CHILE and Malaysia are expected to commence negotiations for a Free Trade Agreement (FTA) in Kuala Lumpur in June, said a Latin American news report.

The report by news agency Prensa Latina last week quoted Chile's Palace of La Moneda or the Government House in Santiago as saying that both sides have held preliminary talks.

Chile is Malaysia's third largest trading partner in Latin America.

The FTA talks follow the announcement by Prime Minister Datuk Seri Abdullah Ahmad Badawi when he met Chilean President Michelle Bachelet at the APEC summit in Hanoi November last year.

An FTA, if concluded, would also serve to make Chile a gateway for Malaysian exports to the Latin American market, with a population of 550 million people, and imports worth US$298 billion (RM1.09 trillion).

Trade between Malaysia and Chile rose to RM894 million in 2005 from RM883 million in 2004, with the balance of trade in Chile's favour.

Major Malaysian exports to Chile were electrical and electronic items and iron and steel products, and imports were mainly copper and lead.

Director of Economic Bilateral Affairs of the General Direction of Economic International Relations Andres Rebolledo said Chile already has commercial agreements with Singapore and Brunei.

With the addition of Malaysia, Chile would be closer to Asean, he said, adding that Chile shares a similar economy with that of Malaysia.

Chilean exports to Malaysia totalled US$122.6 million (RM419.2 million) while imports totalled US$188.5 million (RM644.7 million).

Chile signed a bilateral FTA with Japan in late March, considered the first such pact with a South American country for the world's No. 2 economy.