Unhappy at his lack of playing time in Italy, the Chilean may leave for Spain in a bid to find regular action, and the Catalan club are thought to be keen on a temporary switch
Vargas, who arrived in Italy following a €13.6 million move from Universidad de Chile, failed to break into the first team and has yet to score for his new club in 13 appearances.
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Espanyol would pay €405,000 towards the deal, and would also take on a large percentage of the Chilean's annual salary.
Cristian Ogalde, Vargas' representative, is in Barcelona to meet with Ramon Planes, director of Espanyol, with both parties confident a deal can be struck.