Peru last night announced it recognises Palestine as a state, becoming the seventh South American country to do so in a rapid diplomatic domino effect which has alarmed Israel.

The declaration came on the eve of a Latin American-Arab summit to be hosted in the Peruvian capital, Lima, reflecting growing political and economic ties between the two regions.

"Palestine is recognised as a free and sovereign state," Peru's foreign minister, José Antonio García Belaúnde, told RPP radio. "There was no pressure from any side. We have acted with freedom and independence." He expressed Peru's continued support for peace talks.

The announcement followed similar decisions by Argentina, Bolivia, Brazil, Chile, Ecuador and Guyana in recent weeks, bolstering Palestinian hopes of momentum towards global recognition.

It came as a chink of good news for Palestinians amid controversy and despair over leaked peace talks documents showing negotiators' apparent weakness in dealings with Israel and the US.

"Peru's decision is very good news," said Mauricio Abu-Ghosh, president of Chile's Palestine Federation. "It recognises the existence and sovereignty of the Palestinian state."

Israel warned that South America's rush to recognition was "highly damaging interference" by countries that were never part of the Middle East peace process.

The US has lobbied the region to say recognition is premature. That argument has fallen flat with conservative and left-wing governments but Washington will be pleased that Peru, like Chile, hedged its position on Palestinian claims for borders that existed before 1967, encompassing the West Bank and Gaza Strip.

Waves of emigration from Lebanon, Syria and Palestine to South America over the past century has dotted the region with small but influential Arab minorities, with some boasting politically connected tycoons.

Increasing trade – which will be trumpeted at next month's Lima summit – has given an economic edge to cultural ties. Brazil, which has tripled its trade with Arab nations in the past decade, was thanked last month by President Mahmoud Abbas for allowing Palestine to open its first embassy in the Americas.

Argentina's support for the Palestinian state's pre-1967 borders is tinged with its own territorial claim over the Falkland Islands, which it calls the Malvinas. It lost a brief 1982 war against Britain for the archipelago and has complained that Britain violates UN agreements by refusing to discuss sovereignty.

Venezuela previously recognised the Palestinan state in 2005. Analysts say Uruguay and Paraguay may be next.