The BBC's James Reynolds: This was a highly symbolic meeting

"With this we will close a history of conflicts, distances and lack of communication. We have dared to take a bold step toward the future," Peruvian President Alberto Fujimori said during Monday's ceremony.

Mr Fujimori and his Ecuadoran counterpart, Jamil Mahuad, met in a clearing hacked from the Amazon jungle, 1,300 kilometres northeast of Peru's capital, Lima.

The talks at Lagartococha cemented a peace agreement signed between the two nations in October.

The two presidents met in a jungle clearing

Peru and Ecuador have fought three times over the 80 kilometre border area in the Andean foothills, which was claimed by both countries.

The area was left undefined in the Rio de Janeiro Protocol that set territorial limits after a 1941 border war.

During Monday's meeting the two presidents signed an agreement which fixes the position of four border posts.

They are the first of 27 to be placed along the frontier. Officials expect to complete the project in April.

$3bn cash injection

Under the October peace treaty, Peru ceded a small area, Tiwinza, to Ecuador as private property without relinquishing sovereignty.

The two countries have fought three times over the border

Ecuador may not station police or soldiers in Tiwinza and people travelling through will not be allowed to carry any weapons.

The deal also creates adjoining ecological parks and includes a trade accord and a navigation pact.

BBC South America Correspondent, James Reynolds, says the border meeting would have been inconceivable just five months ago, when Ecuador and Peru were edging towards renewed armed conflict.

Next month, both leaders head to Washington to discuss with the United States Government the possibility of setting up a $3 billion peace fund to encourage development in the region.

Our correspondent says the border ceremony was highly symbolic and designed to show that the two countries are finally at peace after more than 50 years.

Fujimori goes overboard

But preparations for the meeting got off to a shaky start after Mr Fujimori fell into the Cenepa River on Saturday near where the two sides fought a war in 1995.

He was crossing the river in a flimsy raft during a visit to inspect the area ahead of the ceremony.