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The State of Ceará is located in the Northeast of Brazil, characterized by a semi-arid climate, with a pronounced time and space variability of its rainfall. Recurrent droughts have been plaguing the region, and as a result, water is stored in reservoirs as much as possible. However, it is has been shown that, despite the large amount of water stored in reservoirs, the water shortages still persisted. After years of having water resources management based only on supply side, Ceará State's current water policy emphasizes the demand side, including legal water rights, charging for water educational campaigns, and the decentralized decision making of the users through their participation in river basin committees. This policy is carried out by Secretariat of Water Resources (SRH), who motivates, analyzes, and formalizes the requests for water use rights, and the Company of Water Management of the State (COGERH), which acts as a catalytic agent in activities that support users' organization in river basins. This paper shows how Ceará is dealing with the initial allocation of water rights and analyzes the obstacles and challenges of that new way of managing water in the state. The model is still being implemented, but the differences in the results for overcoming the 1993 and 1998 droughts show the importance of having a dedicated institution for water management. A conceptual model is also presented representing the steps that could be followed for the implementation of a water market that is limited in space. [ABSTRACT FROM AUTHOR]