A relay running in South America could do more bad than good, as it would increase the average latency
I was also thinking about that. "Does improving geo-diversity negatively affect latency?"
and I agree with you that the example (more relays in South America) would probably increase avg. latency for European users but at the same time has a change to decrease latency for e.g. Brazilian users.
So in the end the question is where are most of your users? And what is your optimization goal/what is your priority? (a low worst-case latency for all users or a low latency for most of the users) https://metrics.torproject.org/userstats-relay-table.html
I would still prefer having more relays in uncommon locations even if that comes with an (acceptable) latency penalty. Whatever 'acceptable' is.
Since the question "How does a good relay look like and where is it located?" is a non-trivial one and because Roaster is effectively codifying the (Torproject's?) answer to it I'm also interested in the outcome from this point of view.