Under a 1944 agreement Mexico must let a certain amount of water flow down the Rio Bravo into Texas every year, and the US must divert five times as much into Mexico from the Colorado river.
The water is measured in acre-feet: the amount needed to cover an acre of land to the depth of a foot, equal to about 1.23m liters.
Mexico has not met its obligation in full since 1993, and now owes 1.5m acre-feet - four years' worth of water.
Under the agreement signed on Saturday, Mexico must discharge 6% of the debt immediately, but this is accompanied by joint plans for a $400m (£260m) investment aimed at reducing wastage from the Rio Bravo before the river reaches Texas, where it becomes the Rio Grande.
It is the first time the two countries have worked together on water conservation to ameliorate the chronic shortages along the eastern reaches of their common border that, after 10 years of drought, is reaching crisis proportions.
"These projects will allow our country to achieve 53% efficiency in the use of water in the region, which is a significant advance of the current level of 33%," a Mexican government statement said.
"This will mean a reliable supply of water in the frontier, and in time allow compliance with the 1944 treaty.
The issue took center stage this spring when Texas farmers took full advantage of their political muscle in Washington to complain about another year of drought that threatened to blight their melon fields and citrus groves.
Their complaints were reinforced by satellite images that suggested that the situation over the border in the Mexican state of Chihuahua was not as bad as the authorities there claimed, indicating that they were holding back water.
A phone call from President George Bush finally forced President Vicente Fox to publicly promise in mid-May that Mexico would pay the debt. This brought him into direct conflict with Chihuahua authorities, which continue to insist that they cannot be expected to release water they simply do not have.
Although Fox delayed the announcement of his promised plan of action, he had little choice but to bow to the US pressure, which has been kept up by farmers blocking border crossings.
The deal, and the relative efficiency with which it was negotiated, is a welcome success for Fox as he struggles to prove that he can resolve the long-festering problems inherited from the 71-year regime of the Institutional Revolutionary Party.
Source: The Guardian
