Nov 14 Peru's government said on Saturday it would quit an APEC summit in Singapore after recalling its envoy to Chile over charges a Peruvian military officer had spied for Chile's government. [nN14489069]
The charges that an air force official was in the pay of the Chilean government will further fuel tensions as an international court considers a Peruvian demand to claim more of territory disputed between them.
But the incident is just the latest chapter in a long dispute analysts agree is unlikely to spill over further or disrupt trade and investment between the South American neighbors, which are both key copper and metals exporters.
Here are some of the key facts about ties between the two, their history and trade relationship:
* Diplomatic ties between Peru and Chile have been periodically rattled since Chile defeated Peru in the 1879-1883 War of the Pacific and won a slice of mineral-rich land from its northern neighbor.
The border spat remains a source of tension. Peru filed suit against Chile last year at the International Court of Justice in The Hague, disputing their maritime border and demanding more of the rich Pacific Ocean fishing waters between them.
* But even in times of tension both countries are committed to free trade. Earlier this year a trade pact between the two countries went into effect, opening up their economies to each other as they sought to weather the global crisis.
Both countries rely heavily on revenues from mineral exports that have plunged during the world turmoil.
* In 2008, trade between the two countries reached $3.37 billion, a 24-percent increase over the year earlier, according to Chile. Chilean exports to Peru focused on the service sector, oil and fuel. Chile imports copper derivatives, fish oils and petroleum products.
* Private sector ties are also strong. Chilean retailers Falabella FAL.SN, Ripley RIP.SN and Cencosud CEN.SN, which controls major Peruvian supermarket Wong, have seen their neighbor as a key piece of expansion plans in the region and have invested heavily in Peru.
According to official figures, Chile's direct investment in Peru was around $5.5 billion from 1990 to 2008, making Peru the third-largest destination for Chilean investments.
* However, Chile has this year revived Peruvian fears with plans to buy new hardware to upgrade its armed forces. The Chilean government is studying the possible purchase of U.S. stinger missiles worth about $455 million, medium-range missiles worth $145 million and Sentinel radar systems worth $65 million.
Chile says any such deal would simply align it with the United States without affecting the "basic military balance in the region".
Chile's armed forces have benefited from years of windfall copper earnings, thanks to a law which guarantees them 10 percent of state copper giant Codelco's sales.
(Reporting by Patrick Markey and Antonio de la Jara in Singapore; Editing by John Chalmers)
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