Speaking in Chile, he said Latin America was fundamental to the prosperity and security of the US.
Mr Obama praised the region for its dynamism, saying it was ready to assume a greater role in world affairs.
He added that Latin America's political experience could be a guide for other peoples seeking democracy.
Mr Obama is in Chile on the second leg of a tour of Latin America that has been overshadowed by US-led military action against Libya.
"The world must now recognise Latin America for the dynamic and growing region that it truly is," he said.
He added that the transition from authoritarian rule to democracy in the region - and in Chile in particular - could be a model for other parts of the world.
"At a time when people around the world are reaching for their freedoms, Chile shows that, yes, it is possible to transition from dictatorship to democracy, and to do so peacefully," Mr Obama said.
Mr Obama stressed the importance of US trade relations with the region, saying the US bought more Latin American products and invested more in the region than any other country.
Mr Obama emphasised shared historic experience and democratic values.
"We are all Americans," he said. "There are no senior partners or junior partners, only equal partners".
Mr Obama acknowledged that in the past relations had sometimes been difficult.
"I know that, at times, the United States has taken this region for granted," he said.
And the US president said progress in the Americas had not come fast enough, highlighting enduring corruption and "stark" inequalities.
He said criminal gangs and drug cartels posed a direct threat to democracy and economic development in the region.
But he said the US accepted its shared responsibility for the problem and would boost security cooperation while implementing a strategy to reduce demand for drugs.
Mr Obama also criticised the communist government in Cuba, urging it to "respect the basic rights of its citizens".
"We'll continue to seek ways to increase the independence of the Cuban people, who are entitled to the same freedom and liberty as everyone else in this hemisphere," he said.
Mr Obama arrived from Rio where he praised Brazil as a model of democracy.
From Chile, Mr Obama heads to El Salvador for talks with President Mauricio Funes.
Rising crime and insecurity in Central America is concerning US officials.