Chile and the United States have agreed a free trade pact after 11 years of talks, both countries have said.

We have reached a good agreement with the United States President Ricardo Lagos

Chile's President Ricardo Lagos said the trade deal would "mean more jobs, more work, more development, more growth" for the South American country.

US Trade Representative Robert Zoellick said the pact would abolish tariffs on 85% of consumer and industrial goods.

Negotiators from both countries held a marathon overnight session in Washington on Tuesday to iron out final disagreements.

Farmers to benefit

"At dawn today a very important step has been accomplished," President Lagos said in the Chilean capital, Santiago.

"We have reached a good agreement with the United States, and Chile will have a free trade accord with the US".

Mr Zoellick told a press conference in Washington that the pact would bring the abolition of 75% of Chilean tariffs on US agricultural goods within four years.

All agricultural tariffs between the two countries will be scrapped after 12 years.

Mr Zoellick was flanked by Chile's foreign minister, Soledad Alvear, who led the Chilean delegation.

The negotiating teams reached agreements on labour, the environment, agriculture and financial services, the Chilean newspaper La Tercera de la Hora reported on its web site.

Praise for Chile

Before the pact can be signed, further talks must take place to polish the final legal wording but these are expected to be a formality.

The negotiations began in the early 1990s and were stepped up two years ago as part of US attempts to create a Free Trade Area of the Americas (FTAA) embracing the whole of North and South America.

Chile signed a free trade deal with the European Union earlier this year.

Earlier this month, Chile was praised by Alan Greenspan, chairman of the US central bank, for its responsible approach to economic and fiscal policies.

The International Monetary Fund (IMF) has also given Chile a good report for its response to the risk of economic crisis in South America after Argentina sank into political turmoil.

Chile is suffering from weak economic growth: the IMF has cut its predictions for this year to 2.6% from an earlier forecast of 3%.