LAST EDITED ON 06-13-13 AT 10:50 AM (EST)... but peaceful escorts aren't allowed and clearly mergers can't exist.
This is essentially correct. Matt would have to attack Eric's single army in Brazil and take it out in order to move there. And the same for Eric, he would have to attack Matt's single army in Venezuela to advance toward North America, which is probably the wisest move with Sophie still spread out. Once she gets the extra 5 armies for holding North America, she'll be a tough nut to crack from South America.
You also get one free move, any sized army, from one territory to an adjacent territory that you hold at the end of your turn.
Critically, you also have to take at least one territory to earn a card at the end of the turn, so Matt and Eric might end up ping-ponging territories held by only a single army to keep losses down. I'd say they're both between a rock and a hard place, squeezed together in the smallest continent.