The Geopolitics of Port Security in the Americas

Commentary by Henry Ziemer, Joseph S. Bermudez Jr., andJennifer Jun

Published September 23, 2024

This commentary is one of a two-part series on China's role in Western Hemisphere ports; read the other commentary here.

"[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." This sentiment would not seem out of place in a contemporary discussion of Chinese strategic advances in the Western Hemisphere. It is in fact more than two decades old, coming from the testimony of Dr. Tomas Cabal, then professor of business at the University of Panama, who appeared before the U.S. House Subcommittee on Domestic and International Monetary Policy on December 7, 1999, to discuss what, at the time, was the recent acquisition of two ports on both sides of the Panama Canal by the Hong Kong-based company Hutchison Whampoa (now Hutchison Port Holdings). In the years since, China's global-port presence has only grown, much to the consternation of policymakers in Washington. Today data from the Council on Foreign Relations (CFR) estimates that Chinese entities have established varying levels of ownership or operational control over 129 port projects worldwide.

Investing in port infrastructure makes good economic and strategic sense for the People's Republic of China (PRC). Roughly 80 percent of international trade moves by sea, making ports key nodes in the global economy. To the PRC, which conducts some 90 percent of its trade by sea, ports are even more central to Beijing's economic and national security. Since 1999, investments from the PRC and companies headquartered there have boomed as Chinese companies have expanded internationally, bringing with them the long arm of state-backed infrastructure investment.

Even as China led with economic objectives in mind, military interests were not far behind. The sheer importance of port infrastructure to China means the presence of a PRC-owned, operated, or financed port means Beijing cannot help but assign national security value to the facility. In practice, this means the People's Liberation Army Navy (PLAN) has assumed a new role as guarantor of Chinese port projects and the sea routes leading to them around the world. In turn, China's growing network of ports directly aids the PLAN's power projection capabilities and blue water aspirations by providing convenient points for docking and resupply. In the United Arab Emirates and Equatorial Guinea, for instance, PRC-backed port projects were found to have been built to explicit specifications, allowing military vessels to berth there.

Much of the literature to date on China's overseas port investments has focused on Beijing's desire to secure its sea lines of communication through the Indian Ocean and Suez Canal, through which most of China's oil imports flow. But more recently, the PRC has taken a keen interest in expanding its portfolio in the Western Hemisphere. Whereas previous major investments like the ports of Balboa and Cristobal along the Panama Canal were mediated through private firms, today China's largest port projects in Latin America and the Caribbean (LAC) are handled by state-owned enterprises (SOEs). These include most notably the mega-port of Chancay, built, owned, and operated by China COSCO Shipping Corporation (COSCO), as well as the agricultural hub of Paranaguá in southern Brazil, acquired in 2017 by China Merchants Port. The growing involvement of the Chinese state in LAC ports suggests that Beijing is waking up to the region's critical economic role, especially as a source of food and critical minerals for the PRC. It also belies a more strategic calculus to project power into the United States' shared neighborhood.

However, existing datasets on China's overseas port holdings do not always capture the full picture. The aforementioned CFR database, for instance, only counts "a Chinese entity having a definitive equity stake in the specified port, wharf, container terminal, or other physical entity itself." This means leases for port operations like the kind Hutchison received for the ports of Balboa and Cristobal are not captured. Similarly, AidData, which tracks PRC development financing, reports port modernization projects like Venezuela's Pequiven Maritime Terminal, where China provided the capital, but did not officially retain an equity stake or operational control over the port itself. These differences matter, as they impact the nature and extent to which the PRC can project influence from the waterside to the hinterland. Peeling back the layers of China's ownership and investment in Western Hemisphere ports demands further investigation. However, a preliminary overview suggests that the PRC's influence is both more diverse and more widespread than often assumed.

Strategic Implications

While many of the concerns raised focus on the potential for ports to be converted to military purposes in the event of a conflict, the PRC's ownership and operation of regional ports goes well beyond that possibility. Overall, PRC control over ports presents three broad strategic challenges to the United States: (1) intelligence gathering, (2) control over preferred logistics routes, and (3) potential for sabotage and adversarial military use.

