The first public-private partnership experience in prisons in Uruguay

Daniel R. Zubillaga Puchot and Rodrigo Rey

"The criminal produces not only crimes but also criminal law, and with this also the professor who gives lectures on criminal law and in addition to this, the inevitable compendium in which this same professor throws his lectures onto the general market as "commodities" [...]. The criminal moreover produces the whole of the police and of criminal justice: constables, judges, hangmen, juries, etc".

Apologetic notion of all professions' productivity, Karl Marx

"There is no "better" prison; all prisons are degrading".
Carlos E. Uriarte (Assistant Professor of Criminal Law, Law School, University of the Republica.

Current situation of Uruguayan prison system

The Uruguayan prison system is currently undergoing a deep crisis on account of overpopulation, overcrowding, the high number of prisoners awaiting sentence, recidivism and degrading cases of in-prison violence. 

The statistical report prepared by the office of the Parliamentary Commissioner for the Prison System reveals that by the end of the first semester of 2017, Uruguayan prisons housed 11,149 individuals, i.e. an incarceration rate of 320 per 100,000 inhabitants, thus placing Uruguay among the first thirty countries in the world[1]. Specifically, prisons of the metropolitan area concentrate 64.3 % of prison population; Unit No. 3 (Libertad), Unit No. 4 (Santiago Vázquez) and Unit No. 7 (Canelones) house 53.7 % of the country's prison population[2]. High recidivism rate -60 %- is particularly evident in these units.

Due to the steady growth in prison population, and extremely poor prison conditions, Prison Emergency Act No. 18.667 was passed. The main purpose of this Act was to improve the facilities' building and material conditions through a specific authorization to the Executive for extraordinary funding[3]. The act especially contemplates the erection of new prisons, the conclusion of unfinished works, and infrastructure improvement. Further, Budget Act No. 18.719 doubled the resources allocated to the Ministry of the Interior and resolved the creation of Instituto Nacional de Rehabilitación (National Prison Rehabilitation Institution) as a decentralized service[4]. These laws evidence that national prison policy envisages the expansion of the prison system.

The choice of the (semi) private prison management scheme

In 2011, Gerencia de Evaluación de Proyectos (Project Evaluation Management) of Corporación Nacional para el Desarrollo (National Development Corporation) conducted a Profile Analysis (the “Analysis”) on the “building of a new prison for 2000 inmates”. This study highlights the expected increase in prison population when referring to “demand for prison places”. As a matter of fact, the Analysis approaches overpopulation in Uruguayan prisons from a supply-demand standpoint, and describes the adopted execution scheme[5] as profitable for the State as well as a business opportunity for the private partner[6].

Later, in 2012, a “Feasibility Report” prepared by Deloitte, a consulting firm, was published. This report clearly identifies three options to build a new prison: a public work contract, a public-private partnership, and privatization. The report recommends the second option[7], and its “Economic rationality” section explicitly states that the new prison intends to promote qualitative changes in management processes in order to improve in-prison rehabilitation conditions[8].

The agreement: context, stakeholders and design 

Background: on June 9, 2015 the Ministry of the Interior and a group of companies constituting the “Unidad Punta de Rieles S. A.” consortium signed Contrato para el Diseño, Construcción, Conservación y Operación de la Unidad de Personas Privadas de Libertad Nº 1 (Agreement for the Design, Building, Maintenance and Operation of Prisoners Unit No. 1) (hereinafter, the “Agreement”[9]). It is worth mentioning that in this Agreement the Hiring Administration is the Ministry of the Interior. This apparently minor detail implies that the Ministry of the Interior, being the only key institutional stakeholder appointed to manage these units, becomes the manager of prisons forever.

The most relevant architectural characteristics of the new PPP prison are: an inmate diagnostic and allocation center with a hundred places within the prison; eight buildings and two residential modules; a 22-bed infirmary; visit rooms; a video-conference room; alternate-use rooms (gymnasium, theater, reading room, occupational workshops); general services and production workshops. All cells are equipped with a washstand and a toilet. There are 12 modules for 108 or 102 inmates, with 3-people cells; four modules for 125 inmate each, with 5-people cells; and two modules for 50 inmates each, with individual cells. All residential modules have a study room, a dining hall, a commissary, shared showers, an infirmary visiting room, a yard and emergency stairs. Security systems include high-tech security, fire detection, forbidden object detection, mobile phone inhibition, and communications.

The financing scheme is fully based on trading bonds on the Montevideo Stock Exchange, applying a project-bond[10]initiative. The investment amounted to 717.7 millions of Unidades Indexadas (Indexed Units); offers were received for 1,080.7 millions of Indexed Units[11], the main buyers being the companies engaged in retirement saving funds (AFAPS).

