Japan and Chile finalized the details Tuesday of their bilateral free-trade agreement, which will eliminate all tariffs on 92 percent of bilateral trade in terms of value within 10 years, officials said.

Foreign Minister Taro Aso and his Chilean counterpart, Alejandro Foxley, who is in Japan on a three-day visit through Wednesday, signed the agreement, Japan's first FTA with a South American nation, Tuesday evening.

Japan and Chile will grant each other most-favored-nation status in the areas of investment and services, the officials said.

Foxley urged Japanese firms to invest more in Chile, stressing that its economy is rapidly expanding and can be a gateway to South America. Economic growth of more than 5 percent is now forecast for business 2006.

"This is still merely an starting point," Foxley told reporters after signing the free-trade pact with Aso.

Asked why Tokyo chose Chile as a free-trade partner despite expected opposition from Japanese farmers, Aso argued that the pact will benefit consumers and that Chile is an important partner, given its stable democracy and open economy, including FTAs with more than 40 countries.

Japan is currently the second-largest export market for Chile, behind only the United States. The pact will eliminate tariffs on 90.5 percent of Chile's exports to Japan in terms of value, the officials said.

Chilean exports to Japan totaled 565.4 billion yen in 2005, with copper-bearing ores accounting for 38 percent, molybdenum-bearing ores 17 percent, and salmon and trout 9 percent.

Currently, tariffs are imposed on about 30 percent of all Chilean products in terms of value.

For Japan, the pact will abolish tariffs on 99.8 percent of the nation's exports to Chile, which amounted in 2005 to about 104 billion yen, the latest available figure. Automobiles accounted for 63 percent of total exports.

Tariffs are currently imposed on almost all Japanese imports, the officials said.