UPDATE 12-First of Chile's Trapped Miners Is Rescued

* First rescued miner is a father of two

* Men trapped for record 69 days after cave-in

* Men will be hoisted out one at a time

(Updates with first miner rescued)

By Cesar Illiano and Terry Wade

COPIAPO, Chile (Reuters) - The first of 33 trapped miners was pulled to safety in a capsule barely wider than a man's shoulders early on Wednesday, an emotional breakthrough as a two-month ordeal inside a Chilean mine neared its end.

Rescuers, relatives and friends broke into jubilant cheers as 31-year-old father-of-two Florencio Avalos emerged on the surface to breathe his first fresh air in 69 days after a claustrophobic ascent of around 2,050 feet (625 meters) through thick rock.

Rescuer Manuel Gonzalez took 17 minutes to descend the shaft and he was hugged by the waiting miners. He then took just minutes to buckle Avalos into the capsule and send him to the surface.

Relatives rushed to hug and kiss Avalos, who walked out of the capsule looking healthy after his nearly 16-minute ascent. He was then embraced by President Sebastian Pinera as the surrounding crowd chanted "Chile! Chile!"

The men have spent 69 days in the hot, humid bowels of the gold and copper mine in Chile's northern Atacama desert. For the first 17 days, they were all believed to be dead, and their record-breaking story of survival has captured the world's attention.

Nervous wives, children, parents and friends waited on an arid, rocky hillside above the San Jose mine on Tuesday night as rescue teams started an evacuation expected to take up to 48 hours.

Pinera earlier sang to the strums of a guitar played by Mining Minister Laurence Golborne around a campfire as relatives waited anxiously for their loved ones.

The specially-made steel cages are equipped with oxygen masks and escape hatches in case they get stuck.

Jessica Salgado's nerves jangled as she waited for her husband Alex to emerge.

"The first thing I'm going to do is hug him hard, tell him how much I love him and how I've missed him all this time," she said.

Rescuers Monday successfully tested a capsule, dubbed "Phoenix" after the mythical bird that rose from the ashes, after reinforcing part of the narrow escape shaft with metal casing to prevent rocks falling and blocking the exit.

Engineers said the final stage of the rescue still has its risks but that the capsule is handling well in the shaft, and they expected a smooth extraction.

Each man's journey to safety should take about 15 minutes. The capsule travels at about 3 feet per second, or a casual walking pace, and can speed to 10 feet per second if the miner being carried gets into trouble.

The miners can communicate with rescue teams via an intercom in the capsule.

They have been told to keep their eyes closed and will be given dark glasses to avoid damaging their eyesight after spending so long in a dimly lit tunnel. They will then be under observation at a nearby hospital for two days.

FOUND ALIVE

Rescuers originally found the men, miraculously all alive, 17 days after the mine's collapse with a bore hole the width of grapefruit. It then served as an umbilical cord used to pass hydration gels, water and food, as well as letters from their families and soccer videos to keep their spirits up.

The men have set a world record for the length of time workers have survived underground after a mining accident, and have been doing exercises to keep their weight down for their ascent.

Medics say some of the men are psychologically fragile and may struggle with stress for a long time after their rescue.

President Pinera, who ordered an overhaul of Chile's mine safety regulations after the accident, arrived at the mine on Tuesday and met with the miners' families.

Every Chilean TV station was saturated with coverage of the rescue operation.

"Everyone is following the rescue step by step. We are a Catholic country and we see this as a real miracle," said Maritza Gonzalez, a 50-year-old housewife in the capital city, Santiago.

Many relatives held vigils over the past two months at a tent settlement dubbed "Camp Hope" above the mine, and more people joined as the climax neared.

One of the 33 miners is a Bolivian national and Bolivian President Evo Morales was expected to visit the mine in the early morning hours of Wednesday. (Additional reporting by Antonio de la Jara, Juana Casas and Brad Haynes in Santiago; Writing by Simon Gardner and Hugh Bronstein)