Five days after her caesarean section, Nancy boarded a night bus in the southern Mexican city of Villahermosa and made the 10-hour journey back to her home in the capital. Instead of a baby, she nursed a wad of bills buried in a blue handbag she never let out of her sight.

The cash was the final instalment of her 150,000-peso (£7,000) fee to be a surrogate mother for a gay couple from San Francisco. After a traumatic year that included being all but abandoned by the agency supposedly looking after her, and being falsely accused of demanding additional cash to hand over the baby, Nancy was not so sure it had been worth it. “I just wanted to get my money, go home, rest and forget about it all,” said the 24-year-old, sitting in her tiny apartment in a poor barrio of Mexico City. “And now the money is all gone.”

Nancy’s story says much about the southern Mexican state of Tabasco’s emergence as the world’s most dynamic new centre of international surrogacy, fuelled by the tightening of restrictions in other countries such as India and Thailand.

While some Mexican “surrogacy journeys” progress smoothly, there are horror stories of unscrupulous or mismanaged agencies stealing money and eggs, subjecting pregnant women to psychological abuse, and cutting corners on their payments. There is also evidence that many surrogates are recruited without rigorous screening of their mental and physically suitability.

Surrogacy agencies say they offer an unquestionably legitimate service, but in reality, all operate in a legal grey area because surrogacy in Tabasco is legally required to be altruistic. Some have even alleged that fierce competition has resulted in rivals “poaching” their surrogates.

“There are good agencies and bad agencies” said a nurse from Villahermosa, the capital of Tabasco, who visits surrogates at home in and around the city, as well as some living in agency-run houses. The nurse, who did not want her name published, said many were essentially left to fend for themselves. “They all make the same promises,” she said of the agencies. “Some keep them and others don’t.”

Commercial gestational surrogacy, in which a woman is paid to carry a baby to whom she has no genetic link, has been an accepted practice in some US states since the late 1980s. But with costs typically topping $100,000 (£61,000), medical tourism agencies have found a profitable niche coordinating much cheaper services in the few countries where surrogacy is permitted. For years India was the world centre of surrogacy tourism, but strict legislation at the end of 2012 restricted surrogacy clients to married heterosexual couples.

Within months, international surrogacy agencies switched their focus to the swelteringly hot Mexican state of Tabasco, where civil code has allowed gestational surrogacy since 1998.

Agencies set up their first bases in Cancún, 450 miles from Villahermosa. The city was already an established centre of medical tourism, and the agencies promised sand, sun, sea and now surrogacy. They told their clients it did not matter where the IVF treatment to create embryos took place, so long as the baby was born in Tabasco.

Advertising primarily on the internet, with a focus on the gay market, the agencies offered networks of donors, clinics and women willing to rent their wombs, all for less than half the usual US prices.

Agencies have multiplied across the state, as well as in Mexico City, and have recently reported a surge of inquiries from Australia, perhaps a result of Thailand’s crackdown on surrogacy because of a case in which a surrogate mother claimed an Australian couple had refused to take their baby because he had Down’s syndrome.

“This is going to take off,” said Carlos Rosillo, who has set up a Villahermosa-based agency called Mexico Surrogacy. “At the moment there are maybe 10 to 15 surrogate babies being born a month, but when it is that amount every day the real problems will start,” he said. “If we don’t get better prepared it will be chaos.”

The industry is already dealing with the fallout from claims that Planet Hospital, a Cancún pioneer, cheated dozens of clients out of large deposits for procedures that were incomplete or carried out improperly. The California-based company was forced into involuntary bankruptcy this year. It also faces an FBI investigation.

The case underlines the vulnerability of surrogate mothers: when Planet Hospital shut, it left five women pregnant and others awaiting implantations. Most remained in the care of a regional manager, Marisol Garibay, who set up a new agency, Babies at Home. Some have complained about how they were treated. “It was hell,” said Michelle Velarde, who left before seeing a full pregnancy through. “Marisol was a kind of despot.” Garibay vehemently denies all the allegations as a smear campaign organised by rivals seeking to poach her surrogates.

The vulnerability of surrogates is partly rooted in their delicate legal position.

The Tabasco civil code permits gestational surrogacy, so it is the contracting parents, not the surrogate, whose names appear on birth certificates. But the law also states that the surrogates must be acting “altruistically” – as it does in the UK, Canada and Australia.

This means that the surrogacy boom in Tabasco is theoretically rooted in a groundswell of poor women from a relatively conservative culture who are motivated by a generous urge to give affluent, often gay, foreigners the chance to become parents in return for little more than thanks, and the payment of their expenses.

Some surrogates interviewed for this story did seem genuinely excited about helping others start a family, and were notably blase by the contracting parents’ sexual orientation.

Nancy said she loves the idea that the parents of the baby girl she carried are gay men from San Francisco. “Maybe one day she might be curious and ask about me,” she said.

