Private prisons in US stand to cash in from Trump’s mass deportation plan

If there was one industry that was particularly interested in the U.S election results, it was that of private prisons. The economic effects of Donald Trump’s return to the White House will be widespread, but in the case of this sector, which lives off public contracts to accommodate the excess prison population — and is eagerly awaiting becoming a detention center for the millions of undocumented immigrants that the president-elect has promised to deport — the difference between a Democratic victory and a Republican triumph was something akin to the distance between staying afloat and striking it rich.

This is how investors interpreted it: in the summer, when the assassination attempt on Trump took place, the two main American private prison corporations, GEO Group and CoreCivic, rose on the stock market because it was understood that the shooting strengthened the Republican candidate and brought him closer to victory. Once the polls closed and it became clear that the results were good news for the Republicans, the explosion came: shares in the two companies shot up, closing the first post-election session with gains of 42% and 29% respectively.

Those numbers, which are very unusual for a single day, have continued since, unleashing something approaching euphoria among senior executives, who talk of increasing 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 chief executive, as an offer to Trump.

According to a report by the NGO The Sentencing Project published last summer, the prison population in private prisons in the U.S. is around 8% of the total. That is, almost 100,000 inmates live in cells in for-profit penitentiaries. The figure is drawn from adding those detained under federal jurisdiction to those from 27 other states, while in the remaining 23 states private prisons are not used to house inmates. To this number should be added a further 16,000 people detained by immigration services.

The turnaround is complete. The growing trend was for private prison groups to be increasingly repudiated. In 2019, pressure from humanitarian organizations against them took effect, and the eight largest U.S. banks agreed to cut off their funding for ethical reasons, thus increasing their borrowing costs. Shortly afterward, the poor performance of the business due to the drop in arrests during the coronavirus pandemic lockdowns, and the huge debt they had accumulated, forced them to suspend the high dividend they distributed, one of their great attractions to new shareholders, which triggered a collapse in the stock market. To top off the string of negative news, President Joe Biden signed an executive order in 2021 prohibiting the renewal of private prison contracts with the federal government, which cut off one of the pillars of their business and left them at the mercy of their dealings with the states.

GEO Group and CoreCivic did not take the Democratic move well. The former warned that the federal veto could lead to hundreds of layoffs and damage to the communities where its facilities are located while the latter argued that the high rate of incarcerated people per facility, one of the recurring accusations against the companies, was not its fault. Meanwhile, Biden, in his own words, was trying to end the economic benefits of corporations that he accused of promoting a “less humane and safe” incarceration.

This was not a personal crusade born out of nowhere. Criticism of this model has been around for a long time: in addition to the constant complaints from NGOs, in 2016 the Department of Justice investigated the fact that private prisons have higher rates of assault, more common incidents of excessive use of force, and more frequent solitary confinement. The agency also urged that contracts not be renewed, or that the scope of contracts be reduced before they expire.

The prospects with Trump at the helm are very different. In a return to the past that few anticipated, private prisons have become an object of desire for the markets, with a revaluation that, in the case of GEO Group, is close to 90% in a month, and in the case of CoreCivic, 60%. The stock market capitalization of the former is already close to $4 billion, and that of its rival, $2.5 billion. This vertiginous advance, accentuated since the elections, has made these corporations appear — along with bitcoin, the dollar, oil companies, or Elon Musk’s Tesla — on the list of the big winners of a Republican government.

“A great opportunity”

The tone of its executives 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 incoming president. “This is to us an unprecedented opportunity,” said GEO Group CEO Brian Robert Evans. “We expect the incoming Trump administration to take a much more aggressive approach regarding border security as well as interior enforcement, and to request additional funding from Congress to achieve these goals.”

The lack of physical space does not seem to be a problem. Approving the construction of new prisons involves cumbersome bureaucracy, but the same does not apply to adding new buildings to existing facilities, which, as their owners have recently pointed out, are located on huge plots of land.

One of the areas they are most confident of seeing growth is that linked to migrants. U.S. Immigration and Customs Enforcement (ICE) is a major client of both companies, and GEO Group claims to be able to deliver some 31,000 beds for this segment, more than double its current capacity and expandable to hundreds of thousands “and even several million participants,” according to the company, using a euphemism.

People arrested by ICE are not serving sentences for crimes, but are instead held while an immigration judge decides whether they should be deported. Detention levels peaked at more than 55,000 under the Trump administration and fell to a low of 13,000 in 2021 amid the pandemic, in order to allow for more social distancing between inmates. The institution itself acknowledges that during Covid-19 it “temporarily adjusted its enforcement posture to focus strictly on criminal aliens and threats to public safety.”

These agreements represent a fundamental part of the turnover of private prisons. In 2022, GEO Group earned $1.05 billion in revenue from ICE contracts alone, which accounted for 43.9% of its total revenue of $2.4 billion. Outside the U.S. its presence is more residual, but it also provides its services occasionally 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, domestic business is by far the one that brings in the most revenue for the sector. And it expects it to multiply under Trump. The Republican made frequent references to insecurity during his electoral campaign and sought to convey an image of being tough on crime, in contrast to the supposed laxity of the Democrats. “You can’t walk across the street to get a loaf of bread. You get shot, you get mugged, you get raped,” the former president recently said at a campaign event north of Detroit. “That’s simply not true,” responded Detroit Police Chief James White.

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