My husband is from Argentina and he definitely disagrees with his country's harboring of war criminals. In fact, I think most of the citizens did. There was and is a huge disconnect between the people of Argentina and their government. I imagine the Nazis paid to be sheltered there. The crooked politicians benefited, not the everyday people.
With that said, the teacher certainly knew who Hitler was. He either didn't look closely at the photo and didn't give it much consideration or he was trying to cover his ass with the school administration. Certainly the incident should have been investigated further.