The first time Carmen Gonzalez sent money back to her family in Mexico, in 1991, Western Union charged her a $12 fee to wire $100. She earned that $12 working for six hours in a clothing factory in midtown Manhattan, which paid her $2 an hour.
These days Ms. Gonzalez pays $5, which she earns in less than an hour, so she sends a bit more. The family is benefiting from a financial transformation propelled by new technology and increased competition that has driven down the average cost of sending money to Mexico by nearly 80 percent since 1999.
The drop in fees saved Mexican immigrants about $12 billion over the decade that ended in 2010 -- five times the amount of official United States aid to Mexico during that time, according to data from the World Bank and recent Mexican government figures. The cost of sending money to other countries has also declined sharply, though not by quite as much.
The benefits are far-reaching, development experts say, providing a powerful means to chip away at poverty in other countries and expanding the hard-won earnings of immigrants in the United States.
The lower costs may be one reason that remittances have held steady even as fewer immigrants from Mexico have come to the United States and the recession has cut into incomes. Overall remittances to Mexico declined during the global recession but picked up again after 2009.
Some experts say more money could flow to countries like Mexico if Congress approves an immigration overhaul granting a path to citizenship to millions of illegal immigrants, because studies have shown that legalization can lead to increased wages. Others argue that with legalization, many immigrants will invest more heavily in the United States, sending less of their income back to relatives.
The total remittance transfers sent across the globe from the United States in recent years are almost $50 billion annually, according to the Bureau of Economic Analysis, or roughly the equivalent of the government's foreign aid budget. (Estimates by the World Bank suggest that the figure is significantly higher, close to $100 billion per year, according to Dilip Ratha, an economist who leads the World Bank's remittances program.)
"Remittances may well be the best single way to foment development," said Nancy Birdsall, the president of the Center for Global Development, a nonprofit research group in Washington. "It turns out that even a modest reduction in the cost of making remittance transfers adds up to a substantial amount compared to official aid."
Estefana Bautista, who left two children in her native Mexico when she immigrated to Texas in 2005, said she pays $5 less to send them money now than when she first arrived, which she called "a big help." "I send those 5 dollars to Mexico," Ms. Bautista said. "My kids know that they're getting a little more money every two weeks."
Growing competition among transfer companies has been the driving force behind the steady decline in costs. A decade ago, Western Union and Money Gram dominated the market. Now they contend with dozens of international competitors like Xoom and Ria.
Western Union's share of the global remittance market has dropped to 18 percent from around 75 percent in the late 1990s, while Money Gram's market share has declined to 5 percent from 22 percent in that time, according to the companies and government figures.
"What we're really seeing is competition not just based on price, but also on service quality," said W. Alexander Holmes, the chief financial officer of MoneyGram. "It's a very interesting time in the market."
Worldwide, costs for sending remittances to any country have come down from around 15 percent per $300 transaction in the late 1990s to below 10 percent today, Mr. Ratha said. For money sent to Mexico, costs have declined from 9.5 percent per $300 to just over 2 percent today.
In addition to fees covering the processing, remittance companies make money from converting currencies. Remittance experts say these exchange rate fees have not come down nearly as much in recent years. In a meeting in 2011, finance ministers from the Group of 20 countries committed to reducing remittance costs over all from around 10 percent to 5 percent per transaction by 2014.
This month, a bipartisan group in the Senate introduced proposals to allow immigrants here illegally to gain legal status and eventually become citizens.
Manuel Orozco, a remittances expert at the Inter-American Dialogue, a research group in Washington, said legalization could also lead to higher wages for this group of immigrants, who could in turn send along more of their disposable income.
According to Mr. Orozco's analysis, undocumented Latin Americans send about 10 percent less money home than legal immigrants, partly because of low earnings. He estimates that legalizing that population would drastically increase overall remittance flows to Latin America.
However, other experts contend that widespread legalization may not increase income for these immigrants.
"Most of the reason that illegal immigrants earn low wages is not their illegality, it's their lack of education," said Mark Krikorian, the executive director of the Center for Immigration Studies in Washington, adding that legalization "is not a life-changing development, as far as their earning power goes."
Demetrios Papademetriou, the president of the Migration Policy Institute, said that while a path to citizenship would certainly increase the earnings of undocumented immigrants being exploited by employers, those at the higher end of the labor market might not see an increase in income until the job market improves. "It may not be easy for them to move into new jobs that will pay much better than the current jobs that they have," Mr. Papademetriou said.
He added that in the long term, granting unauthorized immigrants legal status could actually make them less likely to send large sums of money abroad. "What you're likely to see is a psychological and emotional shift toward the family here because now they're safe and they're permanently here," he said.
Lower remittance fees have made things easier for Ms. Gonzalez's youngest daughter, Itzel, who was born in the United States and lives with the family in Harlem. When Itzel was in middle school, her mother remembers her saying: "I don't need brand-name shoes or clothes, but the computer, yes. That's my tool to keep moving forward."
So Ms. Gonzalez saved for the next three years and bought Itzel an Apple laptop for her 15th birthday. Three years later, Itzel won a scholarship to Haverford College. "The only one of my children that made it to college was Itzel," Ms. Gonzalez said. "So I say, you see? It is worth fighting and making sacrifices."nation
This article originally appeared in The New York Times.