Well, it happens on UA too
Denied boarding (on UA) because didn't have Visa for China, though only connecting there.
That said, DL should have made this right by immediately rebooking OP's associate on another airline that got him into São Paulo as close as possible to the original itinerary or at least put the associate in BE that he was rebooked on to for the following day.

As was pointed out in the UA thread that I posted above, do these agents not know how to use TIMATIC?