Are Chinese Ports in Latin America Preferred by Organized Crime?

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

Chinese-owned or operated ports in Latin America and the Caribbean (LAC) have lately been the subject of much discussion in policymaking circles owing to their potential use as intelligence-gathering hubs, control over preferred logistics routes, and potential for military use by the People’s Republic of China (PRC) in a crisis or conflict scenario. While these concerns fully merit the attention of policymakers in Washington and in the region, another aspect of these ports also deserves attention: whether they are shipping installations of choice at the intersection of Chinese criminal networks and organized crime groups in the Americas.

Organized crime worldwide uses ports to transport illicit commodities and conceal them within legitimate cargoes. This has only increased in recent years as criminal groups have diversified into new and more distant markets and bulkier illicit goods, like illegal metals and ores, illegal timber, or chemical precursors for illegal drugs. The increasing trade links between China and Latin America have created a shipping infrastructure that moves vast amounts of legitimate commodities from Latin America to China and finished goods from China to Latin America. China is now South America’s most important trading partner, with trade between the two regions growing 26-fold between 2000 and 2020 (increasing from $12 billion to $315 billion); trade is expected to double, reaching more than $700 billion, by 2035. China seeks the region’s commodities, especially carbonates, crude oil, soy, corn, beef, timber, and mineral ores, which are increasingly shipped as bulk commodities through Chinese-owned or operated ports, and in return sells finished products to the region, such as cars, cell phones, computers, integrated circuits, and large construction vehicles.

These commodities and goods are moved through the region’s commercial ports. Goods also move increasingly through Chinese-owned or operated ports. Hutchison Port Holdings is a Hong Kong-based investment holding company that operates seven ports in LAC, four in Mexico, two in Panama, and one in The Bahamas. It also operates a container terminal in the Port of Buenos Aires. In Mexico, it operates the port of Lázaro Cárdenas, the largest in the country’s port system, and a specialized container terminal that is responsible for the handling, storage, and custody of containers both by sea and land. In Panama, it manages and operates the ports of Balboa and Cristobal, located on the Pacific and Atlantic sides of the Panama Canal. The China Ocean Shipping Company (COSCO) is a Chinese state-owned shipping and logistics services supplier conglomerate of which COSCO Shipping Ports Ltd. is a part. The latter has a 60 percent ownership stake in the port of Chancay in Peru, which it will also operate exclusively when it opens in November 2024. With its four berths and its planned 5 million TEU handling capacity, Chancay will be the largest port by TEU in Latin America (TEU, or twenty-foot equivalent units, is a standard unit of measurement in the maritime container shipping industry). On the South Atlantic coast of Brazil, China Merchants Port Holding Company (another Chinese state-owned entity) owns 90 percent of the port of Paranaguá and also operates it. It is the second-largest Brazilian port in terms of cargo handling. Paranaguá is located at a strategic point for the flow of agricultural products from Brazil. Chinese mining company Jinzhao will also build and operate exclusively the third-largest port in Peru in Marcona, which should open by 2027 to ship minerals such as copper and iron concentrates, as well as solid and liquid grains, to China.

In addition to Chinese companies operating key ports in the region, Chinese shipping companies ply the waters between China and Latin America. COSCO Shipping, for instance, has a route that originates in the Hutchinson-administered port of Manzanillo, then makes calls at Lázaro Cárdenas, Quetzal in Guatemala, Callao in Peru, and Guayaquil in Ecuador, returning to Lázaro Cárdenas before crossing the Pacific Ocean to Busan in South Korea and Kaohsiung in Taiwan, finally ending in Hong Kong. The company also has a route connecting Mexico to all Central American countries, save Belize.

Why Chinese-Operated Ports Could Be Preferred Hubs for Crime While there is no publicly available evidence of direct PRC or Chinese company involvement in the criminal operations described in this commentary, there are reports that some Chinese diplomatic staff may be complicit in the illicit trade in wildlife. The two-way transpacific trade in illegal goods, coupled with certain features of ports and companies, may turn Chinese-administered ports in Latin America into preferred hubs for Chinese criminal entities working with regional organized crime groups.

As an authoritarian regime, China depends on opacity for its engagement with Latin America and other regions of the world. Countries striking investment and infrastructure deals with Beijing are learning that they are expected to follow China’s lead, limiting transparency and accountability, just like back in China. Lack of transparency facilitates the making and taking of bribes and corruption, while also shielding those involved and allowing them to escape accountability. 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. One long-time researcher of organized crime activities in LAC has stated that “this is standard operating procedure in ports around the region, particularly in ports where the PRC has piers it controls and can limit or deny inspection of products offloaded there.”

