over, however, the more they seem to find.
Beyond the requirement for Chinese companies operating overseas to gather and report information on foreign entities, PRC companies dominate the logistics software often used at ports. LOGINK is a Chinese logistics software that stores information such as maritime information, customs information, geolocation, regulatory filings, trade information, and booking data—in short, a treasure trove of data.17 Given the 2015 National Security law, as one columnist puts it, “for Chinese firms, theft of your data is now a legal requirement.”18
Even non-PRC ports can present threats if they feature Chinese equipment to move and scan commercial freight, for instance. In other words, the PRC can engage in commercial espionage even at those ports where only its equipment is present. Something as benign as the ZPMC ship-to-shore cranes moving containers are likely a tool for Chinese commercial espionage.19 In a world where acute supply chain vulnerabilities are both commercial and defense concerns, Beijing’s capabilities, even short of operating or owning a port, is a huge cause for concern. As two defense analysts have concluded: “With virtually all the world’s seaborne goods passing through or near Chinese infrastructure, Beijing could easily leverage the information it accesses in order to selectively seize critical goods, such as medicines; divert or delay military components; or let essential supplies just sit in storage—no naval deployments needed.”20
While the PRC is frantically collecting data on foreign ships and nations, it has blocked its own ships from sharing that data with other countries.21 This mirrors the country’s behavior in other commercial domains: increase others’ dependence on it while reducing its own dependence on others.
Beyond commercial espionage concerns, PRC operated and owned ports are busy rewiring much of LAC’s trade routes that will frustrate U.S. efforts to build safer and more secure supply chains in the future. Individual PRC ports intend to bolster China’s competition in specific areas, such as ports that have been constructed principally or primarily to ship raw materials and critical minerals directly to mainland China.
Hard security risks and potential conflict with PRC
Within the various domains of warfare—land, sea, air, space, cyberspace—port operation and ownership is critical to advancing the PRC’s goals in the sea domain. Ports have long been key to controlling the world’s waters, and control of the world’s maritime routes has always been the key to global power. Sir Walter Raleigh famously said: “For whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself.” The Chinese are following a well-worn path: the United Kingdom’s rise to global power coincided with the rise of its naval and maritime power; even more prominently, so did the United States’.
Chinese operated and owned ports host People’s Liberation Army Navy vessels routinely. They also serve to reliably resupply and repair navy vessels during port calls. According to a global report by the group Maritime Executive, “a third of ports in which China made economic investments have hosted and also resupplied military vessels of the People’s Liberation Army Navy.”22 As a rising revisionist power challenging the current global order, the PRC’s maritime strategy revolves around a seemingly innocuous web of port operations that can reliably serve multiple uses in multiple contexts. It is imperative to understand that the PRC does not conceive of “inter-operability” in the same way as the United States; rather, the PRC understands “inter-operability” in terms of reliability in times of crisis. Port infrastructure is yet another form of under-the-radar, yet novel state power projection capability.23
Southern Command has repeatedly highlighted several other areas of concern in its yearly posture statements to the United States Congress. SOUTHCOM has noted how PRC port facilities can engage in electronic or cyberattacks, Global Positioning System jamming, or even physical attacks from containerized anti-ship weapons systems.24 In a contingency situation, such disruptions could translate to significant vulnerabilities. For instance, last year, the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party validated the idea that Hutchison’s operations in the Panama Canal could delay military assistance to Taiwan.25
The PRC’s maritime network is crucial to its strategy for global power projection. The United States should not expect the PRC to develop a similar network of naval bases around the world for power projection. Instead, Beijing intends to become a “pier competitor” by setting up a string of dual-use ports that can serve as an extensive international network of infrastructure for People’s Liberation Army vessels.26
Do LAC’s criminal organizations prefer PRC operated and owned ports? While the answer to this question is not yet settled, initial indications demonstrate that LAC’s criminal organizations may prefer Chinese operated and owned ports for their opacity and the volume of transpacific trade they handle. China is often the market for many of LAC’s illicit goods, such as illegal wildlife, gold mining, and timber trafficking.27 The PRC often insists on opacity and lack of accountability in many of its infrastructure investments in LAC.28 As one scholar summarizes: “Bribes and corruption, in addition to coercion, are at the heart of any criminal organization seeking to exploit transportation or logistics facilities, including ports. This can involve paying a customs official to overlook violations or a crane operator to load a specific container onto a truck driven by someone associated with a criminal organization, accepting or falsifying bills of lading, or ensuring that no one questions discrepancies in the information on manifests.”29
