I have come to Axis&Allies from more “serious” war games like World in Flames. These types of games attempt to simulate the political realities of the war. If the UK invaded South America and militarized these conquered regions the US would have gone into isolationistic hibernation. In fact, we might have invoked the Monroe Doctrine and declared war on the UK.
If you want to follow a more historical path then simply add these powers to the Allied side following Japan’s use of its sneak attack. Many of these powers declared war on the Axis following this event. Heck even Argentina will eventually declare on Germany and Japan.
Flip to Pro-Allied after Japan Sneak Attack and US in the war
Mexico
Colombia
Venezuela
Brazil
Peru
Liberia
Flip to Pro-Allied once Holland falls (Poor Belgium doesn’t even get a space :) )
Belgium Congo
Chile remains Strict Neutral
Saudia Arabia flip Pro-allied once Germany attacks someone.
Portugal should provide its IPC (1) to Germany once France falls. (Germany influence Portugal to sell its Tungsten to Germany.)
Allies can not declare war on Portugal. However they may treat the Azores as a pro-allied space. UK has 500 years of alliances with Portugal and had agreements with Portugal regarding the Azores.
Mongolia flips to Pro-Russian if Japan and Russia are at war. Russia may not activate pro-allied nations.
Since I am not a veteran A&A I am not sure the effect on play balance, however it is simply wrong to allow UK to activate or invade regions in South America without a penalty to US entry.