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For approximately 20 million years, between 23 and 3 million years ago, South America was an island continent, with its own unique fauna. The starting point for this diversification was inherited from the supercontinent Gondwana, which consisted of South America attached to Antarctica (which was forested at the time) and Australia for about 150 million years. This unique Gondwanan fauna included numerous marsupials (now divided between Australia and South America), including carnivorous marsupials, ratites (represented today by the rhea, emu, and ostrich), a diverse avian fauna, and unique plants, including many cycads (considered living fossils) and family Proteaceae, with beautiful pink and white flowers. Many of these are not extinct animals or plants, but large numbers of their relatives have gone extinct in the last few million years.
Because what we consider to be "typical mammals" evolved in North America and Eurasia, South America did not possess these until it linked up with North America just 3 million years ago, an event known as the Great American Interchange. Before that, the endemic mammals of South America consisted of marsupials, xenarthans (armadillos, anteaters, and sloths), many diverse ungulates (extinct order Notoungulata -- "south ungulates"), litopterns (odd long-nosed mammals that played that role of mid-level browsers, like camelids and horses on other continents), astrapotheres (sometimes called "a cross between a small elephant and a large tapir"), and pyrotheres (large, mastadon/tapir-like ungulates). The majority of these are extinct animals. The entire clade of endemic South American ungulates, the Meridungulata, consists of extinct animals.
Unlike Afro-Eurasia, which was dominated by placental mammals, and Australia, which was dominated by marsupials, South America was a unique evolutionary battleground where placentals, marsupials, and a few odd others ("Terror Birds") competed with each other for supremacy. In the end, the marsupials and the Terror Birds lost out, overwhelmed by Afro-Eurasian placentals which invaded during the Great American Interchange. Many of the marsupials that have not joined the ranks of extinct animals are small and live high in the Andes mountain range, the longest mountain range on Earth. Some of the extinct animals that lived in South America categorized as marsupials include Thylacosmilus, a saber-toothed marsupial predator, and the borhyaenids, otter/wolverine shaped marsupial predators. Opposums were omnipresent and more numerous than today.