Extending a hand to a shaken nation, President Bush declared Saturday that the United States would work to bolster "democratic foundations" in Peru as a means of fighting terrorism. He said the two nations share a common perspective on terrorist violence: "We must stop it."

"Our nations understand that freedom is only as strong as the institutions protecting it," 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 Bush share "the energy and the stubbornness" to combat terrorism without wavering.

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.

The terror attack on Wednesday loomed over Bush's visit. Security was heavy. Streets were filled with military tanks, armored cars, water cannons and 7,000 riot police and troops in camouflage. They stood watch over the thousands of Peruvians who braved the hot sun in shorts and flip-flops to smile and wave at the U.S. presidential motorcade.

Riot police firing tear gas dispersed dozens of anti-American demonstrators, and smoke billowed over a square near the Palace of Justice. There were no reports of injuries, but at least three men were seen being led away by uniformed police.

At the news conference, Bush offered condolences over the attack and announced $195 million in assistance for Peru this year, a threefold increase; $75 million of it would go toward counternarcotics and security.

"Peruvians have been reminded again this week of the terrible human toil of terror," Bush said. 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."

The two leaders also sought to show they are ease with each other. Toledo noted they are the same age — 55 — and that they both accented their dark suits with pale blue neckties. Bush joked in Spanish about Toledo's headful of black hair and his own "pelo gris," gray hair.

Afterward, Bush and Toledo met for an hour with the presidents of Bolivia and Colombia and the vice president of Ecuador, and then sat down to a fancy dinner in the palace conservatory.

In their meetings, the leaders discussed fighting drugs and terrorism and the prospects for Senate passage of an extension of the Andean Trade Preferences Act, said White House spokesman Sean McCormack.

Bush supports renewing and expanding the act, which sets special tariff treatment for imports from those countries. The legislation is pending in the U.S. Senate and Bush has urged senators to move it forward.

One of the presidents quipped to Bush: "The Senate is manana-ing this to death," McCormack said. He would not identify which leader made the statement.

Bush told reporters he had talked with Toledo about how the United States can help fight drug trafficking and terrorists. He said the United States would support Peru's Truth and Reconciliation Commission, which is looking into past human rights abuses and would reach out with teacher training, nutrition programs and cultural exchanges. He also announced a trade mission to Peru, led by Commerce Secretary Don Evans, this year.

"The United States is actively supporting the president's efforts to strengthen Peru's democratic foundations," Bush said. "You can't alleviate poverty if there's terror in your neighborhood."

Besides money, Bush said the United States 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.

But 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.

"We are reviewing all avenues toward an effective policy of interdiction," Bush said. He said the shootdown had caused the United States to "step back" and study how best to combat narcotrafficking.

"And we want to make sure that when we work with countries like Peru that we achieve the common objective, which is make it hard for those narcotraffickers to move through their airspace, across their land or in oceans," he said.

Toledo said he asked Bush agreed on expanding trade between their countries.

"I think it's important because trade is a synonym for work, and work is a way to deal with poverty," Toledo said.

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."