Chilean police began investigating a suspected plot to smuggle 23kg of cocaine into Sydney on a commercial aircraft this week.
Local authorities seized the cocaine - estimated to be worth $17 million in Australia - and tipped off the Australian Federal Police.
AFP officers switched the cocaine with a substitute, and on Tuesday ferried the packages to a Port Botany car park, near Kingsford Smith Airport.
Two men, both 33, attended the car park and allegedly tried to collect the packages.
Officers arrested the men on the spot and later charged them with attempting to possess a commercial quantity of a border-controlled drug.
The offence carries a maximum penalty of life behind bars.
Investigators executed search warrants at properties in Liverpool and Georges Hall, southwest Sydney, allegedly seizing about 5kg of MDMA, $8000 in cash, and 10kg of a suspected drug-cutting agent.
AFP investigators in South America worked with local police to execute search warrants in Chile.
They arrested a Bolivian national and Argentinian national. Both were charged with trafficking and criminal association offences.
AFP Detective Superintendent Morgen Blunden said every kilogram of drugs seized internationally reduced harms in Australia.
Prefect Inspector of Chile's police Erick Menay said agencies' co-operation "dismantled" an organisation dedicated to the shipment of cocaine from Chile to Australia.
"This investigative process also made it possible to identify methods of operation and financing through cryptocurrencies, reaffirming our commitment to the development of specialised investigations to pursue criminal organisations," he said.
Both Australian men appeared before Downing Centre Local Court on Wednesday and were refused bail.
They will return on December 9.
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