However, the Irish U20's, featuring City trio Paddy McCarthy, Willo Flood, and Stephen Elliott, fought back in the last five minutes.
First, Cork City's Kevin Doyle scored before a last gasp equaliser from City's McCarthy. In the third minute of injury time the tall defender headed home a free-kick to take the game into extra-time.
But the South Americans progress as they snatched a golden goal on 104 minutes when the Irish had a man off injured.
Both McCarthy and Elliott, who scored three goals in the tournament, played throughout, with Flood being replaced on 80 minutes.
City's Glenn Whelan was suspended after receiving a second yellow in the 2-0 defeat of Mexico in the final group game.