The frayed relations between Chile and Peru appeared to unwind further Saturday, after Peruvian President Ollanta Humala officially recognized an administrative district in a disputed border area.
The Chilean government promptly sent a protest note to Peru "strongly" rejecting the law because it concerns "unquestionably" Chilean territory.
And Santiago said a planned bilateral meeting of ministers on social integration that had been set to take place in December was canceled.
Humala said the move aimed to spur development in the disputed La Yarada-Los Palos area on the border with Chile and improve living conditions for its inhabitants.
Moreover, he said it would enable them to elect their own representatives and create conditions for them to take part in decisions involving their future.
The action effectively asserts Peruvian sovereignty over a tiny four-hectare (10-acre) wedge of land within the district that Chile also claims.
The arid region where the district is located was the scene of the 19th century War of the Pacific between the two countries.
The current controversy has surfaced less than two years after the two countries had appeared to resolve their biggest boundary dispute.
In January 2014, the International Court of Justice in the Hague delineated the two countries\’ maritime boundaries, giving Peru rights over an additional 50,000 square kilometers (19,300 square miles) of sea.
But the two countries disagree on where the land boundary begins, with Peru insisting it runs from the edge of the sea and Chile arguing the starting point is some 270 meters inland.
Tensions flared in October, when the Congress voted to create the new district, prompting Santiago to recall its ambassador for consultations and setting off a flurry of diplomatic notes.
On Friday, Chile claimed Peru had sent troops to the disputed area, a charge Lima has denied.