"Security is impossible in a world with terrorists," Mr. Bush said in a joint news conference with Peruvian President Alejandro Toledo. "Our nations understand that political and economic progress depends on security."
Toledo, for his part, said he and Mr. Bush share "the energy and the stubbornness" to combat terrorism without wavering. He called it "a war with no ambiguities whatsoever against terrorism and drug trafficking."
Mr. Bush, the first U.S. president to visit Peru, arrived three days after a car bombing near the U.S. Embassy killed nine people and embarrassed the Peruvian government.
"Peruvians have been reminded again this week of the terrible human toil of terror," Mr. Bush said, offering U.S. sympathy to the victims. He thanked Peru for taking the lead "in rallying our hemisphere to take strong action against this common threat."
Toledo added: "On this issue, we are partners. We are stubborn."
Mr. Bush said he had talked with Toledo about how the United States can help in the fight against drug trafficking and terrorists. "That's part of the reason I'm here is to support our mutual desire to fight terrorism and to help democracy thrive," he said.
Mr. Bush said the United States had tripled assistance to Peru for fighting drugs but also has an obligation to reduce U.S. demand for illegal drugs. "We've got to do a better job at home of convincing Americans to stop using drugs," he said. "That will, in turn, help the region."
The increased U.S. aid will support Peru's efforts to stem a possible resurgence in coca production and the recent appearance of heroin poppy crops in remote highland areas.
Mr. Bush came out of his meeting with Toledo having made no decision on whether to resume drug surveillance flights over Peru.
They were suspended after a Peruvian military jet shot down a plane carrying American missionaries, killing 35-year-old Veronica Bowers and her infant daughter, Charity. A CIA-operated surveillance plane had mistakenly identified the aircraft as a possible drug-smuggling flight.
Toledo said he asked Mr. Bush to consider a new initiative "for bilateral trade and investment within the framework of the Andean community." He said the two saw eye-to-eye on expanding trade.
Mr. Bush, meanwhile, said he was committed to renewing and extending the Andean Trade Preferences Act, which sets special tariff treatment for imports from those countries. The legislation is pending in the U.S. Senate and Mr. Bush urged senators to move it forward.
The president's calls for free trade with hemispheric neighbors comes as his administration is imposing tariffs totaling 29 percent on Canadian softwood lumber for what the Commerce Department said was unfair trading practices.
Mr. Bush also announced the return of Peace Corps volunteers to Peru for the first time in nearly 30 years, with the first of them to arrive in August. He called it "a symbol of stronger ties between our people and the stronger relationship between our nations."
Mr. Bush arrived under heavy security. Streets were filled with military tanks, armored cars, water cannons and 7,000 riot police and troops in camouflage.
The terror attack on Wednesday loomed over Mr. Bush's visit. The president said he trusted Toledo's government to keep his one-day visit safe, and Peruvian officials tightened security throughout Lima, the capital, especially at the embassy.
Riot police firing tear gas dispersed dozens of anti-American demonstrators, and smoke billowed over a square near the Palace of Justice, reports CBS News correspondent Mark Knoller, who is traveling with Mr. Bush.
There were no reports of injuries, but at least three men were seen being led away by uniformed police. Other reports said there had been eighteen arrests.
Toledo, whose approval ratings have plunged to below 30 percent after eight months in office, gave a nationally televised address Friday to outline eight anti-terrorism measures, such as rebuilding the state intelligence structure and doubling the anti-terrorism budget.
"We will not allow a return to violence," Toledo said.
For his first trip to South America, Mr. Bush chose Peru to highlight the democracy that last year followed the hard-line government of former President Alberto Fujimori.
While in Lima, Mr. Bush planned to use his meetings with Toledo and the leaders of Bolivia, Colombia and Ecuador to advocate extending the Andean Trade Preferences Act, which sets special tariff treatment for imports from those countries. The legislation is pending in the U.S. Senate.
The president arrived in Peru from Mexico. His four-day swing through Latin America continues on Sunday when he flies to El Salvador.
The administration was noncommittal on whether Mr. Bush raised with Toledo the case of Lori Berenson. The 32-year-old American is serving a 20-year sentence in a Peruvian jail for helping rebels from the Tupac Amaru Revolutionary Movement plan a 1995 attempt to seize Peru's Congress.
Berenson has maintained her innocence, saying Peruvian officials misconstrued her concerns about social justice as a terrorist agenda.
The Berenson case is tricky for Mr. Bush, who has pledged zero tolerance on terrorism following the Sept. 11 attacks.
Mr. Bush also used his weekly radio address Saturday to make his trade argument to Americans back home.
"Prosperity in our hemisphere will produce profound benefits for all our countries," Mr. Bush said in the broadcast.
"The United States is strongly committed to helping build an entire hemisphere that lives in liberty and trades in freedom."
In addition, the president said he hoped to create a "common border" with Mexico and Canada to keep North America safe from terrorists without disrupting legitimate trade and travel between the NAFTA partners.
U.S. officials see the 2,000-mile border between the United States and Mexico as a weak link in homeland defenses because of the heavy flow of illegal drugs and immigrants.
Democrats are calling the president's trip trip a ruse to gain Hispanic votes at home.
In the Democratic radio reply on Saturday, Antonio Villaraigosa, speaker emeritus of the California State Assembly, said the trip is an act of pre-campaign anxiety.
"The president's trip this weekend to Latin America is part of an orchestrated strategy to curry favor with Latino voters in the United States," Villaraigosa said.
"But our community knows the difference between rhetoric and results. They know the difference between pandering and producing."
Villaraigosa said Bush has given only "vague assurances" on immigration and will not go on record in support of a legalization plan for overstaying immigrants.
He said, "Democrats are the champions of minority entrepreneurs, while Republicans have tried repeatedly to eliminate programs that help provide Hispanic small businesses with access to capital."