Some members hope Unasur could become a regional version of the EU
The leaders of 12 South American nations have formed a regional body aimed at boosting economic and political integration in the region.
At a summit in Brazil, they signed a treaty which created the Union of South American Nations (Unasur).
Brazil's President Luiz Inacio Lula da Silva said the move showed that South America was becoming a "global player".
But tensions between several members will make it difficult for the group to achieve its goals, observers say.
Mr Lula said at the summit in Brasilia that the differences between some Unasur governments were a sign of vitality in the region.
"The instability some want to see in our continent is a sign of life, especially political life," Mr Lula said.
"There's no democracy without people [protesting] in the streets," he added.
The treaty envisages that Unasur will have a revolving presidency and bi-annual meetings of foreign ministers.
Prior to the Brasilia summit, Venezuelan President Hugo Chavez described the "empire" of the United States as Unasur's "number one enemy".
Mr Chavez is embroiled in a bitter diplomatic row with his Colombian counterpart Alvaro Uribe - a staunch US ally - over Colombian claims that Venezuela has been helping to finance the activities of the Colombian Farc rebels.
The Unasur members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela.