Background/Question/Methods It is estimated that deforestation is currently the source of approximately 20% of global green house gas emissions. Compensation for Avoided Deforestation (CAD) programs, which use the money from the purchase of carbon offsets to pay the owners of forest to conserve, have been proposed as a means to mitigate this cause of global climate change. The UN Framework Convention on Climate Change has named research into the efficacy of CAD schemes as a top priority in the Bali Roadmap to setting international policy for the reworking of the Kyoto Protocol. Mexico's federal government has implemented one of the world's largest CAD programs. The first program, payment for hydrological services (PSA-H) was implemented in 2003 and was closely followed by the payment for carbon sequestration, biodiversity conservation and agroforestry improvement program (PSA-CABSA) in 2004. Both of these programs specifically compensate property owners for avoided deforestation. My research examines the barriers to program success that have occurred during the course of implementation. Analysis is based on a review of project documents combined with semi-structured interviews conducted with participants in the 2003-2005 iterations of the program and program implementers from the federal to local levels. Results/Conclusions Based on a model of decentralized resource management, early iterations of the PSA-H and PSA-CABSA programs provided little support or guidance to participants beyond direct payments. Under these circumstances, program success was heavily dependent upon certain pre-existing conditions, including: 1) external actors to provide technical assistance in management, monitoring and marketing, 2) strong internal governance systems; 3) participant's continued dependence on and active management of forest resources. However, significant modifications as the program has evolved, such as targeted support for technical assistance in forest management and market development, suggest ways and means of overcoming some of these barriers. These results indicate that payments alone are not enough to promote even short-term changes in forest management practices let alone long-term avoided deforestation.