The Foxes are still to agree personal terms with the Internacional star who has previously been linked with a move to Arsenal, where he would have teamed up with fellow countryman Alexis Sanchez.
Leicester City, now managed by former Chelsea boss Claudio Ranieri, avoided relegation to the Premier League after a fine run of late season form under Nigel Pearson.
If Charles Aranguiz is brought in for a £10.5m sum then the deal will represent a club record for the King Power Stadium side who have already invested heavily in new additions this summer.
Leicester City have signed Japanese international Shinji Okazaki, experienced centre-back Robert Huth and Bundesliga left-back Christian Fuchs.
The 26-year-old played a key role in Chile’s 2015 Copa America triumph this summer and is a versatile talent who can play either in a central midfield role or out on the right-wing.