Regional integration in the Southern Cone of America has taken place against a backdrop of two processes. The first is the revival of regionalism in the early 1990s as an alternative to the multilateral format of trade liberalization. The second process is a shift in how all Southern Cone economies have pursued growth, from a model founded on import substitution to one based on opening up their trade. The MERCOSUR agreement was created as an instrument to facilitate, jointly determine and drive the integration of these economies as the international economy entered a new stage of globalization. The strategy chosen by the MERCOSUR members for economic integration makes this an ambitious venture. Its model is similar to the European format, developing through a sequence of stages with increasingly close economic relations. The empirical data in respect of production, trade, and foreign direct investment, however, show the limits to the integration process as it has developed so far. A comparative analysis of the bloc’s performance within the world economy demonstrates that the region is relatively closed to commercial flows with a low level of intra-regional trade. The region displays a marked capacity to attract Foreign Direct Investment, but in a context of increasing geographical concentration towards the biggest country in the bloc. Furthermore, the three smaller MERCOSUR countries have not yet profited from joining a larger market. For Argentina and Uruguay, during the first phase, integration brought with it a loss of their share in MERCOSUR’s industrial production. Two reasons account for this: Firstly, non-tariff barriers have not yet been fully eliminated; and secondly, although MERCOSUR adopted a customs union format, it continues to operate like a free trade area when it comes to the rules governing circulation of goods within the integrated zone. With regard to the option of gaining markets outside the bloc, the potential benefits of economic integration have not yet been fully exploited by the MERCOSUR countries, either. Joint negotiations of MERCOSUR members with third parties have developed vigorously over the last ten years, but the results have been meager. Gaining external markets will depend on the ability of the Southern bloc to develop a true common trade policy and thus improve its bargaining power in trade negotiations, in particular with industrialized countries. The current trend of pursuing agreements with other Southern economies or blocs does not seem the ideal way to advance the full functioning of the regional trade agreement, although they do enhance the bloc’s global political position. Agreements with Northern economies, on the other hand, can grant improved market access for products of regional interest and simultaneously promote deeper integration. But negotiating with the North is not easy, for the wide-ranging gains facilitated by these agreements are associated with a complex and adverse political economy which can be overcome only with a great deal of political will and leadership on both sides.