Actually the government is displacing whatever private venture market exists in Chile. If there is a lack of venture capital in Chile, the government should address the taxes and regulations that are stifling startup activity.
The Chilean government is actively facilitating the growth of private venture markets by reducing taxes on venture gains to a point far below those in the United States. Part of the point of this program is attracting high growth businesses into an environment where local financial networks can invest at their own risk and connect with networks outside Chile.
If you believe in markets you should realize the Chilean government is doing something innovative and pro-entrepreneur at very low initial cost and likely negative cost in aggregate. I'd put it in the same boat as the matching funds programs run by Hong Kong and Singapore, with the major difference that the individual sums invested are much smaller and there is less bureaucracy involved.
