Only about one-in-four adults have the same problem, the report adds.
It says the disparity between children and adults is even greater in terms of lack of access to sanitation.
The authors of the study call for improvements in water privatisation programmes, to include greater community involvement.
Minorities badly affected
The report, co-written by the UN's Economic Commission for Latin America and the Caribbean and the children's fund, Unicef, says the problem is a threat to nearly 21 million children under five in the region.
The worst affected groups are black and indigenous children, particularly in Nicaragua, Honduras and Bolivia, it says.
"Thousands of cases of infant mortality and malnutrition could be avoided every year with substantial improvements in access," the report says.
Last November, a report from the United Nations Development Programme (UNDP) demanded a big increase in spending to provide clean water in developing nations. The UNDP wants another $4bn (£2bn) a year spent, and says that water has not received the attention it deserves.
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