Nope. Of course they'd like you to incorporate in Chile and hire Chileans, but it's far from a requirement. In fact, it's not even something they explicitly encourage you to do.
Yeah, this is something I'd expect at the joint co-working offices more than the Start-Up Chile office itself. However, they do leave the doors wide open while people are working there. Anyone can wave at the doorman and take the elevator up to the office for a rummage around. The reception desk doesn't have a good view of who is coming and going from 60% of the office space.
I'd say have $5-10K for out of pocket business expenses after "getting to Chile" expenses. The things that you need to begin the program - plane flights, visa costs, mandatory 6 months of travel health insurance - can easily eat up $5K all by themselves, depending on where you're coming from. The visa fee for UK citizens is almost $1500, for example.
If you don't have enough money to pour in up front, cash flow will drive you crazy. Put together a six-month budget, even if it's loose. Put every expense you can think of in it. Reimbursements can only happen once a month and you absolutely need to plan things out to get the most out of the funding.
Very cool. Not in NY but curious to see how it turns out. Face-to-face is definitely the best way to do an in-depth customer interview, if you can get up the gumption.
One thing I like to do is visit coffeeshops (chains like Starbucks work best) and target people who aren't in a rush or engrossed in work. Being friendly and giving them a gift card (hence the chain coffee shop) for their time works wonders.
Not a direct answer to your question, but: the program accepts Chilean entrepreneurs/startups as well as applicants from other countries. Which doesn't meant there can't be negative sentiment, but locals aren't barred from taking part and getting funded.