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Participatory water governance has become highly influential around the world as a means for managing water resources. Scholars and practitioners advocate for the inclusion of previously marginalized communities in water resources management through the devolution of power, responsibility, and participation. Where community institutions are weak or missing, experts recommend strengthening or re-building them to enable inclusive decision-making over water resources. Our study looks at devolution in a government-initiated integrated water resources management approach in the Caylloma Province, located in the department of Arequipa, Peru. We used process tracing to analyze 97 qualitative interview transcripts with crop farmers and pastoralists managing water for irrigation, interview transcripts with personnel in water management agencies, and field notes from participant observation in water-related meetings. We found that farmers had limited ability to participate in local institutions for water management due to market integration and labor migration, among other socioeconomic and political stressors. For this reason, transferring more water management responsibilities and decision-making power to community-level institutions without considering the factors that limit their sustainability over time is not necessarily feasible or even desirable by local communities. Instead, strengthening and streamlining intermediary and government institutions at regional scales may be more effective at addressing local needs in watershed management.