The feasibility of a system of payments for environmental services (PES) for the watershed whose proceeds could be used to conserve forests and develop sustainable farming and livestock techniques has been examined. The study included a socio-economic analysis of the watershed area identifying potential service providers, a survey of potential users of the environmental services and their willingness to pay for them, and mapping and hydrological study of the watershed area to identify the most important areas for maintenance of environmental services. The estimated costs of modifying land use practices were compared with the amounts that users would be willing to pay. In doing this, it is possible to analyze the viability of several alternative options for a PES system. The system has been used to mitigate damage caused by the El Niño phenomenon to the Piura River watershed in Peru.