Latin America and the Caribbean are relatively well endowed with water resources.However, population growth and rapid urbanization are putting considerable pressure onwater available for irrigation. Local and regional water scarcity problems are exacerbated bysevere water quality problems; and wastewater is frequently used for irrigation. Moreover,prospects for new investments into irrigation development appear limited.This paper examines the factors underlying irrigation development in Latin Americaand the Caribbean, reviews the water supply situation, and describes trends in water demandand irrigated agriculture. The overall water management in the region is assessed, and recenttrends in investments in the water sector, with a focus on large-scale irrigation systems, areanalyzed.The paper concludes that in this context of accelerating demand and decliningirrigation investments, new water development is not the primary solution to water resourcechallenges in the region. Much greater attention is needed on water policy and managementreform to improve the efficiency and equity of irrigation and water supply systems. In orderto pay for future investments, irrigated agriculture needs to produce high-value crops for bothlocal consumption and exports into competitive world markets. Policies to officially transfermanagement responsibilities from agencies to farmers - and to privatize urban water supplyand sanitation - are increasingly important. The complex tradeoffs across sectors and acrosswater uses can best be managed through integrated water management at the river basinlevel—but developing appropriate institutions for intersectoral water allocation remains animportant challenge under the fragmented management structure in most of Latin Americaand the Caribbean. Thus, the challenges for water policymakers in the region are great, but astrategy that focuses on river basin management, irrigation management transfer andprivatization, and market-based water allocation can effectively address these challenges