There was more than what met the eye in October last year at the signing of a 99-year extension of Peru’s concession to landlocked Bolivia to develop a free trade zone along a three-mile stretch of its sea coast. That was made clear when Peruvian President Alan García startled many observers by saying he had no objection to his country's neighbor obtaining sovereign rights to Chilean sea coast that formerly belonged to Peru.

For many, García’s statement was more newsworthy than the concession's extension, which even included a new clause permitting Bolivia to operate a naval academy near Peru's southern port of Ilo and allow ships to do maneuvers in Peruvian waters. Currently, Bolivia’s navy operates only on Lake Titicaca, located on the border it shares with Peru. In fact, not much about the free trade zone concession has been newsworthy since its inception in 1992 — nearly 20 years later, it has yet to be developed.

But García’s willingness to allow Bolivia to establish a corridor to the Pacific through territory that Peru lost in a war more than a century ago was remarkable because, to most observers’ knowledge, no Peruvian president had ever granted such permission. Peru was given the right to veto any deal granting such access thanks to a clause included in a 1904 treaty signed by Chile and Bolivia. Ever since then, Peru has regularly exercised that clause, or threatened to.

Peru has always viewed such permission as waving any claim to the territory lost in the 19th century War of the Pacific in which Bolivia also lost coastal territory, says Lupe Andrade, a political consultant in La Paz, Bolivia, and former mayor of the capital. “No Peruvian president has dared say they would allow Bolivia access to the sea in northern Chile because it would, in effect, mean giving up claims to the two provinces it calls The Captives,” Andrade says. Yet it is the most logical route for such a corridor — from Bolivia to the Chilean port city of Arica or its environs, which was once part of Peru.

For that reason, Andrade downplays the free trade zone agreement that García renewed in October with Bolivian President Evo Morales. She adds that Bolivia has never taken advantage of the deal for a number of reasons. "On several occasions when Bolivia was in a stalemate over negotiations with Chile for ocean access, Peru has offered an alternative: Export through our ports!" says Andrade. "That sounds wonderfully generous. But the problem is that Ilo … is too far to the north and so much less feasible for the added transportation cost."

Paul Lira Briceño, an economist at Pontifical Catholic University in Lima, notes that the free trade agreement is a “political gesture." He says, "In economic terms, it's not important because Bolivia has had the free trade zone in Ilo since 1992, and 18 years have passed and it has done absolutely nothing with it.”

One Beach, Two Visions

Still, the photos taken in Ilo in October of indigenous Bolivian women wading on the shores of the Peruvian beach in their traditional pollera dresses and of García and Morales promising to make the “Boliviamar” project happen were evidence that relations between the nations have improved considerably. Not so long ago, the presidents, who are ideological opposites, were more often heard trading insults rather than compliments.

"Relations have been bad because the two leaders have very different visions of how to govern,” says Andres Velarde, dean of finance and business administration at the Peruvian University of Applied Sciences in Lima. "If this initiative can bring the neighboring countries together, it’s a very positive thing.”

For Bolivia, the free trade zone could allow it access to what some experts see as a future global transportation hub. One of two transcontinental roads under construction stretching from Brazil to Peru’s Pacific coast will exit just north of Ilo, near Nasca, when completed in 2013. "The transcontinental roads will change the history of Peru,” Velarde asserts.

Meanwhile, for Peru, the funneling of Bolivian tourism and trade to Ilo would further García’s ambitious policy goals. If the free trade zone advances, some of the US$300 million in Bolivian trade that runs through Chile’s Arica port annually might come through Peru, stimulating and diversifying the southern region’s economy, he says. Currently, Ilo’s port caters mainly to mining companies in a desert region with little else going on economically. “Arica is much more competitive than Ilo is, so this kind of a project, if it is done well, could stimulate development in southern Peru,” Velarde says.

Perhaps more importantly, Peru may be pulling Bolivia on its side in its own territorial dispute with Chile involving sovereign rights to 10,000 square miles of ocean now under Chilean control. Chile claims Peru ceded the disputed area in a 1952 accord. Peru has countered that the accord was meant to resolve fishing, not boundary issues. In 2007, Peru issued a new official map with the marine boundaries redrawn to show the disputed area under its flag, which drew a diplomatic protest from Chile. The case is now before the International Court of Justice at The Hague.

"Many people think [Peru's] agreement with Bolivia is just symbolic, since the beach they have access to is not a port, which is what the Bolivians really want,” says Richard Webb, head of the Instituto del Peru think tank in Lima. “Anything to do with Chile is about 100 times more significant, because of all the remaining feelings about the war and because of the marine border dispute.”

