The exact quote goes as follows: “Apparently it’s a river dolphin, which among other strange characteristics, has genitals similar to those of a woman. So, the Indians use it as a substitute, but they must kill the animal once they’ve finished coitus because the genital area contracts and the penis cannot come out.”
Did Che actually observe this? Who knows.
Is this in line with Amazonian culture? Absolutely. As a Brazilian saying goes, O boto e um homem perfetio e a bota e a mesma a mulher, "The boto is a perfect man and the bota is the spitting image of a woman."
The Amazonian river dolphin, boto in Portuguese and bufeo or buejo in Spanish, figures prominently in indigenous cosmologies. It is a swift, elusive animal that is unlike any other in the Amazon and, in its own mammalian way, is more human than any other aquatic creature. They are wily, shameless sneaks who deceive and lure in lone humans, but they are also powerful, "enchanted" beings who may grant shamans great abilities. Their body parts are valued across South America as potent amulets or medicinal ingredients. (Though some folks who chemically analyzed ground dolphin penis found that much of the stuff sold as aphrodisiacs is fake). There's enough lore surrounding them that Candace Slater has written an entire book from her field experiences in Brazil. The tales that we're interested in have also been recorded by Laura Rival among the Huaorani of Ecuador, by Juan Carlos Galeano in Colombia and Iquitos, Peru, and by Mark Cravalho and Mark Harris in far western Brazil. What tales are those? Ones in which dolphins have sex with people, of course.
The stories certainly do not begin with Che. Joao Daniel, an early 18th-century Jesuit missionary, described a "man-fish" that would lure desperate men and women to their death and compared it to the European mermaid. Later accounts suggest these might be human-dolphin offspring, but neither Daniel nor any other colonial author mentions such intercourse. The first definite connection between the boto and sexuality is in an account from Englishman Henry Bates from 1863:
Many mysterious tales were recounted about the Bouto, as the large Dolphin of the Amazon is called. One of tthem was to the effect that a Buoto once had the habit of assuming the shape of a beautiful woman, with hair hanging loose to her heels, and walking ashore at night in the streets of Ega, to entice the young men down to the water. If anyone was so much smitten as to follow her to the waterside, she grasped her victim around the waist and plunged beneath the waves with a triumphant cry. [as quoted in Harris 2013]
Similar tales are reported by each of the mentioned ethnographers. Male dolphins may also appear as young, half-naked men, or the dolphin may appear as a mysterious person dressed in white who is constantly evading the gaze of those it visits. Camara Cascudo mentions that these male dolphins are great partiers:
In the first hours of the night he transforms himself into a handsome young man, tall, white, strong, a great dancer and drinker, and he appears at the dances, courts, converses, frequents gatherings and faithfully attends encounters with females.
Rival also notes that botos, when on land, love to drink and dance; Carvalho records this story about a dolphin named Roubim:
There was a social hall in the aningal (area of ananga plants) where a handsome young man always appeared. He would go to the room with women, drink beer, leave and return again when there was a party, and never paid his bills. Roubim had come again and asked for a drink, telling the proprietor that he was going to pay. The proprietor told his men to go after him when he left. They did, and shot at him. Roubim jumped into the water and turned into a dolphin, leaving a cape behind.
Unlike in Che's account, it is usually the human who comes away worse. The Roubim story ends with a girl who wanted to see the dolphin returned to the water fall sick and, being immune to the shaman's help because she ate food offered by Roubim, die in the doorway of the shaman's home. Women impregnated by dolphins, or other animals, may be devoured from the inside. Men embrace a beautiful women whom they cannot release and which brings them into the river to drown them; children at play may be distracted by the rare good look at a boto and fall into the river. In a similar theme, Rival gives us the closest account to Che's:
The only myth about male beastiality relates the story of a man who finds the genitalia of the nutria (Amazon dolphin) identical to, and far more desirable than, those of a human female. He derives so much pleasure from copulating over and over again with the she-dolphin that he ends up wasting all his blood and semen, drowns and dies in his animal lover's dwelling at the bottom of the river.
Slated likewise mentions, in passing, similar stories in indigenous communities. There is at least one story in which the animal lover must be killed, however. Huaorani women and girls love to talk about the cuica, a giant earthworm that enters unsuspecting women and gives them great pleasure. Once the woman discovers the source, they seek out the cuica- until a female relative sees it as an addiction and kills the worm. (Of course the woman also dies in her sorrow for the worm.)
The perceived similarity between humans and dolphins, as mentioned in the opening saying, is well documented. Slater quotes an informant:
It's true dolphins don't have legs, but otherwise, they're just the same as people. That is, of course, in some respects. You know what I mean!
She notes that the dolphin vagina is "roughly comparable to that of a human female," but that comparisons extend beyond genitalia to other aspects associated with reproduction: the boto is said to have human breasts, pubic hair, underarm hair, and menstruation cycles.
There are various interpretations of these tales. I'm keen to side with Slater on this matter, who mentions that the specific stories of human male-female dolphin intercourse are told by so many different groups that each element may take on any number of meanings depending on the cultural context. That said, Slater does paint a broad image of the boto as representative of foreign/white/urban/captialist encroachment on Amazonian territory. Interestingly, her work is mostly with what appear to be "mestizo" populations- Henry Bates even notes that boto myths were first told by Europeans. I'm more convinced that boto stories deal primarily with categories of sex and nature. Rival considers them warning tales about unfettered, pure sexual desire, and Galeano met a Peru shaman who gave abstinence as a cure for maladies caused by contact with "enchanted" beings. Carvalho extrapolates on Slater's idea of the dolphin as a stranger, emphasizing their dangerous, erotic qualities- human relations, particularly sexual ones, are filled with uncertainty. The boto stories, for him, fulfill too many fantasies and norms of machismo influenced gender ideology to also be a rebellious engagement with them. Similarly, the human-nature relation is unstable and constantly negotiated as humans encounter an unknown other. The boto as enchanted being again represents uncertainty and unknowing- it becomes human only at night, and the cure for sickness from a boto encounter, or with other animals, is always found with the shaman and their knowledge.
But back to the original question. I can find no eyewitness accounts of these events. The cited authors even explain that stories are rarely first person, and, if they are, they happen to the narrator when they are part of a group. The elusive nature of the river dolphin makes any story of physical encounters with a live individual hard to believe. Quite interestingly, that's the most fictive part of Che's anecdote. He's taking what seems to be a folktale at face value, but he's not making it up.
Cravalho, Mark A. “Shameless Creatures: An Ethnozoology of the Amazon River Dolphin.” Ethnology 38, no. 1 (1999): 47–58. https://doi.org/10.2307/3774086.
Galeano, Juan Carlos. Folktales of the Amazon. Westport, Conn: Libraries Unlimited, 2008.
Harris, Mark. “Enchanted Entities and Disenchanted Lives along the Amazon Rivers, Brazil.” In The Social Life of Spirits, edited by Ruy Blanes and Diana Espírito Santo. University of Chicago Press, 2013.
Rival, Laura. “What Kind of Sex Makes People Happy?” In Questions of Anthropology, edited by Rita Astuti, Jonathan Parry, and Charles Stafford. Berg, 2007.
Rival, Laura, Don Slater, and Daniel Miller. “Sex and Sociality , Sex and Sociality: Comparative Ethnographies of Sexual Objectification , Comparative Ethnographies of Sexual Objectification.” Theory, Culture & Society 15, no. 3–4 (August 1, 1998): 295–321. https://doi.org/10.1177/0263276498015003015.
Slater, Candace. Dance of the Dolphin: Transformation and Disenchantment in the Amazonian Imagination. University of Chicago Press, 1994.