Chile-Peru Border Dispute: What's on the Line?

On January 27, the International Court of Justice (ICJ) at The Hague will hand down its decision on a dispute between Chile and Peru over 10,000 square miles of ocean off the west coast of South America.

The Chilean government claims the dispute for sovereignty over the area was settled through a treaty the two countries signed in the 1950s—but its counterpart in Peru argues that this earlier agreement applied only to fishing rights.

The issue is a sensitive one, particularly in light of residual nationalist sensitivities on both sides originating from a war in the late 1800s. Still, the two countries have pledged to adhere to the court’s ruling as part of an effort to improve their bilateral relationship and pursue peaceful and lawful solutions to disputes moving forward. In this light, The Hague’s verdict could prove a milestone for diplomatic maneuvers and the respect for international law in the region—particularly should the two sides stick to the ICJ’s decision.

So what can we expect from the ruling, and what will it mean for South America?

Q1: What implications will the ruling have for the region?

A1: Most importantly, both Chile and Peru may use this ruling as an opportunity to generate an open dialogue and to strengthen bilateral cooperation. And such improved cooperation could carry great benefits for both countries, particularly in the realms of economic stability and energy security.

Given the commercial ties between Chile and Peru, both countries will not only benefit from settling their maritime borders, but also from seizing this opportunity of open diplomatic dialogue to strengthen trade agreements. In 2012, Chilean investment in Peru amounted to US$12 billion, while Peruvian investment in Chile totaled US$7 billion, demonstrating the importance of their commercial relationship.

That same year, a full 50 percent of trade within Latin America came from the Pacific Alliance, a regional trade agreement that includes Colombia, Chile, Mexico, and Peru. Because this economic bloc promotes trade liberalization through regional cooperation and integration, a setback in Chile-Peru relations could hinder the alliance’s potential for stable economic development.

In simplest terms, then, the successful implementation of the ICJ’s decision could keep bilateral economic relations on their already-promising trajectory. And any increased tensions between the two countries resulting from a rocky (or failed) implementation of The Hague’s ruling would bode ill for their economic prospects moving forward.

Similarly, a peaceful resolution to this dispute could bode well for regional energy security. Chile, in particular, is constantly in search of new sources of energy to fuel its sizeable copper mining activities. Peru, an abundant source of natural gas, could fill that gap. Solving this border dispute could open up opportunities for working toward regional energy integration—particularly within the still-developing framework of the Pacific Alliance.

As much as a peaceful end to this conflict would likely prove highly beneficial for both countries, a failure to respect the ICJ’s decision could have grave economic repercussions for each country—and broader implications for Pacific Alliance members. Still, prospects are good for mutual respect of whatever verdict The Hague hands down.

Q2: What are the possible outcomes of the ICJ’s ruling?

The petition that Peru brought to the ICJ explicitly requested that the maritime limit be resolved through the application of a line equidistant from both countries. This type of Solomonic solution is not without precedent—indeed, in 2012, the ICJ delivered a similar verdict in a dispute between Colombia and Nicaragua.

Whatever The Hague decides, it is up to the governments of Chile and Peru to respect the decision.
Given Chile’s demonstrated historical respect for international law and institutionality—and the sizeable domestic agenda incoming president Michelle Bachelet will face when she assumes the presidency—Chile will likely fall in line with the court’s decision. Still, the Piñera administration has, in advance of the ruling, already made clear that it expects the enforcement of the ruling to be gradual—not immediate.

In contrast, Peruvian president Ollanta Humala has insisted that The Hague’s ruling would warrant immediate implementation. Still, because it was his government that petitioned the ICJ to take up the dispute, he can likely be expected to obey the ruling—even if it isn’t firmly in Peru’s favor.

Regardless of their differences, both governments have acknowledged the economic benefits of fostering friendly relations and encouraging mutual adherence to international law. In many ways, the current dispute has proved (and will continue to prove) more of a test of political and diplomatic maturity than an exercise of historical retribution or nationalistic posturing. And this certainly bodes well in the lead-up to the decision.

The upcoming ICJ decision on the Peru-Chile maritime border will certainly carry significant weight for both countries, regardless of the outcome. With their close commercial ties and energy interdependence, Chile and Peru would both benefit from maintaining respect for international law and abiding by whatever ruling is delivered on January 27.

The implications for the region cannot be ignored either—particularly should one or both sides fail to uphold the ruling, which could present a step backwards for the burgeoning Pacific Alliance. And in the context of the upcoming ICJ case over Bolivia’s desire for a sea-lane through Chilean territory, Peru and Chile’s handling of this decision could set a precedent for regional respect for international institutions and commitment to peaceful and diplomatic solutions to even the most contentious problems.

Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Rodrigo Otárola, intern scholar, and Jillian Rafferty, staff assistant, both with the CSIS Americas Program, provided research assistance.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Carl Meacham