Chapter 5: War and its Causes

Outcome:

Over the next fifteen days, Bolivia continues to increase its troop levels at the border. Additionally, FLC activity is moving south west, and appears to be spilling across the border. Your Minister of the Interior reports that the National Police have noticed a significant spike in border crossings between Colombia and Peru. Bolivia announces six days into the fifteen day period that at the end of the 15th day, if demands are not met, troops will cross the border.

What do you do now?

Submit to demandsPay the reparations and give Bolivia the territory. It is not worth risking a war with an unpredictable dictator. Peru might lose a lot more than that if Bolivia launched a war of conquest, and the war effort would likely cost significantly more than the sum Bolivia is demanding.
Continue to ignore the issueYou cannot give in to the posturing of an erratic dictator. Show resilience in the face of a hostile neighbor and demonstrate to your people and to Bolivia that you absolutely will not be dictated to. Publicly declare that Peru will not be bullied, and encourage your populace to go about their daily business as usual.
Pre-emptively strike BoliviaLaunch airstrikes against key government and military targets, and send troops to the border to protect against a counterattack. Declare that Bolivia's demands constituted a hostile act, and you were forced to respond militarily to pre-empt the threat and protect Peru's national interests.
Raise the issue at the UNRequest economic sanctions or other punitive measures be levied against Bolivia. This is an undeniable encroachment on Peruvian sovereignty, and must be punished.
Return troops to the borderPrepare for the Bolivian invasion while simultaneously increasing troop numbers as a show of force. Perhaps Bolivia will back down if you demonstrate military might and a willingness to fight. Additionally, move troops to your northeastern border to tighten border control and confront FLC contagion.