Immediately after the return of the invading army into Spanish Chili, the new toqui Huenecura proceeded to attack this new establishment. While on his march he fell in with Lisperger, who had gone out from the fort at the head of an hundred and sixty of his men to protect a convoy; and immediately attacked the Spaniards with such fury that he cut the whole detachment in pieces, and the commander among the rest. After this first successful essay of his arms, he proceeded without delay against the fort, which he made three several attempts to take by storm; but was repelled with so much skill and valour by Gil Negrete who had succeeded Lisperger in the command, that after an obstinate combat of two hours he was obliged to desist from the attempt to storm, and established a close blockade. This was continued till the governor Ramon sent orders for the garrison to evacuate the place. The Spanish army was now divided into two separate bodies, one under the command of Alvaro Pineda the quarter-master of Chili, and the other under the orders of Don Diego Saravia, who proceeded to lay waste the Araucanian territory without mercy. Watching his opportunity however, Huenecura attacked and defeated them in succession, and with such complete success that not even a single person of either detachment escaped death or captivity. By these unexpected misfortunes, that fine army on which such flattering hopes of security at least, if not conquest, had been founded, was entirely annihilated. In consequence of these repeated and heavy disasters, orders were given by the court of Spain, that a body of two thousand regular troops should be continually maintained on the Araucanian frontier; for the support of which force, an annual appropriation of 292,279 dollars was made from the royal treasury of Peru. At the same time the court of royal audience was re-established in the city of St Jago on the 8th of September 1609, after having been thirty-four years suppressed. This measure gave universal satisfaction to the inhabitants, and the court has continued there ever since with high reputation for justice and integrity.

By this new regulation, Ramon added the title of president to those of governor and captain-general of Chili. Having received considerable reinforcements, to replace the army so lately destroyed, Ramon ventured to recross the Biobio at the head of about two thousand men. Huenecura advanced to meet him, and a sanguinary and obstinate battle took place in the defiles of the marshes of Lumaco. The Spaniards were for some time in imminent danger of being completely defeated; but the valiant governor, taking his station in the front line, so animated his soldiers by his presence and example that they at length succeeded in breaking and defeating the enemy. Shortly after this victory, Ramon died in the city of Conception, on the 10th of August 1610, universally regretted by the Spanish inhabitants of Chili, to whom he was much endeared by his excellent qualities and his long residence among them. He was even highly esteemed by the Araucanians, whom he had always treated, when prisoners, with a humane attention which did him much honour. According to the royal decree for establishing the court of audience, the government of Chili now devolved upon Don Luis Merlo de la Fuente, the eldest oydor or judge.

Much about the same time with Ramon, the toqui Huenecura likewise died, either from disease or in consequence of wounds received in the late battle. He was succeeded in the toquiate by Aillavilu the second, who is represented by Don Basilio Rosas, a contemporary writer, as one of the greatest of the Araucanian generals, and as having fought many battles against Merlo and his successor Don Juan Xaraquemada; but he does not particularize either their dates, the places where they were fought, or any circumstances concerning them.

Among the missionaries who were at that time employed for the conversion of the natives in Chili, was a Jesuit named Luis Valdivia, who, finding it impossible to preach to the Araucanians during the continuance of war, went to Spain and represented in strong terms to Philip III. the great injury suffered by the cause of religion in consequence of this long and cruel war. That weak prince was more devoted to the advancement of religion than to the augmentation of his territories, and sent immediate orders to the government of Chili to discontinue the war, and to settle a permanent peace with the Araucanians, by establishing the river Biobio as the frontier between the two nations. On purpose to secure the punctual execution of these orders, the king offered to exalt Valdivia to the episcopal dignity, and to appoint him governor of Chili. He refused both of these high offers, and only stipulated for the restoration of Alonzo Rivera to the government, whose views were conformable with his own, and who had been exiled to Tucuman as formerly mentioned.

Much gratified with the prosperous issue of his voyage, the zealous missionary returned to Chili in 1612, carrying a letter written by the king of Spain to the national assembly of the Araucanian chiefs, recommending the establishment of peace between the nations, and that they should promote the propagation of Christianity among their dependents. Immediately on his arrival in Chili, Valdivia hastened to the frontiers, and communicated the nature of the commission with which he was entrusted to the Araucanians, by means of some prisoners of that nation whom he had purposely brought with him from Peru. Aillavilu the toqui gave little attention to the proposed negociation, which he deemed a feint for deceiving and surprising him. But, as he died or resigned the command soon after, his successor Ancanamon thought proper to inquire into the reality of the pacific proposals, and directed the ulmen Carampangui to converse with Valdivia, that his offers might be laid before a general assembly of the ulmens. Accordingly, on the invitation of Carampangui, Valdivia repaired to Nancu in the province of Catiray, where, in an assembly of fifty Araucanian chiefs, he made known the substance of the proposed pacific negociations, read and expounded the royal letter to the Araucanian confederacy, and made a long oration on the motives of his interference and on the important concerns of their immortal souls. The assembly thanked him for his exertions, and promised to make a favourable report to the toqui. On his return to Conception, Valdivia was accompanied by Carampangui, where he was honourably received by the governor; who dispatched Pedro Melendez one of his ensigns, under the safeguard of the ulmen, on a message to the toqui, carrying with him the letter of the king of Spain, and a request that Ancanamon would meet him at Paicavi, a place near the frontiers, that they might confer together upon the preliminaries of peace.

The toqui soon afterwards came to the place appointed, with a small guard of forty soldiers, and accompanied by several ulmens, bringing likewise along with him a number of Spanish prisoners of the first families, whom he set at liberty. The governor, with Valdivia and the principal officers of the government, received Ancanamon with every demonstration of respect, and conducted him to the lodgings appointed for his reception amid the repeated discharges of artillery. The governor then proposed, as preliminary articles of peace, that the river Biobio should serve hereafter as the common boundary between the Spanish and Araucanian nations, beyond which neither should be permitted to pass with an army: That all deserters should in future be mutually returned: And that missionaries should be allowed to preach the doctrines of Christianity in the Araucanian territories. Ancanamon required as a preliminary, that the forts of Paicavi and Arauco, which had been lately erected upon the sea coast to the south of the Biobio, should be evacuated. The governor immediately abandoned Paicavi, and agreed to give up the other immediately after the conclusion of peace. Being so far agreed, and as the consent of the four toquis of the uthalmapus was requisite to ratify the treaty, Ancanamon proposed to seek for them in person, and to bring them to the Spanish camp.