The outline of the business is: the private contractor will provide a certain quantity of “functional places” and certain services, such as INR inmate and staff food; infrastructure maintenance; security system maintenance and equipment; laundry room; cleaning and plague control; commissary and sale of groceries. The Ministry of the Interior agrees to pay the private partner, for the provision of the functional places and services aforesaid, approximately 200 Indexed Units[12] per place per day during 330 months[13], on a quarterly basis. Health, security and rehabilitation services are specifically typified as “services excluded” from the obligations of the private partner[14].

It is worth mentioning that payment obligation is especially subject to overpopulation[15]. Should prison population increase beyond 120 % of the facilities' capacity, the State must pay an additional amount described in the Agreement as “overpopulation compensation”. This was a very much criticized aspect of the Chilean prison concession program; it was considered one of the factors determining the aggravation of the crisis of the prison system, and in particular, as a factor driving overpopulation. In our opinion, the main legal consequence of overpopulation is the State's failure to keep the constitutional mandate of in-prison rehabilitation. This is why it is a mistake to say that re-socialization service is excluded from the Agreement, as this service is inherent in the logic underlying the overpopulation compensation clause.

The political economy of punishment and the financial government of surplus 

The theories having studied in detail the relations between punishment and economic structure -hereinafter, political economy of punishment- have incorporated Marxist concepts and other theoretical tools of the critical paradigm.

The first important study on the historical development of punishment systems, their anchorages and dynamic connections with social and economic structure has been attributed to Rusche and Kircheimer. According to these authors, every production system tends to discover punishments which correspond to its productive relations[16]. Brief, the authors state a structural premise: punishments correspond to specific modes of production relations historically identifiable.

Moreover, this historical approach would clear the way to a new understanding of transformations and changes undergone by some specific punishment technologies. By way of example, and with reference to the changes underwent by prisons formerly sustained by the inmates' profit-producing and productive work, transformed into unproductive confinement deposits entirely dependent on subsidies, the authors state this replacement can be easily explained in the light of the decrease of profitability of convict labor. Therefore, shifts in institutional logic, its disciplinary methods, daily management and discourse, should be explained by two external macroeconomic factors: the general fall in wages and the increase in labor availability in society.

A note on post-Fordist reflections: this is an interesting starting point, as it circumscribes the issue to a specific context defined by the exhaustion of the Fordist model and the deterritorialization of control mechanisms. Post-industrial State development also provoked an authentic crisis in the traditional organization of criminal control and its disciplinary discourse[17].

And in this scenario of apparent crisis of confinement as a punishment method, several designs and ways of prison privatization operate as an actual technological upgrading. This privatization drive entails the possibility of reproducing the prison system and its main asset: the incarcerated individuals.

Based on this information, we should ask ourselves about the effects of these legal and financing schemes, and their relation with the reproduction of the prison system. Do they effectively join the confinement machinery and the punishment program of post-disciplinary societies, defined by De Giorgi as the government of surplus populations?

Finally, and in view of the increasing number of prison privatization cases, we should ask ourselves the unavoidable questions posed by Carranza, which we reproduce here as guidelines for future contributions: Is it constitutional to delegate the State's function of enforcing the sentence?[18] What are the advantages of private prisons? How much does the State save by delegating the enforcement of sentences? Is the privatization of the enforcement of sentences ethical?

Daniel R. Zubilllaga Puchot, Attorney-at-law. He graduated from the Law School of the University of the Republic. He is a free-lance Criminal and Family Law Lawyer. He is a G. 1 Researcher in CSIC projects "Dogmática pena y jurisprudencia: la constitución de la práctica" and "Plan estratégico para la instalación del Observatorio de los sistemas judicial y legislativo - Fase B".

Rodrigo Rey, Attorney-at-law. He graduated from the Law School of the University of the Republic.

[1] See: The evolution of incarceration rates. Parliamentary Commissioner for the Prison System. Boletín Estadístico del Sistema Penitenciario, No. 2. First semester, 2017, p. 4.

[2] IbIdem. p. 6.

[3] Section 1 of Act No. 18.667: “The Executive is granted, until December 31, 2010, an extraordinary, one-time authorization to resort to the necessary funding sources for up to $ 292,192,931 (two hundred ninety-two millions one hundred and ninety-two thousand nine hundred and thirty-one Uruguayan pesos), to be used, according to the procedures set forth by  Texto Ordenado de Contabilidad y Administración Financiera y Normas Concordantes y Complementarias (TOCAF - Accounting and Financial Administration Rules Compilation - Amended Text), exclusively to: 1) Build, install, recycle, renovate, and, in general, perform any building modification in prison buildings and facilities. 2) Purchase, lease or loan premises for prisons or correctional facilities. 3) Purchase the necessary equipment for buildings and correctional facilities, so as to comply with the purposes of this act. 4) Pay for the expenses arising from the transfer of inmates, their food, basic needs, hygiene and healthcare”.

[4] See sections 206 to 275; 222; and 226 of Act No. 18.719.

