Moves by President Cristina Fernandez de Kirchner certainly indicate that Buenos Aires has embarked on a longer-term strategy to sink differences with neighbors and concentrate instead on its Falklands sovereignty project.

In an extraordinary turn-about Fernandez dropped a long-standing confrontation with Peru and pledged instead everlasting friendship with the erstwhile rival. In talks with Peruvian President Alan Garcia, Fernandez offered apologies for previous actions, considered hostile by the country, and promised reparations as well.

In 1995 Argentina sold weapons to Ecuador while it was in an armed conflict with Peru.

For that reported offense to Peru, Fernandez offered an "institutional apology and historic reparation" and stressed instead common historic bonds between the two countries.

In a broad hint at what else was afoot in Argentina's policy shift, Fernandez paid tribute to the Peruvians' solidarity with Argentina during the 1982 conflict with Britain. Military-ruled Argentina invaded the islands, claiming Argentine sovereignty over the territories, triggering a British military response.

In the resulting 74-day conflict, Britain beat back the Argentinian advance, but despite the switch from military regime to democracy, Argentina maintained its territorial claim.

Last year Argentina infused new life into its claim over the Falklands, a British overseas territory under U.K. rule since 1833, after the Falklands government awarded licenses for hydrocarbons exploration in North Falklands basin.

Garcia has responded to Fernandez with warmth, dismissing the "long chill and distance" as an irritant that could have been avoided. The long history of friendship between the countries, he indicated, was intact.

Fernandez responded: "There are few nations with which we have such important common historic bonds. The Peruvian administration sent us airplanes, pilots, missiles, and aid during the Malvin as wartime."

The stage has been set for a wide-ranging economic collaboration that, Argentine business representatives hope, will improve Argentina's economic prospects and help improve the country's balance of payments. Argentine-Peruvian trade fell sharply last, partly in response to the global economic downturn.

Earlier in February, Fernandez claimed a diplomatic victory by winning Latin American support for her Falklands cause but efforts to give life to the issue at the United Nations and in Europe have been thwarted by calls to Buenos Aires to resolve differences with Britain on a one-to-one basis.

In her address to the Peruvian Congress Fernandez faulted Britain for holding on to the Falklands as a colonial enclave. Britain rejects Argentine claims, citing the Falklanders' exercise of self-determination to stay under British rule.

Argentine Foreign Affairs Minister Jorge Taiana said Britain's decision to allow drilling for hydrocarbons in the Falklands basis was a serious development that affected not only Argentina but the whole region.

Analysts said the current standoff over the Falklands would have its first test as soon as results of the initial drilling operations became known, some time this month.

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