I discovered the official web site of the Southern Common Market. The members of this economic zone are: Argentina, Brazil, Paraguay, Uruguay and associated members are Bolivia and Chile. The aim of the common market is to increase regional economic cooperation. It is also known as Mercado Común del Sur (Mercosur) in Spanish, and Mercado Comum do Cone Sul (Mercosul) in Portuguese.
"MERCOSUL" is the Portuguese acronym of the group. Maybe the Spanish name of the group "MERCOSUR" is better known, because three of four Mercosur members do have Spanish as their official language (Argentina, Paraguay and Uruguay). The two "observers" not fully members (Chile and Bolivia) also speak Spanish. And the countries that had manifested some interest in joining Mercosur in the future (Mexico and Venezuela) also speak Spanish. However as Richard said, the group is known as "MERCOSUL" in Brazil.
The flag above is based on one I saw on the web site. The stars symbolize the members and the disposition is like Southern Cross constellation, the line I think symbolizes the global position of the market in the Southern Hemisphere.
Could the green curve represent — in a stylized way — the (southern) tropic of Capricorn, in which the member countries of Mercosur are located? Just a thought.
The only Mercosur flag I have seen available in flag shops in Buenos Aires, Argentina, is the one with the "MERCOSUR" text written below the logo. We would need to know from a Brazilian member, if in Brazil a "MERCOSUL" flag does exist or not. I have never seen as a real flag the "no text" variant. But more research is needed to confirm or deny its possible existence. The flag is used in meetings of the group. For example when presidents or secretaries of government, join to discuss about Mercosur regulations.
Mercosur flags are not very common (yet). They are not used as European Union flags in Europe (for example). I think in Brazil, the authorities had the idea to use it in the Presidential Building next to the National Flag, but I have not heard any more news about it recently.
However, the real flag bears the word "Mercosul" (the acronym in Portuguese while "Mercosur" is the Castillian acronym). It is flown alongside the national flag of the Pro-Tempore presidency of the bloc, which is held alternatively, every six months, by each country's Minister of Foreign Affairs. Currently, there's a proposal in the Brazilian National Congress to have it flown mandatorily along with the National flag, more to the EU style, at least when Brazil is the Pro Tempore President.
Brazil now holds the presidency this semester, and I can see the flag been flown everyday along with the national flag on the Ministry of Foreign Affairs building. Currently, this is the only building in the country which flies the flag. By the end of the semester, only the Brazilian flag will be flown.
Furthermore, the reverse of the flag is exactly the same, with the green stripe ascending from left to right, but with the Castillian acronym "Mercosur." On the other three countries, Argentina, Uruguay and Paraguay, which speak Castillian, the front of the flag reads "Mercosur," while in this case it is the back that reads "Mercosul."