Chile's government yesterday dismissed allegations that members of its military had spied on neighbouring Peru, as a serious diplomatic row between the two countries deepened.

"When there are accusations of this type, governments must exercise caution," warned a Chilean presidential spokeswoman, denouncing the espionage claims against two Chilean military officials.

"We want to be clear: Chile does not spy," insisted spokeswoman Carolina Toha.

The spat has already forced the cancellation of a meeting in Singapore today between Peru's President Alan Garcia and his Chilean counterpart Michelle Bachelet.

A Peruvian court earlier began extradition proceedings against the two Chilean officers, as the government launched an official inquiry, justice officials in Lima said.

The Chileans, identified as Daniel Marquez Torrealba and Victor Vergara Rojas, were allegedly working with an officer of the Peruvian Air Force, Victor Ariza Mendoza, whose detention officials announced last Thursday.

News reports said that Ariza, who worked in 2002 in Peru's embassy in Santiago, has been charged with "revealing state secrets, money laundering and espionage" on behalf of Chile since September 2005.