Andrade says Chilean President Sebastian Pinera has been all but silent on the issue, while Jaime Ravinet, Chile's defense minister, said vaguely on a visit to Spain in November that his country is “committed” to meeting Bolivia’s ocean access needs. And according to her, Morales has made the issue of a corridor through Chile a priority, using all the tools at his disposal, including veiled threats to divert water that Chile gets from the Bolivian Andes. “This is a game of chess,” she says.

Border Battles

Several other border disputes continue to rumble across Latin America. While none is likely to lead to an outbreak of war like the one between Argentina and Great Britain over the Falkland Islands in 1982, they are stoking a regional arms build-up and impeding trade and unity.

One of the more acrimonious disputes is between Nicaragua and Costa Rica over the San Juan River separating the two nations. In November, Costa Rica lodged a complaint before the Organization of American States in Washington, D.C., claiming that Nicaragua was illegally dredging the channel and stationing 50 soldiers on its territory. A ruling from The Hague last year affirming Costa Rica’s right to navigate the river and Nicaragua’s right to regulate traffic has done little to eliminate tensions.

Of greater economic consequence is Nicaragua’s dispute with Colombia over two Caribbean islands, San Andrés and Providencia, and thousands of square miles of ocean floor in the Caribbean that have been under Colombian control for two centuries. International law experts are monitoring the case, which is also before The Hague, because it involves opposing principles in boundary disputes: What has been agreed to in the past versus what modern conventions deem as a fair division of territory. At stake in most of the quarrels are lucrative fishing and mineral rights, which comes as no surprise given the rapid worldwide decline in fish stocks and the sharp rise in prices over the last decade of crude oil, gold, copper and other natural resources.

Bolivia’s long quest for access to the Pacific Ocean through Chile — perhaps the most politically charged of all the disputes — is the exception to those cases. Bolivia is not seeking control of resource-rich land or fishing grounds. It wants sovereign rights to land and an ocean port to give it a more direct and economically viable ways of transporting minerals and other trade items. Until 1884, Bolivia had that access. Its boundaries extended to the Pacific and included two ports, Mejillones and Antofagasta, until victorious Chile redrew the map.

If Bolivia and Chile reach a deal, it could heal an open sore on the Southern Cone’s body politic: Formal diplomatic relations between the two countries have been cut since 1978. Morales has enlisted the help of his ally, Venezuelan President Hugo Chávez, who famously said a few years ago that he hoped to one day take a swim on a Bolivian beach.

An agreement for a Bolivian corridor and port on the Pacific would be an enormous accomplishment for Morales, the country’s first indigenous leader, who in recent weeks has been scrambling to shore up political support after violent protests erupted in several Bolivian cities after he announced sharp increases in fuel prices.

Since taking office in 2005, he has described the nation’s lack of a port as an historical injustice that stunts Bolivia’s economic growth. Morales owes his election partially to the political sensitivity of the issue. He built his political base by leading opposition earlier in the decade to a plan to build a pipeline to ship Bolivia's natural gas to Mejillones — now under the Chilean flag — where it would be converted to liquefied natural gas (LNG) and shipped to foreign buyers on the Pacific Rim.

The plan was scrapped after Morales and other opponents fanned anti-Chilean sentiment. “They asked, ‘Why should we do this? It will only make the Chileans rich,’” Andrade says. But an unfortunate byproduct of the project falling apart is that lucrative Asian markets for the nation’s rich deposits of natural gas are literally out of reach. So a deal to open a corridor could give new life and, from Bolivia’s point of view, legitimacy to a pipeline and LNG project.

Chilehas yet to make any sovereign concessions, although it does allow Bolivians to pay little or no duty on their goods passing through its ports. García’s declared willingness to consent to a deal between Peru and Bolivia could change the political calculus, however.

Some analysts in Chile say there is no more chance of the country giving Pacific access to Bolivia than there is of the U.S. giving a corridor and port land to Canada or Mexico. Still, a deal is being talked about in Santiago more earnestly than ever. Some critics noting that such a deal would allow Chile to reduce its defense budget, the second highest (3.5%) only to Colombia (3.7%) in South America when figured as a percentage of gross national product.

In October, Chilean senator Pablo Longuiera proposed a national plebiscite on the issue, which was welcomed by Morales. Shortly after, Morales told a gathering in the Bolivian city of Oruro, “We want to return to the sea with sovereignty because it is very important for international trade and to facilitate investment in our country.”