There are many motivations behind forming a regional customs union.  First, it is important to understand the various dgrees of regional integration:

Free Trade Areas:   Within an FTA, trade is free to occur between member nations.  All trade barriers are gradually reduced or eliminated.  However, this reduction applies only to the member nations, not to barriers against other nations.  Members are able to maintain discretion over all other trade barriers.  Borders must be regulated to ensure that goods from outside countries do not pass illegally between member nations, taking advatage of the lower tariff rates.

Customs Union:  Like an FTA, trade barriers are removed among member nations.  However, integration is taken one step further.  All countries agree upon a common external tariffs, eliminating the need to regulate borders.  Any outside good that enters the union is free to cross internal borders.

Common Market:  Free factor migration is included in a common market.  Capital and labor can be used in any member nation.  This is in addition to internal free trade and a common external set of barriers.

Economic Union:  All of the previous policies are included in an economic union.  Internal policy is intergrated even more by agreeing upon common monetary, fiscal and welfare policies.  A central currency can be used to ease transactions between nations, though this is not a necessary step.  The European Union is moving towards this goal.
 

Political and Security Concerns:  The Southern Cone's history is full of regional strife.   By forming a customs union, Mercosur links these governments together at a time when all four countries are democratically governed.  This interdependence is insurance against political unstability.  It is written into Mercosur policies that member nations must be democratic.

Gains from Liberalization:  Prior to Mercosur, many South American nations were highly protectionist.  Their high tariffs meant that state controlled industries suffered from inefficiency.  Along with lowering internal tariffs dramatically, Mercosur is slowly lowering all tariffs.  This is a two phase introduction to global competition.  Opening trade first with their neighbors, Mercosur industries are forced to compete amongst themselves.  Their hope is to improve efficiency while still ensuring protection against more efficient global producers.  Secondly, their external tariffs will gradually be lowered as well.

Gains from Regionalized Production and International Investments:  Many multinational corperations find regional integration to their advantage.  Since Mercosur's opening, many corperations have moved production to Brazil or Argentina.  This allows companies to produce in one country and sell to other member countries without tariffs, all while taking advantage of  lower production costs.
 

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