If you based the hypothetical on pure talent, South America would dominate. IMO, the problem for South American national teams is that almost all of their top players are splintered within the top European leagues and have very little time to gel together and play as a team. While a few German players do play outside of Germany, they are not nearly as fractured as Argentina or Brazil, and even Chile or Uruguay. On paper, Argentina should have dominated Germany at the WC (and perhaps they still would have had Argentina not been so banged up).
Only the GK Neuer would be an advantage for Europe (and Bravo is just behind).
A South American All Star team would have these to choose from:
Forwards: Messi, Neymar, Suarez, Higuain, Cavani, Tevez, Douglas Costa, Alexis, Dybala, Correa
Attacking Midfielders: James, Banega, Oscar, Willian, Coutinho, Lamela, Pastore
Holding Midfielders: Vidal, Luiz, Fernandinho, Mascherano, Biglia, Carlos Sanchez
Fullbacks: Marcelo, Alves, Felipe Luiz, Zabaleta, Zapata
Center Backs: Silva, Godin, Marquinos, Rojo, Otamendi, Garay, Cacares, Isla, Medel, Murillo
GK: Bravo, Muslera