I'm kind of beginner so maybe I'm wrong, but I understand it as "The LATAM sky sadly blue" but I don't really get the meaning behind the words. Since Japanese language is a lot about context, I will publish the whole sentence.
街並みがあまりにもヨーロッパに似ているのも、それなのにくっきりと濃い、南米特有の悲しいほど青い空に、ジャカランダの木が枝を伸ばしているのも、新鮮だった。
It basically means the writer (or the character in focus) is being overwhelmed or upset at something, "the blue sky" in this case. I think there often is a certain sense of conflicted emotion with this 悲しいほどに, like "I should like it but this is too much", when used with normally positive concepts. It's also a bit unusual, poetic expression. You are more likely to see it in songs and novels, than in daily conversation and a (non-artistic) professional setting. If I were to translate it, I might choose "disturbingly" or maybe "overwhelmingly" rather than something that involves "sadness".
悲しいほどに美しい is another typical phrase that uses 悲しいほど in this sense. It can be used to describe an ephemeral/stoic kind of beauty, rather than one that (merely) provokes pleasure.
