I travelled through Peru and Chile a couple of years ago (only for two months, not 12, you lucky devil) and had, I have to say a great time.
Peru was fun, but it’s less prosperous than Chile and consequently can be a little bit harder work - accommodation is a bit more basic, I can now laugh about the nightmare night-bus journeys, and a lot of people do just see you as a walking wallet, which is a pest. For example, we’d get mobbed stepping of a bus by hotel touts, shoe-shine boys, postcard sellers etc, all of whom had selective deafness concerning the word “no”. All part of the local colour. The good stuff for Peru: Pisco (whence comes, as has been mentioned, the eponymous drink), has a sea-life reserve and bars, the oasis resort of Huacachina near Ica is a good place to try sandboarding (going down is fine, climbing back up sand dunes is less thrilling). Arequipa and the Colca Canyon were great (esp. if you like condors), and then it was on to Cuzco. Backpacker central but nice for all that, jumping off point for the Inca Trail/Machu Picchu - if you like walking, you’ll love the trail. Then we went down to Puno and Lake Titicaca - Puno is a fun town, quite a few backpackers crossing to or from Bolivia.
Chile was quite a step up in terms of western trappings - more expensive to boot. We went almost the whole length (started at Arequipa, stopped at Chiloe). There is a road the whole way down, and you only go to Argentina if, like us, one of your party develops a sudden craving for steak. Travelling the whole length of Chile takes you from the tropics to the Antartic - you will probably need to change your wardrobe at some point. Highlights were the Valley of the Moon in the North, the area around Santiago generally (particularly the vinyards and, it has to be said, Pisco distilleries) and Pisac, which is basically an adventure sports resort - white-water rafting and canoeing, snowboarding and ski-ing.
The language thing shouldn’t be a problem. I went with no Spanish and a phrase book, and picked up enough to get by by dint of embarrassing myself with bad Spanish at every available opportunity. When I had a stand up row with a bus-driver, I realised I’d learned more than I thought. If you already know Spanish, you should be able to use that as a stepping stone and pick things up quite quickly.
