First because some companies are already generating revenues and spending that cash locally. Add those inflows to the matching funds participants are expected to provide (most end up spending more) and it's clear Chile's exposure per startup is lot less than $40,000. And that's without considering the multiplier effect all this spending has on the local economy.
How the exact numbers run will depend on how they pick the teams, but I'm guessing that if two to three percent of the participants take investment or stay on permanently the program will be a net plus. Which makes it an income transfer if it works - but one from other parts of the world to Chile. And it's a good deal for entrepreneurs too so what is not to love?
He said that due to the cost of living, he was able to employ some very smart individuals who he wouldn't be able to afford to pay if he lived, say, here in Ireland. And mentioned that other startups were doing the same.
So even if it's not a requirement it happily happens anyway due to economics/cost-of-living/etc which sounds great.
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.