In a pair of matches involving four Argentine players, Nalbandian advanced by besting Carlos Berlocq 6-2, 2-6, 6-2, while Monaco fell 6-4, 3-6, 6-4 to Maximo Gonzalez.
Monaco had reached the finals of the Chilean event in 2010 and 2008. He fell to Brazilian Thomaz Bellucci in last year's championship match and to Chilean star Fernando Gonzalez three years ago.
Also advancing in Santiago Tuesday were seventh-seeded Italian Fabio Fognini, who downed Poland's Lukasz Kubot 7-6 (8-6), 6-2, and No. 8 seed Santiago Giraldo of Colombia, who rallied for a 2-6, 6-3, 6-2 win over Argentine qualifier Facundo Bagnis.