Philadelphia (Reuters) - Chile advanced to the quarter-finals of the Copa America on Tuesday after two goals in the first half from Eduardo Vargas and two in the second from Alexis Sanchez gave them a 4-2 win over Panama in Philadelphia.

The defending champions will play Mexico in the next round on Saturday. Argentina will play Venezuela as group winners.

"This was important for me and for the team," said Vargas. "It has boosted our confidence for the games to come.

"We are Copa America champions but we haven't played as well as we did in the last Copa America and this will give us confidence."

Chile went behind to an early goal but roared back thanks to outstanding performances from their front pair, who ran the Panamanian defence ragged.

Panama took the lead in the fourth minute thanks to a mistake by Chilean goalkeeper Claudio Bravo, who let Miguel Camargo's shot from almost 30 metres out squirm through his hands and into the net.

Chile fought back and were soon 2-1 up.

Artur Vidal and Sanchez worked a one-two in the box after 14 minutes and Sanchez's shot was only parried by Jaime Penedo and Vargas followed up to smash it home.

Three minutes before half time striker Vargas rose to glance home a header to put Chile ahead.

Sanchez was in captivating form and scored one of the goals of the tournament after 49 minutes.

Vargas was the provider this time, creating space for himself in the box before chipping to Sanchez, who volleyed home in spectacular fashion.

Panama kept fighting and pulled one back after 74 minutes and again Bravo was at fault, failing to stop Abdiel Arroyo's header from going in at his near post.

Sanchez had the last word, however, when he rose unmarked to head home a cross with two minutes left to make it 4-2.