All of this is even easier to accomplish when a port’s operational structure is entirely vertical, meaning that one company has exclusive control of all the various functions of a port, whether that be in relation to activities on the quayside, the stacking and dispatching of containers, the inspection and custody of containers, freight forwarding, or port security, among other functions. This is the case in the port of Chancay, for instance, where COSCO has exclusive operating rights. Chancay will also reduce the sailing time between Peru and China from 35 to 23 days, as the deepwater port will allow larger ships to sail directly between the two points, rather than having smaller ships consolidate shipments in Mexico or California before forward shipping to Asia. The savings in time and reduced cargo handling mean that other South American countries with huge markets in China will want to use Chancay to save money. The direct route to China will be particularly appealing to organized crime groups seeking to ship illicit wildlife, metals, timber, cocaine, and other commodities, as fewer stopovers mean fewer opportunities for illicit cargoes to be discovered and interdicted.

Illegal Commodities Shipped to China from Latin America Chinese criminal organizations dominate the illegal wildlife trade in Latin America. Loads of shark fins are bought by Chinese brokers from local crime groups in Nicaragua, Costa Rica, Venezuela, and other places for container shipment to China from Peru and other Latin American ports. A report by Earth League International (ELI) on the illegal shark fin trade not only documents these patterns but also concludes that some members of the Chinese diplomatic community in the region are allegedly complicit in the trafficking as well as offering political protection to Chinese criminal networks in Latin America. Reptiles, sea cucumbers, totoaba, abalone, sharks, jaguars, and various species of rosewood timber are illegally harvested in Mexico for Chinese markets. ELI has reported that Chinese nationals, Mexican cartels, and the Fujian mafia all collaborate in the illicit totoaba trade, as the fish bladders are worth more in weight than gold. China has the world’s largest deepwater fishing fleet, with as many as 6,500 ships. The fleet engages in predatory fishing practices, including off the coasts of Ecuador, Peru, and Argentina. In 2023, at least 75 foreign vessels, most of them Chinese, entered Peruvian ports without a satellite device that is required by Peruvian law. These ships docked in the Peruvian ports of Paita, Chimbote, Callo, and Paracas. According to the Singaporean Global Trade Platform, Cogoport, COSCO has operations in all of them, save possibly Paracas.

China is the world’s largest importer of timber, yet it lacks legislation to prevent illegal timber imports and does not have effective systems for identifying species and verifying the legality of the wood. Mexican hardwood Granadillo trees are logged and transported to the Hutchison Port Holdings–operated port of Lázaro Cárdenas in Michoacán for shipments to China. Illegal timber is also being sourced in South America, where China has become a driver of the illegal timber trade in Peru, for instance. Chinese companies linked to illegal logging have processed illegal timber at deforestation sites using mobile sawmills, according to InSight Crime, and corrupt officials and export companies help launder the illegal wood.

China is also the world’s largest steel manufacturer, with an output higher than that of the rest of the world combined. As a result, it has an insatiable appetite for iron ore, buying approximately 75 percent of global seaborne iron ore. There is a decade-old relationship between organized crime and illegal mining in the Mexican state of Michoacán, where the illicit extraction of iron ore reached a peak in 2014 when 119,000 tons of the metal were seized at Lázaro Cárdenas on a ship that was set to sail for China. There are still many illegal mines in Michoacán, and it is likely that their output is still being concealed within legitimate shipments of the ore to China, an effort which would require complacency by the port and ship operators at best and active collusion with organized crime at worst. Other illegal metals and ores being shipped to China include copper, where brazen thefts in Chile of the metal for shipment to China are becoming more common. China is also one of the main destinations for illegally mined gold from South America. Chinese nationals are directly involved in illegal gold exploitation there, sometimes encouraged or even supported by Chinese authorities. Chinese groups in Peru directly control some illegal mines and gold brokerage companies, but it is unclear whether they were organized criminal groups or unscrupulous entrepreneurs. In Ecuador, illegal gold mining has increased to such an extent that the Andean country declared illegal mining a national security threat in January 2023. Since the overwhelming majority (99 percent in 2019) of Ecuador’s exports are sent to China, the probability that China’s licit imports have been adulterated by illicit gold is near certain.

