If there was an industry especially pending the electoral result in the United States, it was that of private prisons. The economic effects of , but in the case of this sector, which lives off public contracts to house the surplus prison population, and eagerly hopes to become a detention point for the millions of undocumented immigrants that Trump has promised to deport, the difference between a Democratic victory and a Republican one was something similar to the distance between surviving with difficulties and embracing abundance.
This is how investors have interpreted it: in the summer, when the attempted assassination of Trump occurred, the two main American groups, Geo Group and CoreCivic, once the polls closed, as the count progressed loaded with good news for the Republicans, came the explosion: its shares skyrocketed until closing the first post-election session with gains of 42% and 29% respectively.
These numbers, very unusual for a single day, have continued in the following days. And they have unleashed something resembling euphoria among their top executives, who talk of increasing their capacity to millions of inmates if necessary. “Geo Group was created for this unique moment in our country’s history and the opportunities it will bring,” said George Zoley, the firm’s CEO, in an offer to Trump.
According to a report by the NGO The Sentencing Project published in the summer of last year, the prison population in private prisons in the United States is around 8% of the total. That is, almost 100,000 inmates live in for-profit prison cells. The figure comes from adding those detained under federal jurisdiction with those in 27 other states, while in the remaining 23 states private prisons are not used to house prisoners. To that number should be added another 16,000 detained by the immigration services.
The turn is total. The growing trend was for private prison groups to be increasingly disowned. In 2019, pressure from humanitarian organizations against them took effect, and the eight largest US banks agreed, thus increasing their cost of borrowing. Shortly after, the poor performance of the business due to the drop in arrests during the confinements of the pandemic, and the enormous debt they accumulated, forced them to suspend the high dividend they distributed, one of their great attractions to attract new shareholders, which produced a stock market crash. To top off the string of bad news, President Joe Biden signed an executive order in 2021 prohibiting private prisons from renewing contracts with the federal Administration, which cut off one of the legs of their business and left them at the expense of their dealings with the States.
Geo Group and CoreCivic did not take the Democratic affront at all well. The first warned that the federal veto could mean hundreds of layoffs and damage to the communities where its facilities are located. And the second defended that the high rate of incarceration per center, one of the recurring accusations, was not their fault. Meanwhile, Biden, in his own words, was trying to end the economic benefits of corporations that he accused of promoting “less humane and safe” incarceration.
This was not a personal crusade born out of nowhere. Criticism of this model comes from afar: in addition to the continuous complaints by NGOs, in 2016 an investigation by the Department of Justice was added, which found that private prisons register higher rates of assaults, more common incidents due to excessive use. of force, and more frequent confinements. The agency will also reduce the scope of contracts before they expire.
The prospects with Trump at the helm are very different. In a return to the past that few expected, private prisons have become the object of desire of the markets, with a revaluation that, in the case of Geo Group, is close to 90% in one month, and in that of CoreCivic 60%. %. The market capitalization of the first is already close to 4,000 million dollars, and that of its rival is 2,500 million. This dizzying progress, accentuated since the elections, has made them appear, along with bitcoin, the dollar, oil companies, or Elon Musk’s Tesla, on the lists of big winners of a Republican Government.
“A great opportunity”
The tone of its managers during the recent presentation of results is a clear example of how aligned the interests of the sector seem to be with those of the new president. “For us, this is an unprecedented opportunity to help the federal government and the incoming Trump administration achieve a much more aggressive immigration policy in law enforcement, both in the interior and at the borders, as well as removal of criminal aliens,” said Geo Group CEO Brian Robert Evans.
It does not seem that the lack of physical space is going to be a problem. Approving the construction of new prisons implies more cumbersome bureaucracy, but the same does not happen with adding new buildings to existing facilities, which, as their owners have recalled these days, sit on enormous plots of land.
One of the businesses that they are most confident of seeing grow is the one linked to migrants. The US Immigration and Customs Enforcement Service (ICE) is an important client of the two companies, and GEO claims to have some 31,000 bed capacity for this segment, expandable to hundreds of thousands “and up to several million.” participants”, according to the company using a euphemism.
People arrested by ICE are not serving time for crimes, but are instead held while an immigration judge decides whether they should be deported. Detention levels reached a maximum of more than 55,000 under the Trump administration and fell in 2021, in the midst of the pandemic, to a minimum of 13,000, with the aim of allowing more social distance between inmates and thus avoiding infections. The institution itself acknowledges that during Covid-19 it “temporarily adjusted its law enforcement posture to focus strictly on criminal aliens and threats to public safety.”
These agreements represent a fundamental part of the billing of private prisons. In 2022, Geo Group earned $1.05 billion in revenue from ICE contracts alone, accounting for 43.9% of its total revenue of $2.4 billion. Outside the US borders, its presence is more residual, but it also occasionally provides its services to governments in the United Kingdom, Australia and South Africa. In these last two countries it operates two correctional facilities with more than 3,000 beds each, while in the United Kingdom it is dedicated to the custody and escort of prisoners in its fleet of more than 400 vehicles.
Beyond these international ramifications, its domestic business is, by far, the one that brings the most income to the sector. And they hope that with Trump it will multiply. The Republican made frequent mentions of insecurity during his electoral campaign, and sought to convey an image of being tough on crime in the face of the supposed laxity of the Democrats. “You can’t cross the street to buy a loaf of bread. “They shoot you, they assault you, they rape you,” the former president said recently at a campaign event north of Detroit. “That’s simply not true,” Detroit Police Chief James White responded.
