If I am not mistaken (and I am quite often) that wood is Mahogany which is a little cheaper than Teak.
Is that the coaming board (around the cockpit) or is that the rudder?
In any case the little buggers and/or rot has made some nice holes in the piece you were thoughtful enough to photograph and post.
Your cheapest option is to do as gulfcoatscruizer suggests and use epoxy with some colloidal silica filler to fill the voids that were created. Interestingly the 'micro-balloon' (or 'Microlight' fairing) filler has a similar color to Mahogany so your last coats could be epoxy mixed with that filler. I am using terminology from the West System epoxy stuff: WEST SYSTEM Epoxy
I would not be recommending it if I have not used it. It is easy to use if you know how to read and take the time to thoroughly browse their instructional pages.
If you are a purist and good at working with wood you might consider replacing the entire piece(s) with new Mahogany that you cut to the size of the original piece you have removed. You might have to laminate (join) 2 pieces together (plain marine epoxy) to get the resulting thickness that you want but this would add strength rather than weaken it.
This is totally your call as it is your boat and your budget.
Do let us know how it works out for you.