Peruvian President Alan Garcia accused Chile of assaulting Peru's sovereignty, throwing his weight behind allegations that Chile paid a Peruvian military officer to spy.
"These repulsive acts do not correspond to a democratic country and leave Chile in poor standing in the eyes of the world," Garcia told reporters at the presidential palace Monday.
Chilean Foreign Minister Mariano Fernandez denied the accusation, saying his government conducted a meticulous review and ruled out involvement of any Chilean state institution.
Peruvian media reported late Thursday that air force officer Victor Ariza, 45, was arrested last month for allegedly spying for Chile.
On Friday, a judge ratified charges against Ariza and another, unidentified member of the air force for allegedly revealing national secrets, espionage and money laundering. The judge also issued an arrest warrant for two members of the Chilean military allegedly involved in the affair, according to a Lima court statement.
After meeting with national security officials Monday, Garcia said he could confirm that Peru is a "victim of an act of espionage."
He demanded a full investigation from Chilean President Michelle Bachelet, saying he wants to believe she was not involved.
Fernandez, in turn, called for calm and asked that Peruvian authorities investigate the affair, which he said occurred "between officials of the Peruvian armed forces."
Garcia's aides have said he canceled a meeting with Bachelet at an Asia-Pacific summit in Singapore this weekend before returning early to Lima on Sunday to deal with outrage over the case. Chilean media, however, say the meeting took place in private.
Peru still holds a grudge against its wealthier neighbor for taking a chunk of its southern territory in the 1879-84 War of the Pacific. Relations have been tense since Peru took a maritime border dispute to the International Court of Justice in the Netherlands last year.