I thought I'd put in a note about my experience with a comparable program in Singapore called iJam. A very similar thing, though at the time it didn't include office space or travel expenses - basically a government managed micro-grant of $30,000, repayable only if you make $2MM in revenue.
I was also very frustrated by the amount of bureaucracy and the difficulty in getting payments - much of the time whether or not payments made it through was based on personal relationships. In fact at one point our payments were suspended simply because one of the advisors on the review committee didn't like us. In the end we got our cash - but lost a lot of time and ultimately didn't find it to be worth it. A better approach for us would have been to find a supportive early investor.
However, all of that said - even in Singapore, with its reputation for completely clean government - the program was riddled with conflicts of interest, double dipping, and other problems that led to a fair bit of controversy. So I understand the need to put stricter controls on how the money is doled out.
Net - this isn't so much about Chile, but rather about governments trying to be investors - they can't move quickly, they are not profit motivated, and they tend to rely on relationships rather than merit in the absence of clear guidelines.
I'm hopeful that the Chileans will figure out a clean set of rules that apply to everyone equally which will make equitable the tradeoffs between the free money and the pain of dealing with some bureaucracy.