A very interesting yet unknown fact about the sloth family is that there was an amphibious sloth!
The first creature of this sea-going sloth group, discovered in the late 1970s, was named Thalassocnus natans  , which means “slow-swimmer of the sea” (thalassos is Greek for “sea”, ocnos for “slow”, and natans is Latin for “swimming”).
We now know that there were at least five of these swimming sloths that lived along the Peruvian sea coast between 6 and 1.5 Million years ago. This was a surprising discovery because all known sloths until then, were terrestrial.
They probabily started out as beach-combing animals and then evolved into sea-going beings that waded or swam into the Pacific Ocean where they fed on algae and other sea plants.
Thalassocnus had a series of features such as the ability to move its tail up and down as an aid in swimming, the way otters do.
Another species of this group known as T. yaucensis had evolved into a creature that resembled the sea lion.
It had evolved well to adapt to its marine environment, its jaws grew longer and slimmer in comparison to its terrestrial relatives, perhaps to allow it to graze on the kelp with slender jaws and strong lips while it grasped the seabed with its claws.
The later species have less dental erosion (striae) on their teeth than the older ones, which may indicate less sand (which caused these grooves in their teeth enamel) in their diet, and therefore, that they swam further away from the shore to feed.
The dry coastline which offered little food may have driven these sloths to the sea, where marine plants grew in abundance.
An interesting question is whether it had a fur (like seals or sea going otters) or was it “naked” like whales and sirenids. Perhaps it shed the thick fur of the ground sloths for a lighter pelt. It may have also developed a thick layer of fat under its skin.
Marine sloths and Patagonian lake monsters
No marine sloth remains have been found in Patagonia or in southern or central Chile, so we can not state that extant members of this group may have originated the myths regarding Patagonian lake monsters.
However, it would not be too far fetched to believe that they expanded southwards, along the Pacific rim, towards Southern Chile.
There they could have continued their evolution, and even become fresh water creatures.
These may have later, (after the Ice Ages) colonized the newly formed Patagonian lakes originating the "lake monster" myths in Patagonia.
Of course, all of the above is speculation and has no backing whatsoever. But it is an interesting thought. Perhaps one day marine sloth remains may be uncovered in the region.
For those interested in the science details of the "real" Peruvian marine sloth, you should read Muzion’s paper to which a link is given below .
 Muizon, C. de & McDonald, H. G. (1995). An aquatic sloth from the Pliocene of Peru. Nature 375, 224-227. Cited in: Ten things you didn't know about sloths. 30.01.07. Darren Naish. Tetrapodzoology.
 The Giant Swimming Sloths of South America. 07.02.07. Brian Switek. Laelaps.
 Christian de Muzion, H. Gregory McDonald, Rodolfo Salas, and Mario Urbina,(2004). The youngest species of the aquatic sloth thalassocnus and a reassessment of the relationships of the nothrothere sloths (mammalia: xenarthra). Journal of Vertebrate Paleontology 24(2):387–397, June 2004 q 2004 by the Society of Vertebrate Paleontology.
 Image source: http://darwiniana.org/NewFossilMammals.html
Patagonian Monsters - Cryptozoology, Myths & legends in Patagonia2010 International Year of Biodiversity Copyright 2009-2010 by Austin Whittall ©