Colombia, Peru, and Bolivia produce most of the world’s cocaine. With the explosion of demand for cocaine in Europe, and new markets in Oceania and Asia, traffickers are relying less and less on mules to transport the drug on their person by air and more and more on container shipments, often concealed in perishable goods to expedite their processing. Traffickers move the drugs through the Caribbean, or less expected routes, from Ecuador or Brazilian and Southern Cone ports. Much of the cocaine passes through the Panama Canal and the Colón Free Trade Zone, one of the world’s great logistical hubs, where criminal organizations use the infrastructure to move drugs all over the world. The free trade zone is immediately adjacent to the Manzanillo International Terminal and the Panama Port, both operated by Hutchinson Ports.

The port of Paranaguá, which the China Merchants Port Holding Company owns and operates, is strategically located to facilitate the export of agricultural products from Brazil. China is the main destination for Brazilian agricultural exports, selling $60.24 billion worth in 2023, or 36 percent of Brazil’s total agribusiness exports. A shipping itinerary, called the Far East South America Service, or “ESA route,” links Paranaguá to the Chinese market. At the same time, the port is the known departure point for huge amounts of cocaine, as represented in seizures, primarily destined for Europe. It is not a stretch to imagine increasing amounts of cocaine being shipped to China and East Asia, concealed in Brazil’s legitimate agricultural products. The same could be true for the Hutchinson-operated Buenos Aires Container Terminal in the Argentine capital city’s port, which sits at the terminus of the Paraguay-Parana waterway, an increasingly important southern route for shipping Andean cocaine to the world.

Illegal Commodities Shipped to Latin America from China Within the large volume of trade between China and Latin America are concealed illicit Chinese-manufactured drugs, including fentanyl, xylazine, methamphetamine, and MDMA (commonly known as ecstasy) precursors, primarily destined for Mexico and parts of Central America, along with a huge volume of Chinese-made contraband cigarettes that are being smuggled to many countries in the region from the Panama Free Trade Zone. Chinese-manufactured counterfeit medicines are known to be shipped to other parts of the world, including the European Union, and are likely being shipped to Latin America as well.

While some cocaine is being shipped from South America to China, a more powerful and deadly drug, fentanyl, killed 107,543 people from overdoses in the United States in 2023. Until 2019, when it outlawed the entire class of fentanyl-type drugs, China was the principal source of finished fentanyl for the U.S. illegal market, entering overland from Mexico. Since then, Chinese brokers have knowingly sold the chemical precursors of fentanyl to Mexican criminal groups for the production of the drug, who then smuggle it to the United States.

According to information from Mexico’s Secretariat of Defense, 273 million doses of fentanyl were seized between 2015 and 2023 and were trafficked through the ports of Lázaro Cárdenas, Manzanillo, and Ensenada. In May 2023, the Mexican navy seized a container in Lázaro Cárdenas with fentanyl and methamphetamines that would have been loaded between China and South Korea. The cargo had left the Chinese city of Qingdao and passed through Busan in South Korea before reaching Mexico. Earlier seizures of illicit chemicals interdicted by the Mexican navy at the port of Lázaro Cárdenas were bound for Guatemala and Nicaragua and originated in China. Other drug inputs are being shipped from China to Mexico; the methamphetamine precursor chemical phenyl acetic acid was found by Mexican marines concealed inside 720 metal drums onboard a vessel at the port of Manzanillo, which had reportedly sailed from Shanghai for Lázaro Cárdenas. At the same port, Mexico’s armed forces seized almost 24 tons of fentanyl in 2019. One kilogram of fentanyl contains enough doses to kill half a million people.

While ports around Latin America, and indeed the world, are hubs of international crime, it is worth investigating further whether Chinese-operated ports are particularly attractive to criminals given the opacity of Chinese business practices, China’s insatiable appetite for the commodities produced in Latin America, and the two-way transpacific flow of illicit commodities.

Conclusion China’s foothold in Latin American ports is unlikely to go away any time soon. In response, the United States, alongside regional law enforcement programs and multilateral organizations such as the Organization of American States’ Maritime and Port Security Program, should take a closer look at how PRC-owned and operated ports can harbor unique vulnerabilities that make them appealing to organized crime. Capacity-building training for port authorities, coast guards, and customs officials should also be prioritized to help countries like Peru better deal with the potential surge in organized crime activity through new ports like Chancay. Finally, the United States should seek to highlight potential hidden costs that countries may incur in the form of growing criminality and violence when they move to sign opaque contracts with PRC firms to operate their port infrastructure.

Christopher Hernandez-Roy is deputy director and senior fellow with the Americas Program at the Center for Strategic and International Studies in Washington, D.C.

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