The 26-year-old from Tauranga was competing in the Whitewater Grand Prix, a seven-stage adventure race featuring the top 30 creek kayakers in the world competing on rivers across the bottom of South America.
Shortly after winning the first stage, the London Olympian was taking action photos of his girlfriend - top Dutch paddler Martina Wegman - when he slipped and fell into the freezing Puesco section of the Trancura River.
"I was swept through a narrow slot and under a rock," Dawson said. "I got pretty trapped and wedged under there and lost sight of daylight. I managed to push and force my way out but, in the process, inhaled water into my lungs.
"I had a bit of hypothermia, was also going into shock and couldn't seem to get my breath so they drove me to the nearest hospital and they transferred me to a larger hospital straight away."
Dawson spent two days in intensive care where he was treated for a lung infection.
While there, medical staff also found a small stress fracture in his back, ruling him out of the rest of the Whitewater Grand Prix and keeping him off the water until March.
"I'm gutted I can't finish this event and had to pull out because things were feeling pretty good after the first stage but a three-month break may be a bit of a blessing in disguise," said Dawson.
"It's been a long, long season and this will be a great chance to take a bit of time off, refresh and work on some other projects. It may even be the perfect preparation for the Rio de Janeiro Olympics in 2016."
Dawson became just the fourth New Zealander - and third Kiwi male - to compete in whitewater slalom at the Olympics when he paddled in London earlier this year. His 15th-placing was just one of a number of highlights as he competed in extreme races around the globe, using the prizemoney to help fund his Olympic campaign.
He won titles at the Teva Mountain Games in Colorado, the Green River race in North Carolina and was third in the Adidas Sickline world championships in Austria.
He'll be cleared to fly out of Chile next week and plans on spending a relaxing Christmas in Holland, before heading back to the Bay of Plenty in mid-January.
"This is not the end of the world, luckily, and I'm already looking forward to making my comeback at the New Zealand nationals over Easter," Dawson said.