But many surrogates are also clearly motivated by the promise of earning more money than any other job available to them could provide, even if this means they have to also navigate a minefield of taboos and misinformation.

A single mother of three who is now carrying a baby for a Norwegian man, said neighbours and friends had been lecturing her about becoming pregnant again, when she can hardly keep her existing family’s head above water. Even so, she said, she had no intention of telling them the truth.

“I would never shake the stigma of selling my baby, even though the baby has nothing of me,” she said, asking for neither her name nor the name of her agency be used.

Even so, she was happy with the way things were going. The monthly instalments of 10,000 pesos has tripled her previous income from working as a maid. “I’m doing this for my children,” she said. “It’s a hard job, but its better than prostitution, which is the only other thing round here that can earn you a bit more.”

The agencies themselves do not mention payments to the surrogates on their websites, beyond medical and living expenses. In interviews, however, representatives treat the altruism requirement as an easily circumvented legal nuance.

“Yes, it’s like a salary, but it’s allowed as long as we don’t call it that,” the representative of New Life Mexico said of the $13,300 that surrogates receive at her agency. Thinking that she was talking to a prospective parent, rather than a reporter, she added, “If we call it economic assistance it’s allowed. It’s just the wording. That’s how this country is.”

Carlos Rosillo of the Mexico Surrogacy has developed an arrangement he believes could withstand the closer scrutiny he suspects will be triggered by the boom at some point. He has set up a charity that receives “donations” from the contracting parents which is then passed on to the surrogates in the form of “aid.”

“The surrogates are our most important assets, and we want to look after them,” he said, though he also admitted they have no legal recourse for forcing agencies to honour their promises.

The surrogate can find herself with a child she did not plan for, if the clients change their mind during the process. The contract may name them as responsible for the baby, but if they don’t turn up to the birth or the registration office, it is not clear what should, let alone what would, happen next.

There was certainly no hint of tension in the Skype conversation between a Spanish couple and Laura, their surrogate, one recent afternoon in the agency’s offices.

The excitement was palpable in the voices of the two fathers as the 29-year-old single mother answered questions about how she was feeling carrying their twins. She stood up so the camera could capture her bump, and said she knew the babies were boys because they kicked so much. The couple giggled before one said he didn´t care what sex they were.

“I am helping them and they are helping me,” Laura said earlier. “My mother was shocked when I first told her, but she understands now.”

Whichever way the deal is organised, Villahermosa-based surrogacy lawyer León Altamirano who runs an agency called GSM, insists the surrogate has nothing to worry about as long as a contract exists that proves the seriousness of the clients’ intention to take home a baby, even if that contract doesn’t mention her payment. “The biggest concern of the parents is that the surrogate will not hand over the baby, and the biggest concern of the surrogate is that she will be left with the baby,” he said, flipping through an example of a contract . “It is not in anybody’s interest to break the deal.”

But with the agency controlling pretty much everything about a surrogate’s payment and care, she has few places to turn if something goes wrong with the broker. It may not be easy to contact the putative parents, as agencies typically limit contact between the parties.

Rich and Thomas Chomko, who described the experience of using a surrogate mother in Mexico as a ‘rough ride’. Photograph: Ted Rhodes/Calgary Herald

Claudia, a woman in her 30s from the Gulf coast state of Veracruz who was one of the former Planet Hospital surrogates transferred to the care of Babies at Home, only got hold of the New Jersey couple whose baby she was carrying through a Facebook message appealing for help. The surrogates had just been moved into a new apartment without running water or electricity and insufficient food, she said in a phone interview, and she was getting desperate. “I was struggling emotionally with the situation,” she said. “But I couldn’t leave without the parents’ authorisation.”

The couple arranged to spring her from the Babies at Home house with the help of a rival agency. “In the end, it was lovely to see the family happy and everything OK,” Claudia said “But the whole thing was pretty hard for me.”

But as the surrogacy phenomenon booms, even some of those with direct experience of its dark side are reluctant to give up on the promises it offers.

Thomas Chomko, one of the fathers of Claudia’s baby, described the whole experience as “a rough ride” in a phone interview from his home. It ended with three torturous weeks with his newborn in intensive care, recovering from an infection he suspects stemmed from inadequate screening of the surrogate before implantation.

But he was adamant his story should not put other potential parents off exploring surrogacy in Mexico – they should just do their homework first. “I’m sitting here and my child is in the other room in my husband’s arms. However horrible this situation has been I have a child,” he said. “We wanted to be fathers so bad that we sped through the investigation process.”

Even Nancy, who says she is still lactating because she cannot afford the medication to stop the flow four months after giving birth, is considering a second try. “I know how it should be done now,” she said, explaining how she would avoid the pitfalls primarily by organising things herself. “I can’t think of any other way of getting my daughter out of the barrio.”