Why did Agrexco go bankrupt?
Shir Hever on the connections between the demise of a company that exports settlement produce and the international boycott and divestment campaign.
Agrexco is a well-known company founded by the state of Israel to help Israeli farmers export their goods to the rest of the world. The company became a symbol of the Israeli economy, and its brands, such as Carmel, became well known in many European cities.
Despite being responsible for about 60-70% of all Israel’s agricultural exports, the company recently went bankrupt. In June, financial irregularities were discovered in the company’s accounts. In September, an Israeli court ruled that the company is to go into liquidation. It is still possible that the company will be bought, although currently an Israeli company (Bickel Flowers) is offering a meager £7 million for a company whose value was estimated at £104 million in June 2009. Bickel Flowers’ offer is yet to be approved by the court.
In today’s shaky global economy, another company collapsing is hardly a rare event. However, Agrexco, being Israel’s flagship exporter of agricultural goods, was not expected to run into trouble so fast. Several explanations have been given for the company’s bankruptcy. Journalists argued that the company overestimated its growth potential and invested money in terminals and ships, counting on a steady increase in demand that never materialized. The problem with this explanation is that it doesn’t explain what caused the sudden decline in demand for Agrexco’s goods, and why Agrexco’s management was not able to make adjustments in time.
Another explanation is that many Israeli farmers abandoned Agrexco and took their business to its competitors. If that is so, why did the farmers choose to leave Agrexco when Agrexco was offering them various perks to stay with the company?
A third explanation for the company’s collapse is that the Israeli government opted to allow it to happen. This could partly stem from a neoliberal ideology that opposes the concept of state-owned companies, or from pressure by Agrexco’s competitors. Yet, this explanation does not shed light on why the company collapsed in the first place, and why the government spent 55 million NIS in an attempt to help the company in December 2010.
Indeed, these three explanations may hold some of the truth, but a fourth explanation has been largely ignored by the Israeli economic media – the fact that Agrexco has been the target of an international boycott campaign, in protest at its role in repressing Palestinians.
Agrexco has been chosen as a focus for protests around the world for three reasons. First, the company’s exploitation of Palestinian workers; second, the company’s marketing and selling of agricultural products from the settlements in the West Bank (and from Gaza until 2005); and third, the company’s policy of misinforming its customers, labeling all its products as “made in Israel” even if said products were produced in the West Bank by Palestinians or by settlers.
In 2004, UK activists chained themselves to an Agrexco warehouse and were arrested, but the charges against them were dropped because Agrexco did not wish to defend its actions in court. Groups of activists formed in cities in which Agrexco had concentrated operations (such as Montpellier, France) to protest the company’s activities and inform the public that the company was involved in criminal activity, exploitation and repression.
Naturally, the company never released any data about the loss of sales as a result of this boycott, not wishing to further bolster the activists’ morale. However, at least some of the Israeli farmers who chose to leave the company must have realized that the company’s brands were no longer good for sales. Only the company’s German employees mentioned the boycott in their call to the Israeli government to bail the company out. Apart from Bickel Flowers, three companies expressed an interest in buying Agrexco: the Israeli Kislev, the Irish Total Produce and the Japanese Classic Japan. These companies received hundreds, possibly thousands, of letters from activists urging them not to buy the company, and eventually withdrew from their intention to buy it.
One company, Mehadrin, would have the most to gain from Agrexco’s demise. The privately-owned Israeli company is set to take Agrexco’s place as Israel’s biggest agricultural exporter. Mehadrin also sells agricultural products from the settlements in the West Bank. It also owns lands of destroyed Palestinian villages, given to it free of charge by the government in order to help conceal the ruins (PDF, Hebrew). With the fall of Agrexco, Mehadrin is now in danger of facing a boycott campaign too.
Shir Hever is an Israeli economist and commentator who researches the economic aspects of the Israeli occupation of the Palestinian territories.
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