Peru says it is suspending free trade talks and confidence-building measures with Chile amid a worsening row between the two Latin American neighbours.
Ferrero said Chile's response was unsatisfactory
Relations have deteriorated over allegations that Chile supplied arms to Ecuador during a 1995 war with Peru.
Chile has denied the claims, but Peru says it is completely dissatisfied with Chile's response.
The latest move comes two days after Peru refused to support Chile to lead the Organisation of American States.
Peru's action throws into doubt a meeting between the two countries' foreign ministers scheduled later this month.
Chile has admitted to selling arms to Ecuador before the brief war broke out and has refused to apologise.
Peru says Chile continued to supply arms to Ecuador during the conflict itself.
Peruvian Prime Minister Carlos Ferrero said Chile's explanation was "unsatisfactory".
"It fails to present apologies in the face of unacceptable facts," he said, adding that relations between Peru and Chile were "going through a difficult stage".
On Monday, Peru refused to support Chilean Interior Minister Jose Miguel Insulza, who was elected Secretary General of the Organization of American States.
Lima and Santiago were due to have begun talks this month on establishing a free trade accord, aiming to sign it later this year.
Mr Ferrero however said he remained hopeful relations between the two countries will eventually return to normal.