Location

To the right of the topmost Telephone in the lizard area.

You can wake Chinchillas using the Animal Flute. They'll walk over to you naturally if you are in their line of sight. If you want to repel them, use Firecrackers. The chest is in a hidden part of the upper left side of the screen, obscured by darkness. It is right past the first Chinchilla. Simply make your way to the chest and open it.