Water has unique features which distinguish it from other natural resources. It also plays the essential role of sustaining life, economic and social development and the environment. These characteristics usually result in legal systems in which water belongs to public domain, but rights granted to economic agents to use it are protected under constitutional guarantee of private property. Stable water rights are an incentive to invest in the development and conservation of water resources. At the same time, the allocation and retention of water rights are always contingent upon putting them to a socially recognized beneficial use. The idea behind this rule is that the quantity of water granted for use should not be more than needed, the concern being with the possibility of monopolization of access to water and encouraging speculation. For an increasingly scarce resource, new demands can only be satisfied by transferring water rights from other uses. To deal with the problem of reallocation, countries have to decide whether to use the administrative mechanisms or the water markets. The sustainable and efficient functioning of water markets depends on the institutional framework established by the State.
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