Crossed wires.

The fastest way to send money is no longer the most expensive, and that could be the first step toward Fox's dream of open borders

Swinging by her local MoneyGram office, Alejandra Figueroa is feeling pretty good. When the 23-year-old Guadalajara housewife goes to pick up the US$1600 wired each month by her husband--a migrant worker living and working Chicago--she doesn't worry about a sizeable chunk of it mysteriously disappearing as it has done in the past.

"Personally, I've been extremely pleased with the service and what they've charged," she says.

A few months back, she may not have been so happy. But more and more these days, others are singing similar praise. It's a welcome change in tune for millions of Mexicans on both sides of the border for whom sending and receiving money has become a form of subsistence.

CUTTING RATES TOPPLING MONOPOLIES

Over the past year, increased competition in the money-transfer market and some subtle arm-twisting by the Mexican government have caused wiring costs to drop substantially. At a March conference on remittance reform held in President Vicente Fox's hometown of Guanajuato, government officials announced an almost 30% decrease in transfer costs within the first 100 days of the administration. Fox considered the victory a first step toward his dream for free and open borders--the cornerstone of his North American immigration policy.

Fox has adopted a pro-migrant stance since he first announced his run for the presidency and made lowering the cost of money transfers an early campaign promise. Publicly referring to migrants as "heroes," Fox knows that serious image boosting on their behalf--especially on the U.S. side--is vital for achieving both the short- and long-term goals of his immigration policy.

In the long run, Fox hopes lowering the cost of money transfers will be the first step toward freer and open borders. His strategy is to increase competition by going straight to the U.S. business community and inviting it into markets previously closed off. The result, he hopes, will be a further decrease in transfer fees due to natural market forces. More importantly, however, he wants to showcase the tremendous purchasing power of Mexican immigrants and what that means for other U.S. industries besides transfer companies, such as airlines, retail firms and banks.

To this end, the government recently organized a conference dubbed "Commitment to the Paisano (fellow countryman)" which was attended by more than 80 companies from both nations and raised roughly US$15 million in aid to migrant community programs and scholarship funds. The U.S. companies--including Western Union, MoneyGram and 7-Eleven Inc.--pledged to continue working toward lowering transfer costs, improving existing services and promoting new technology to increase access to rural migrant communities. Cabinet officials attribute the new spirit of cooperation to Fox's open market philosophy and some old-fashioned salesmanship.

"It's a new government, a new Mexico and the paisanos have been given a new status," says Dr. Juan Hernandez, director of the Office for Attention to Mexican Migrants Abroad. "They are VIP's--very important paisanos--and we plan to treat them that way.

To get an idea of just how important, last year alone Mexican immigrants working in the United States sent home roughly US$8 billion, the country's third-largest source of foreign capital after oil and tourism, according to the Office for Attention to Mexican Migrants Abroad. The transfers serve as the lifeblood for more than one in 10 Mexican households and are equivalent to 60% of all direct foreign investment in Mexico.

Trouble was, the large infusion of cash often came at great expense to the sender. Just two years ago, competition in the wire-transfer market was virtually nonexistent. With only two companies in the field, expensive transaction fees and poor exchange rates made receiving money for people like Mrs. Figueroa a costly affair. According to the Mexican government, to send US$300 from Los Angeles to Mexico through Western Union--the largest money courier service in the United States--used to cost US$27, nearly 10% of the original remittance. Sending the same amount today costs as little as US$12, according to Western Union. The company says market pressures and a large influx of competitors have caused them to adjust the rates they charge.

"Last time we looked at the marketplace, we counted about 140 competitors," says Randall Stockdale, vice president of Western Union.

"If you keep in mind that we are just one out of 140, there are a lot of options that our customers have to send money to Mexico. We do not monopolize the marketplace."

At least not anymore. A 1999 class-action lawsuit accused Western Union and chief competitor MoneyGram of unfairly targeting Mexican migrants with high transfer fees and poor exchange rates, costing them millions of dollars annually. The lawsuit--now settled--reportedly cost the company 10% of its market share, paving the way for new competitors to enter.

CUTTING RATES ... AND BORDERS

Now, President Fox would like to see the market open up even more. He has already relaxed barriers to the money-transfer marketplace and is now inviting non-traditional players to participate. In turn, the virtual monopoly of a few years ago is evolving into a diverse field ranging from credit unions to convenience stores. The Fox administration believes this new, inclusive climate will energize a U.S. business community previously cold on immigration by making them see the issue not as a problem, but an opportunity.

