This conflict became known as the War of the Pacific and ended with a severe defeat of the Peruvian-Bolivian alliance after which Chile annexed all of Bolivia's coast in the form of the entire Litoral department and Peru's southernmost provinces of Tarapacá, Arica and Tacna:[16] eventually, Tacna was returned to Peru but Arica and Tarapaca remained part of Chile as per the Treaty of Lima.

[13][17] The crippling loss of its access to the sea became a national trauma for Bolivia[6][18][19] which continued to claim an outlet to the sea and between 1947 and 1950 formal discussions were held for the first time with Chile on the dispute: these initial discussions proposed the otorgation to Bolivia of a strip of land to the ocean in exchange for non-territorial compensations to Chile like giving it access to the use of waters from Lake Titicaca for agricultural purposes.

[13] Banzer agreed with holding further discussions with Pinochet to explore the feasibility of the territorial exchange and, if deemed practical, working out the details.

[22] The negotiations on the agreement for the territorial exchange were trickier and would start on August 26, 1975, with the Bolivian ambassador Gutiérrez in Chile sending the Chilean government a memorandum establishing the preliminary ground positions of the Bolivian government about the territorial exchange;[18] these included, of course, the cession to Bolivia of a sovereign territory that should include a coastal area with a length of at least 33.33 miles and 10 miles of width and the corridor should be contiguous and directly connect Bolivia to the ocean, the terms also stipulated that the coastal end of the corridor was to be located north of Arica and was to be bordered to the north by the Peruvian-Chilean border and cover the length of the Arica–La Paz railway.

[25][26] Before making its decision final however, Peru's foreign minister met with then American Secretary of State Henry Kissinger who started the meeting admitting feeling puzzled but intrigued as he knew nothing of the history of South America, the War of the Pacific and of the Bolivia-Chile dispute (but also expressing eagerness to learn); and after receiving an exhaustive recount of the history of the three nations since the start of the War of the Pacific onwards from the Peruvian foreign minister Miguel Ángel de la Flor, Kissinger stated that the American official position was essentially one of indifference but with the hope a satisfactory solution for all parties would be reached and with both de la Flor and Kissinger agreeing that drawn-out negotiations would be necessary for this to happen.

Without any significant opposition from foreign allies or domestic parties, the Peruvian government made its decision to veto the Charaña proposal final and official.

[30][31] Besides Peru, other foreign nation that also had a stake in the War of the Pacific and the subsequent Atacama dispute was Argentina which followed a pattern of extracting concessions from Chile in exchange for staying neutral during these events.

[32] It has also been argued that Pinochet might have made the entire proposal simply as a goodwill gesture towards Bolivia since Pinochet was likely aware that the Peruvian consent was necessary for the agreement to proceed and, if that was the case, then he should have also known that the Peruvians would not agree to it;[33] thus making Chile seem willing to reach a solution and fulfill all Bolivian demands (which would be why he went through the trouble of taking the negotiations all the way to an actual accord) without ceding anything in the end and making the agreement flounder due to external factors beyond Chilean control.