The pattern is "take a place name and change the last word to America" (Gulf of America, Lake America, New America)

The fact that applying that to produce "South America" which is a real place--and a continent at that--precisely amplifies the absurdity

I have to say, though: inverting the trope of "you can't make people laugh at a joke by explaining why it's funny" by trying to stop people from laughing at a joke by explaining why it isn't funny is a truly Kaufman-esque bit of comedy