On March 26, 1991, in Asuncion, the four South American countries - Arjentina, Brazil, Paraguay and Uruguay-signed an agreement for the establishment of a “common market of the southern cone(MERCOSUR)”. This common market was to involve 1) the free movement of goods, services and factors of production among the member countries through the elimination of customs duties and non-tariff restrictions, 2) establishment of a common external tariff and adoption of a common trade policy in relation to the Third States or groups of States, and 3) coordination of macroeconomic and sectoral policies between the States Parties in such areas as foreign trade, agriculture, dustry, fiscal and monetary matters. In their effort to accomplish in only four years what the European countries have achieved in forty years, these countries came across many unexpected problems. Conflicts over the issues of common external tariff, sensitive products, and economic policy measures among the member countries reached so high a level that some experts predicted that the MERCOSUR would be one of the unsuccessful attempts for economic integration made in the region. However, on August 5, 1994, at the summit conference held in Buenos Aires, the four member countries overcame a long-standing dispute and agreed upon a compromise formula allowing the creation of a customs union on January 1, 1995. At present, the impact of the MERCOSUR in the arena of international trade is not considered to be so far-fetching. However, if these countries keep marching toward more liberalization, democratization and privatization, the MERCOSUR may evolve as one of the influential palyers in the international trade and investment. The background of the MERCOSUR creation, conflicts and compromises among the member countries, their trade and investment climates, their economic relations with Korea, the impact of the MERCOSUR creation, and the prerequisites for its successful operation have been reviewed and analyzed.