[5]  According to the Profile Analysis “The best PPP scheme for the Uruguayan scenario would be the DBFOT (Design, Build, Finance, Operate & Transfer) scheme. The private partner would design, build and maintain the facilities, being allowed to adjust the design to the future operation of certain services, and would finance the project, resorting to funding from different available sources (its own capital, bank loans, debt issuance). The private partner would also operate some services during the life of the agreement, which would be of more than 20 years. Upon expiry of this term, the private partner would transfer the facilities to the State.” National Development Corporation. Report – Prisoners Project No. 1. Profile Analysis. Project Evaluation Management, 2011, p. 14.

[6] Ibidem, p. 14.

[7] The report states: “(…) thePPP scheme keeps infrastructure and prison services substantially under public control; by transferring to the private sector the financing, design, building, maintenance and operation of the facilities, the funding problem is partially solved, as public funds are limited and their unavailability would delay the provision of a required service (cost of society waiting time ), and the State is freed from extra charges and overtime risks caused by design problems and unforeseen issues during the construction period, as these risks, together with facilities maintenance risks, would have been transferred to the private partner. For this reason (without prejudice to the fact that this opinion must be validated by the mandatory Value-for-Money analysis) we consider that the Public-Private Partnership would be the most advisable scheme on account of several advantages for the State”. National Development Corporation: Technical, Financial, Social, Economic and Environmental Feasibility Study of Building a Prison under the Public- Private Partnership Scheme, 2012, p. 4.

[8] The report specifically highlights “(…) the possibility of implementing management changes that would help to overcome current serious problems of Uruguayan prisons, that jeopardize inmate rehabilitation”. National Development Corporation. Technical, Financial, Study… p. 21.

[9] It should be pointed out that the Agreement is a complex instrument that incorporates by reference several other instruments, what not only makes its reading quite complex but also hinders the comprehensive understanding of the agreement's scope and of the contents of certain obligations.

[10] BRAGARD, J, “Reflexiones sobre el Financiamiento Privado en los Proyectos de Private-Public Partnership. La utilización del Mercado de Capitales”. In: Estudios de Derecho Administrativo, No. 6, Ed. La Ley Uruguay, Montevideo, 2012, pp. 289 and 290.

[11] This official information can be found in the website of the Ministry of Economy and Finance. Visited on Feb. 18, 2018.

[12] Source visited on Feb. 15, 2018: Diario El País, Angelina de los Santos “Una cárcel, mil incógnitas. Punta de Rieles: ¿El fin del hacinamiento?”

[13] See Clause No. 62. “The term of this agreement shall be of 330 (three hundred and thirty) months as of the date of signature, without prejudice to changes to the term specified in contractual documents”.

[14] See Clause No. 6.3.

[15] Furthermore, see Clause No. 17: “As for the PPL unit subject matter of this agreement, should the Inmate Daily Number (NDI) exceed for one or more days the facilities' capacity, the Ministry of the Interior shall pay 90 UI (Indexed Units) per day, per inmate exceeding prison capacity. (…) The Inmate Daily Number (NDI) must not exceed 120 % of the PPL operational capacity”.


[17] BUSTOS RAMIREZ says: “The Post-industrial State is looking for new courses of action, what evidences the crisis of the State's role and, consequently, of State controls, especially criminal control. Criminal control can no longer be related to factory work; work discipline and work re-education through work lose their sense”. BUSTOS RAMIREZ, J: Control social y otros cambios. Obras Completas, Tomo II. Ediciones Jurídicas de Santiago, Santiago, 2012, p. 289.

[18] It should be noted that the Supreme Court of the State of Paraná cancelled its private prison contracts on the grounds of unconstitutionality. Cfm. NATHAN, op. cit. p. 308. In addition, an almost unanimous decision (8 to 1) of Israeli Supreme Court of 2009, resolved that punishment is one of the State's core functions, its delegation to private entities being inadmissible. The Court's arguments were: (a) the management of prisons by private companies constitutes a violation of basic liberty added to the deprivation of liberty arising from punishment, as it diminishes the sovereignty integrity and legitimacy when turning prisoners into a means whereby the corporation that manages and operates the prison makes a financial profit; (b) a private entity employing governmental powers poses an unavoidable risk of an unjustified use of force. This risk is sufficiently high to classify the privatization as a potential infringement of prisoners’ rights; (c) there is a "right against privatization", as inmates cannot be subject to the use of coercive measures by employees of private companies, which would infringe upon the inmates’ rights to liberty and human dignity. See: ARRIAGADA GAJEWSKI, I. “El monopolio estatal sobre el castigo: Privatización carcelaria y teoría retribucionista”, in Espacio Abierto Revista del CIEJ-AFJU Nº 21, 2010, p. 24; and MEDINA, B, “Constitutional limits to privatization: The Israeli Supreme Court decision to invalidate prison privatization”. In: International Journal of Constitutional Law, Volume 8, Issue 4, 1 October 2010, pp. 690 to 713.