(CNN) -- The secretary-general of the Organization of American States announced Monday that the two sides in a Central American border dispute had agreed to talks, but the responses from Costa Rica and Nicaragua showed that they remained far from resolution.

At the center of the storm between the neighboring countries is a dispute over a parcel of land on the Atlantic coast, along the San Juan River, known as Calero Island.

Costa Rica claims the territory and says that Nicaraguan troops have camped out there. Nicaragua maintains the island belongs to it, and that it has not crossed into Costa Rican territory.

The two sides made their cases in front of the permanent council of the regional body last week, and the outcome was a trip to the two countries by the secretary-general, Jose Miguel Insulza.

Insulza, who met with the presidents of both Costa Rica and Nicaragua, returned to Washington to present his report to the assembly.

The two countries agreed to start a binational dialogue that includes negotiation over the disputed territory, Insulza said. They also agreed to reduce tensions by not escalating military and police presence in the area. Finally, they agreed to fight drug trafficking and not let the area in question become a haven for drug transit.

If Insulza's announcement sounded optimistic, it was quickly undercut by the responses from the ambassadors from Costa Rica and Nicaragua.

Jose Enrique Castillo of Costa Rica said that this issue is not a border dispute, but a military invasion and occupation by Nicaragua. He said his country accepts Insulza's points, but wants the Nicaraguan troops to leave within 48 hours.

For his part, Denis Moncada of Nicaragua suggested that drug traffickers were influencing the complaint by Costa Rica, saying that traffickers are the only ones who stand to benefit from the conflict.

Moncada listed a number of historic reports and treaties that define the border between the two countries, and bolster their argument that the disputed area belongs to Nicaragua.

In addition to the troops, Costa Rica claims that a dredging project in the river is dumping sediment on its side of the border, and says that a Costa Rican flag in the area was taken down and a Nicaraguan one posted.

Nicaragua claims that it has not violated the sovereignty of Costa Rica. Nicaragua accused Costa Rica of breaking the diplomatic relations that exist between the countries.