Knowledge of the type, quantity, origin, and destination of goods can provide critical insights into the orientation of global supply chains. Port operators enjoy a granular view of the goods and materials passing through their domains in the form of ship manifests and inspection records. Even the physical infrastructure of ports can be used for intelligence gathering, as showcased by ZPMC, the China-based supplier of cranes used to move and stack cargo containers. ZPMC has pressured port operators in the United States to grant access to its centralized digital management system, with data feeds from cranes around the world going directly through the company's Shanghai headquarters. Such centralization, according to ZPMC, helps to ensure speedy resolution of maintenance issues, but may also be a convenient window for Beijing to peer into the types of vessels and cargoes managed by ZPMC cranes the world over, including in ports not directly owned by the PRC. Security cameras and monitoring equipment present another vector for possible PRC espionage. In Panama, while plans by the China Communications Construction Company and China Harbor Engineering Company to build a new deep-water port in Colón were stymied under former president Laurentino Cortizo, the initiative still left behind 300 Huawei-donated security cameras installed in one of the hemisphere's most active and strategic ports.

Within the Western Hemisphere, China's role in modernizing the port of Santiago de Cuba may have also provided a foothold from which to establish signals intelligence collection capabilities near the U.S. naval base in Guantánamo Bay. The centrality of ports to global commerce, and the complexity of modern port options, means these locations offer a potential treasure trove of intelligence for the country capable of tapping into it. Critically, the PRC need not wholly own or operate a port in order to tap into a portion of this, while China's 2017 National Intelligence Law, which requires all PRC citizens and companies to "cooperate with state intelligence work," establishes the legal grounds for Beijing to tap into this network as needed.

Control over preferred logistics routes may be the most important, but least discussed, strategic asset obtained by the PRC. The operator of a port can confer advantages on certain ships and companies, allowing them to dock and unload faster, cutting stevedoring fees, and reducing customs red tape. In peacetime, this can translate to a significant economic advantage for PRC companies. In times of conflict or crisis, it can be weaponized to snarl supply chains and keep certain raw materials or sorely needed goods out of the hands of adversaries and generally sow chaos in the global economy.

From the perspective of LAC countries, this also poses a serious risk, as demonstrated by the Covid-19 pandemic, where lockdowns and logistical hurdles saw trade between the region and China collapse, decreasing nearly 44 percent between 2019 and 2021. As the number one trading partner for the continent of South America, much of the region's port infrastructure has become geared toward export to China, with brownfield and greenfield investment in logistics focusing on expanding the ability of South American economies to export to the PRC. By threatening to withhold financing for port modernization, China has a powerful means of signaling its displeasure with particular countries.

The final and most dramatic geostrategic risk posed by China's control over ports would involve either their deliberate sabotage or conversion into military use. Outside direct military confrontation, China's ports within the hemisphere allow it to project power with a light footprint within the United States' own hemisphere. This tactic is not new; other U.S. adversaries, including most recently Russia, have used naval visits to the hemisphere as a means of signaling to Washington. For China, however, sending its warships through the region has the added benefit of improving interoperability with its own ports, helping terminal operators familiarize themselves with PLAN ships and operational requirements, and further improving the ability of these ports to serve as dual-use installations.

Overt military use of ostensibly civilian port infrastructure in a conflict of crisis scenario is risky, and unlikely outside of extreme cases. As scholars Isaac Kardon and Wendy Leutert note, "If armed conflict were to occur, China may not have access to port facilities in states seeking to maintain neutrality." Even if remote, the possibility should not be ruled out that China's inter-hemispheric allies, such as Cuba, Nicaragua, and Venezuela, might consent to the use of their port facilities (especially as China has helped finance port modernization projects in both Cuba and Venezuela). Furthermore, China could potentially use its network of dual-use ports in the hemisphere to preposition naval forces in the hemisphere before the outbreak of a conflict. Barring outright use of port infrastructure for naval purposes, the PRC could also engage in targeted sabotage of ports and surrounding infrastructure. The Panama Canal is one especially vulnerable target. Loss of access to the canal, even temporarily, could increase the time required to reposition assets from the Atlantic to Pacific theaters by several weeks. In the event of a Pacific war, the time lost in transit could prove decisive.

Chancay: Anatomy of a Port

No facility in the hemisphere better showcases the strategic risks PRC port investment poses than the port of Chancay, Peru. Announced in 2019 and scheduled to begin operation in November 2024, the port, being personally inaugurated by Xi Jinping, has been billed as the "gateway from South America to Asia." Satellite imagery shows the port as having gone through extensive development between 2019 and 2024, including the development of a new shipping container port with a breakwater and maritime light and the expansion of the existing fishing port.

Once completed, the port will boast an initial capacity of 1.5 million twenty-foot equivalent units (TEUs) annually, though COSCO boasts it would eventually be able to move 5 million TEUs a year, putting it on par with hemispheric heavyweights like the ports of Colón in Panama and Santos in Brazil. Ships departing from Chancay would only take approximately 23 days to reach Shanghai, cutting down by more than a week on transit times for minerals and foodstuffs bound from LAC to China.

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Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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