"It's in the air," says Hernandez, "this new feeling of 'let's work with the paisano' and also, let's not just compete for slices of the pie, let's make the pie bigger."

One company taking advantage is 7-Eleven Inc.--the world's largest convenience retail chain. The Dallas-based company recently announced nearly US$10 million in support of Fox's s immigrant initiatives, the single largest donation from a company thus far. In addition, 7-Eleven Inc. and 7-Eleven Mexico are kicking off a new service called V.com, an ATM-like "virtual commerce machine" wired to the Internet that will provide more convenient and affordable money-transfer services between the two countries. In partnership with Western Union, the new service will put 37 financial service kiosks in Mexican 7-Eleven stores, allowing users to perform several financial services such as money orders and check cashing. 7-Eleven Inc. is banking that technology merging the services of ATM's with the flexibility of the Internet will be the future of moneytransfer transactions.

"It's very safe to do this, it's very convenient to do this, and we envision a world in the not-too-distant future when every 7-Eleven store can be linked through this technology to facilitate the movement of cash," says president and C.E.O. Jim Keyes.

CUTTING RATES is NOT ENOUGH

Beyond the high cost of money transfers, another concern of the Mexican government has been how the money is spent once it makes it into the communities. In the past, the vast majority has been quickly absorbed by domestic consumption and living expenses, leaving very little for savings or investment. Working alongside various U.S.-based immigrant advocacy groups, Fox's administration is studying ways to capture a larger portion of the remittances sent from immigrants and effectively channel them into community programs at home. Experts say initiatives such as these are key in closing the income gap between the two nations and thus reducing immigration-at-large.

"This is the first step for proving that money transmission regulation, solidarity and cooperation can achieve economic benefits and give people opportunities beyond moving to the United States," says Raul Hinojosa, an economist and director of the North American Integration and Development Center at the University of California at Los Angeles (NICAD).

One program already in the works is Fideraza Jalisco, a migrant trust fund in the western state of Jalisco. The program uses migrant donations for basic infrastructure improvements in the communities and to provide financing for small businesses. Fideraza Jalisco matches the money received from the migrants with donations from the state government and private donors. The program even received a US$2 million loan from the North American Development Bank, a deal brokered by Raul Hinojosa and NICAD. Since its creation 16 months ago, the program has funded projects ranging from the construction of a high school to a water treatment plant.

Hinojosa hopes the federal government will help other states develop programs similar to Fideraza Jalisco so they can unleash the entrepreneurial potential in their own communities.

"The key will be making technical assistance and financing available," he says.

"We're excited to see what can happen.

But experts say it's still too early to tell how things will play out. Poor service and lack of access in rural regions--the destination of about 30% of all money sent to Mexico--still prevent the poorest communities from realizing the economic benefits of the remittances. In response to increased government pressure and consumer concern, Telecomm-Telegrafos, the largest money transfer service in rural Mexico, is modernizing its 1,800 offices and information network to better serve customers. The company also announced the end of its 125-year-old exclusive partnership with Western Union as its money transfer agent. Telecomm Telegrafos will now open up its network to competitors to improve existing services.

"Telecomm-Telegrafos is ready to establish new strategic alliances with different companies to provide greater rural coverage and offer new types of telegraph wire services," says Carlos Meir Teheran, director of TelecommTelegrafos.

Experts agree that greater involvement with non-traditional U.S. players is key for Mexico to continue narrowing the income gap. At last month's conference, American Airlines pledged US$1.2 million for civic services in Mexican and Latino communities. Meanwhile, U.S. cosmetics company Mary Kay announced its plan to create 100,000 new jobs in Mexico over the next six years. Both companies are pinning their hopes on an increased cash flow across the border that will yield a multiplying effect on their profit margins. Economists say this is the model of the future and that other companies should follow suit.

"I think the extremely important thing will be to have the U.S. embrace these ideas if not as alternatives, at least as complements to border and immigration issues," says NICAD's Hinojosa.

The Fox administration itself is cautiously optimistic about greater cooperation with the U.S. government and business community. It strongly believes both nations would be better off in the long term by further linking their economies, but knows it's still a ways off from the day when labor, as well as cash, flows freely across the border.

"On the other hand," says Hernandez, "I believe if we don't do this we are committing a great sin. If we don't work to dignify these people right now when the topic is on the table, we will be very sorry in the next two to three years."

Stevenson Jacobs is a Mexico City-based freelance reporter.