The potential for organized crime to exploit PRC operated and owned ports is made easier when ports are vertically operated and one company has control over all the functions of the port. In the case of COSCO Shipping in Chancay, Peru, the state-owned company has control over activities on the quayside, stacking containers, inspecting containers, port security, and other functions. Meanwhile, several investigative NGOs have documented the involvement of Chinese ports in illegal wildlife trafficking.30 Furthermore, illegal, unreported, and unregulated (IUU) fishing, committed often by the PRC, which has the largest fishing fleet in the world—a consequence of heavy state subsidies—often relies on Chinese operated and owned ports to ensure that illegal catch can make it ashore, become layered into legal fish stocks, and avoid the Agreement on Port State Measures intended to reduce IUU fishing. Even though China is not a signatory to the agreement, the document aims to bolster the capacity of developing countries to inspect cargo and flag catches that are the product of IUU fishing.31 Leveraging Chinese operated and owned ports can obviate the risks involved with IUU fishing. Lastly, in a detailed, four-part investigation for Reuters, journalists uncovered how Chinese-made fentanyl precursors transit Chinese port terminals in Mexico’s Lázaro Cárdenas, Manzanillo, and Ensenada ports. In the investigation, criminal groups bragged about the ease with which they bribed port officials and ensured shipments of fentanyl precursors reliably entered Mexico through Chinese port terminals.32
Not all ports are alike. Chinese activity in LAC ports varies widely, leading to divergent risks throughout the region. It is imperative that policymakers ruminate on a set of characteristics that can rank the threat of individual ports to national security and American interests. The following four criteria offer one initial rubric to evaluate the risks of a given port project and thereby better calibrate a U.S. response.
The first criterion is location, both in terms of the proximity of a port to the U.S. mainland and its position vis-à-vis key maritime trade routes. The closer a port is to the United States, the greater potential it holds as a hub for intelligence gathering and potentially as a staging ground for covert action against U.S. interests. For this reason, PRC-owned and operated ports in Mexico, Central America, and the Caribbean basin present some of the most important and immediate challenges. However, proximity to the continental United States is not the only way in which strategically located ports can offer China a possible asymmetric advantage in competition with the United States. By controlling key maritime choke points, the PRC can exercise influence on the flow of international trade.33 For this reason, the PRC’s presence, through Hutchison Port Holdings’ operation of the ports of Balboa and Cristóbal in Panama, has been the subject of much consternation in recent years. Further south, China has also sought to make inroads along Cape Horn, which controls the Drake Passage from Atlantic to Pacific as well as access to Antarctica.34
The second criterion is the mode of cooperation between China and the host country. Projects like the Port of Chancay in Peru, where a Chinese state-owned enterprise not only builds, but maintains an ownership stake and operational control over the port, should rank highest in this assessment, followed by ports where a PRC company has control over day-to-day activity. According to research by the Center for Strategic and International Studies, there are at least 14 ports in LAC where Chinese companies have either acquired a port in whole or in part, or possess a lease granting them operational control. By contrast, PRC companies have assisted with construction efforts in 18 ports throughout LAC. Contract construction is a less serious form of influence but nevertheless grants the PRC familiarity with a port and its infrastructure, as well as the ability to install preferred equipment and capabilities. This can translate to durable influence, particularly in the port technology space. For instance, while the planned expansion of the Colón Container Terminal in Panama by the Landbridge Group was cancelled in 2023, Chinese security cameras installed as part of the project remain in place to this day.35
A third criterion is the relationship between the host government and Beijing. In general, the PRC cannot leverage LAC ports for military purposes without the approval of the host government, limiting the wartime utility of civilian ports. If, however, a port is located in a country which already has an adversarial relationship with the United States, this political hurdle becomes far easier to clear. Thus, special attention should be paid to port projects in the Western Hemisphere’s three consolidated, anti-U.S. dictatorships—Cuba, Nicaragua, and Venezuela. Chinese companies have already assisted with three port construction projects in Cuba, including the modernization of the port of Santiago de Cuba, as well as two in Venezuela.36 The United States should remain vigilant for any proposed initiatives in these countries that could offer a permissive environment for the PLAN to operate.
Finally, the fourth criterion is the criticality of a particular port to global trade. The more that commerce passes through a given PRC port facility, the greater potential for information gathering and influence. In 2023, the ports of Manzanillo and Lázaro Cárdenas in Mexico, operated by Hutchison, ranked third and eighth respectively in LAC by throughput, while Hutchison’s two ports along the Panama Canal, when combined, would fall between fifth and sixth.37 The new port of Chancay currently ranks lower in this standing, but if plans materialize to expand its capacity to move up to 3.5 million twenty-foot equivalent units (TEUs), these numbers could catapult it to the third or fourth-place spot. The more China is able to exercise influence over major nodes of commerce, the more it helps to rewire global commerce toward Beijing—and concomitantly, away from the United States. In times of conflict or crisis, this could also increase China’s ability to maintain access to the raw commodities, particularly minerals and foodstuffs, it imports from LAC, helping further insulate the PRC from economic pressure.38
With enthusiasm for China’s BRI waning in recent years, and following Panama’s courageous decision to end its participation in BRI, the United States has several opportunities to advance maritime security and port infrastructure security. The United States must find a way to make a better offer to LAC.39
Yet, the United States cannot do this alone; it must rely on its partners and the multilateral financial banks to help ease the burden of responding to China’s growing presence in LAC’s port systems.40 Countries such as Japan, South Korea, Taiwan, the Netherlands, and Australia are key partners in this endeavor.
Conduct a study to review LAC port security. Similar to the Biden administration’s supply chain review meant to identify vulnerabilities in key supply chains, a study could identify data the PRC has access to and the intelligence and surveillance each of its LAC ports permits it. A mandated study would also force policymakers to develop their own methodology for a spectrum of concern. Relatedly, a study that identifies the ports of greatest concern could then recommend law enforcement cooperation with local authorities to target the potential criminal use of PRC ports and improve transparency at PRC port facilities.
Insist on greater transparency in tenders, contracts, and operations. The PRC excels at operating in opaque areas. LAC governments, too, have an incentive to reveal little about PRC port operations in their countries, and with greater PRC interest, tenders and contracts often fail to meet high standards. In LAC, the United States could select one or two ports to reform and ensure best practices. If reform is significant enough, western companies will be more interested in operating LAC ports. This will require the United States to be more nimble and aware of opportunities when they present themselves. For instance, the United States was asleep at the switch when the Hutchison subsidiary Panama Ports Company received a 25-year no bid renewal of its two port concessions.41 Washington “literally zoned out.”42 Likewise, the United States failed to help Peru push back against the PRC regarding the operation and ownership of the Chancay megaport by Cosco Shipping. The PRC insisted upon these terms even though the Peruvians found an “administration error” that contravened the country’s domestic law.43 Rather than help Peru wiggle out of the contract with legal assistance, the United States stood by while Peru actively changed its domestic law to permit an arrangement that was previously illegal.
Maintain overhead imagery collection programs on select PRC ports. The United States should maintain strong overhead imagery collection on Chinese owned and operated ports in LAC to ensure they do not expand or quietly but fundamentally alter their nature. When a commercial port in the United Arab Emirates was caught expanding to accommodate military vessels, the PRC was forced to cease construction. When this happens, the United States should leverage occasional public releases of classified intelligence to pressure local governments and the PRC alike to abide by contract terms.44 Imagery collection is also imperative for fighting organized crime and the nexus of transnational organized crime to Chinese ports. The appendix at the end of this document provides one example of how commercial satellite imagery might be used in such a way.
Leverage DFC and multilateral financial institutions to launch a port buyback program. The United States should leverage the U.S. Development Finance Corporation and multilateral financial institutions to engage in port buyback programs where the PRC is the owner. In the cases where the PRC is the port operator, these institutions may consider supporting a program to help countries terminate agreements early and entice more transparent operators to bid on concessions. This would constitute an offensive equivalent to leveraging partners to ensure competitive bids against the PRC when LAC countries announce a bidding process for port construction. Similarly, short of buying out PRC owners, the United States should stand up a program to reduce Chinese equipment—both software and hardware—at LAC ports. Current U.S. law does not permit assistance to foreign ports to extricate Huawei equipment or ZPMC cranes, for instance. Another approach could leverage economic incentives to move away from Chinese equipment at LAC ports that exacerbate U.S. vulnerabilities.45
The below appendix contains images of relevant PRC port projects in Panama and Peru obtained by CSIS from Maxar Technologies.
Please consult the PDF for references.
