Discussion at the meeting will focus on the launch a common market, intended to be similar to the European Economic Community.
"Ambitious goal"
Lucia Newman, Al Jazeera's correspondent in Rio de Janeiro, said: "Forming a truly integrated Mercosur, or South American Market, is an extraordinarily ambitious goal. It took the EU 50 years to get to where it is now."
The South American leaders will also consider Bolivia's request to become a full time member of Mercosur, as well as changes in customs rules to help Paraguay and Uruguay, the bloc's two smallest economies.
Leaders will also discuss the establishment of a South American Bank that would allow the the region to move away from the International Monetary Fund.
Mercosur, also known as the Southern Cone Common Market, was established in 1991 when Brazil, Argentina, Uruguay and Paraguay pledged to seek economic integration and free trade.
But Mercosur's goals have largely been frustrated by its members failure to synchronise their policies.
Hugo Chavez, the Venezuelan president, has accused other South American leaders of delaying essential reforms.
He said he has told da Silva: "What we need here is political Viagra."
He has said he wants to "decontaminate" the trade bloc of US-supported free market policies and the privatisation of state industries.
Da Silva and Chavez have signed a memo of intent for the state-run oil companies of Brazil and Venezuela to launch a technical study on a proposed natural gas pipeline stretching 5,000km from Venezuela to the Recife, a city in Brazil's northeast.