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Peru - Relations with Chile

Peru and Chile became independent without being neighboring States. Peru gained its independence from Spain in 1821 and Chile did so in 1818. Peru did not have a common border with Chile owing to the fact that lying between the two countries was the Colonial Spanish territory of Charcas and, as from 1825, the new Republic of Bolivia.

In 1879 Chile declared war against Peru and Bolivia, in what is known historically as the War of the Pacific. By the Treaty of Peace and Friendship signed by Chile and Peru in 1883 (the 1883 Treaty of Ancon), Peru had to cede to Chile in perpetuity the coastal province of Tarapaca.

Despite Perus and Chiles dispute concerning the maritime boundary allegedly delineated in the 19th century War of the Pacific, the two countries enjoy good relations. On November 4, 2004, the foreign ministers of Peru and Chile signed a joint statement expressing an intent to forge closer ties and further develop bilateral relations and in August 2006 an economic cooperation agreement was signed among both countries.

The enactment of a declaration of maritime borders by Perus Congress on November 15, 2005 created a dispute between Peru and Chile over the maritime delimitation of their border. The declaration of maritime borders by Peru's Congress set off a new round of tensions with Chile, which claims that the maritime borders were agreed to in fishing pacts dating from the early 1950s.

The Garcia administration submitted arbitration of this dispute to the International Court of Justice at The Hague in hopes of finding an acceptable, apolitical solution, but the dispute remained in the headlines and continued to cause occasional friction.

President Alan Garcia took office in 2006 planning to expand and deepen Peruvian relations with Chile while quietly downplaying a series of potentially thorny obstacles. The Peru continued to desire improved bilateral relations, but the obstacles to progress were anything but quiet. The ongoing maritime border dispute was only the most visible hurdle; Chile's vast direct investment in Peru's economy as well as a wide military imbalance were additional potential sore points in an otherwise broad and expanding relationship. In seeking improved ties with Chile, Peru pursued a rational interest-based calculus that must navigate a historically complicated emotional terrain characterized by deep mutual suspicion.

In order to settle the maritime delimitation dispute through established international legal channels, on January 16, 2008, Peru filed proceedings against Chile before the International Court of Justice, or ICJ. These proceedings have not damaged relations between Peru and Chile and economic relations between the two countries have continued to strengthen.

While Peru enjoyed a more than USD 500 Million trade surplus with Chile in 2007, Chile's high profile direct investment in Peru dwarfed Peruvian investment in Chile by a factor of ten. In 2006, Chile invested over USD 4 Billion in Peru, while Peru had USD 50 Million in Chile. Much of Chile's investment had gone into airlines, insurance companies, and well known and successful retail establishments such as the Ripley and Saga Fallabella department stores. With the acquisition of Peru's largest supermarket chain, Wong, Chileans owned many of Peru's major retail and supermarket outlets.

One obstacle to deepened bilateral relations is the hugely assymetrical modernity and strength of Chile's military compared to Peru's. Peruvian investment in new military hardware declined drastically during President Toledo's term to less than $100 million in five years. At the time, Toledo called on Chile to match Peru's cutback and in 2001 the two governments agreed to set up a ministerial commission to discuss harmonization of military purchases. Instead of harmony, Peru's equipment fell into disrepair while Chile's, fueled by billions spent on new planes, boats, and tanks, continued to modernize and expand. The yawning disparity and sense of alleged "betrayal" stoked the fears of some Peruvians that their government was not adequately protecting the homeland from the supposed threat of a Chilean invasion.

Regular front page news reports about Chile's military advantage and continued build-up (mostly but not only in the tabloid press) help fuel the perception of danger and threat. One analyst pointed to a series of "...newspapers, blogs, and spokespeople that paint Chile as a hopelessly embittered neighbor bent on subjugating Peru..." Reflecting these fears, several observers viewed Chile as the nation's greatest external threat.

Perus five-year [2007-2012] military modernization program included $650 million for repairs and new equipment. While much of this was focused on internal threats such as narco-trafficking and remnant terrorism networks, a significant portion was dedicated to defense against external threats, principally Chile. Senior civilian defense officials lamented the need to respond to the glaring military imbalance, but acknowledged that failing to be seen as doing so would be political suicide.

In 2009, a series of incidents renewed tensions between the two countries. These included Chiles Salitre 2009 multinational military exercises and Chiles alleged quiet negotiations with Bolivia regarding that countrys access to the sea. Relations with Chile became further complicated in November 2009, when a Peruvian Air Force non-commissioned officer was arrested for allegedly spying and passing classified defense information to Chile.



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