Santiago: South America's Silicon Valley?

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(CNN) -- Finding enough capital to give a burgeoning business its best shot of success is a challenge that faces many budding entrepreneurs.

So when Mariano Kostalec heard about the Start-Up Chile initiative, he was intrigued.

The government funded project offers high potential global start-ups a $40,000 investment. No equity is ceded and the only requirement is that at least one member of the team remains in the country for six months.

The aim is to turn Santiago into South America's Silicon Valley.

"Looking at what's happening in Argentina at the moment my expectations were actually quite low in a sense," Mariano told CNN's Rosie Tomkins.

"So I came here and I've been actually quite impressed with the country, with the way you can come here and you can set up your business and you know things are going to work the way they tell you.

"You can actually trust people and that's really important."

Mariono's company Uniplaces - an online platform that connects students with landlords - was one of hundreds selected through a specialized admission process conducted by Silicon Valley experts and the Chilean Innovation Board.

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By the end of Start-Up Chile's first phase in 2014 it will have provided grants to 1,000 firms for a total of $40 million.

Its critics say it's a waste of government funding, and won't produce any long term benefits. It's a claim the Chilean President Sebastian Pinera refutes.

He said: "We're importing and bringing to Chile people that have good ideas, entrepreneurship capacity and the ability to start a business here.

"What they will teach to our people is very, very valuable."

Pinera's goal is to brand Chile as South America's innovation and entrepreneurial hub.

The government claims one quarter of those taking part in the project are likely to stay on once their time is up. If they remain in Santiago they'll help bolster confidence in Start-Up Chile and stimulate the economy. If they go, they help spread the word that Chile is open for enterprise and innovation.

It's a direction the country has been moving in for decades. It became the first South American nation to join the OECD in 2010 -- an international organization set up to stimulate democracy and free markets.

John Njoko, the founder of Kwelia, a real estate analysis company, has also reaped the benefits of the Start-Up Chile Project.

"On the corners and on the margins there's still room for improvement," he said.

"We had very limited expectations. But we came here and we needed to build, and we put our heads down and we built."

Such hardworking attitudes are music to Sebastian Pinera's ears. He firmly believes the key to Chile's future success centers around building ties with other countries through business.

"I think that's the right path for Chile to become a developed country," he said.

A previous version of this story stated Start Up Chile required entrepreneurs to open an office in Chile to qualify. This is not the case.