The 23-year-old forward has been the subject of great interest from South America and after negotiations with Sao Paulo broke down, Napoli's sporting director Riccardo Bigon has revealed that Gremio are now in pole position for the Chile international.
“Something happened with Vargas that I’d never seen before,” he told Sky Sport Italia.
“He received many offers from South America and we are set to complete a transfer within hours, so it could be made official tomorrow.
“This shows the huge interest around Edu, who will gain experience in a different league. It will be a six-month loan with a series of options, but they will not have the option to buy him outright.”
Bigon also moved to play down rumours linking the Naples club with a move for Manchester City striker Mario Balotelli.
“It is a very complicated situation and we are complete in terms of our strikeforce," he added. "It is a situation for the future.”