Renewed military contacts between Peru and the United States are seen as a boost to the prospect of increased aviation and defense sales in the Latin American country.

Last week Peru and the United States announced they would update bilateral defense cooperation accords dating to 1952.

U.S. Defense Secretary Leo Panetta, who met with President Ollanta Humala and Peruvian Defense Minister Pedro Cateriano, said the two sides would step up joint counter-narcotics and counter-terrorism measures.

"The United States is part of the family of the Americas and we face some common challenges, we face the challenge of terrorism, of drug-trafficking," Panetta said after meeting with Humala and Cateriano.

"Our country will do whatever it can to work with our friends here in Peru to provide whatever assistance is necessary in order to make sure that Peru can provide better security and prosperity for this country and can help provide for the security and prosperity of this region," Panetta said.

Cateriano echoed Panetta's remarks, adding the bilateral defense accord would be revised and updated.

The U.S.-Peruvian accord is seen as a counterweight to recent moves by China for a larger share of Peru's aviation and defense market, already split between suppliers from the United States, Russia, France, Italy and Spain, as well as Israel and South Korea and regional suppliers.

U.S. officials have indicated they are more interested in setting up defense advisory services than permanent bases, though any expansion of joint operations against organized crime and narcotics trafficking to North America will likely increase U.S. military and security industries' presence in Peru.

U.S. aid to Peru is estimated to top $84 million this year but is likely to be reduced by at least $10 million in 2013. However, new military cooperation accords will likely increase the scope of security industry operations increasing.

Humala is keen to stamp out militant groups and armed gangs that officials say are financed by drug trafficking. In August rebels killed five army officers in a night time ambush about 190 miles east of Lima.

The area where the attack took place was earlier identified as the focus of Shining Path guerrilla activity. Several other armed groups, including Maoist rebels, are also active in the area.

The Shining Path group waged a decade-long battle against the government 1980 but retreated when its leader Abimael Guzman was captured in 1992. More than 70,000 people died in the conflict.

In May a failed government operation against Shining Path militants triggered a government crisis, in which Interior Minister Daniel Lozada and Defense Minister Alberto Otarola resigned.