The Iranian government has agreed to help Venezuela set up a plant to make industrial molds for producing machine parts, an official said Thursday.

Iran's Mining Ministry signed an agreement to advise Venezuela on installing the plant, Valmore Vasquez, the Basic Industries and Mining Ministry's deputy minister of investment promotion, told the state-run Bolivarian News Agency.

CountryWatch: Iran

Iranian specialists are to advise Venezuelans on technology and other matters for the plant that will manufacture molds, which in turn are to be used in factories for making various machine parts.

President Hugo Chavez has sought close ties with Iran since he took office in 1999. He also has said Venezuela should export less of its raw materials, such as iron, and instead develop local industries to turn out finished products.

CountryWatch: Venezuela

Bilateral trade last year between Iran and Venezuela was valued at about US$1 billion. Iranian investment in Venezuela already includes a production line for tractors and several housing projects.

In a visit to Iran over the weekend, Chavez was awarded the country's highest medal and invited Iranian oil companies to invest in the South American country, a major oil producer which also has vast natural gas reserves.