MOUNT KUMGANG, North Korea -- While North Korea continues to spew invective at the United States, it has a different strategy with South Korea: a charm offensive.

Here in a spectacular mountain setting, North Korean park rangers flirt and joke. At a performance of acrobats, North Korean clowns pull South Korean audience members onstage and give them bearhugs.

The Mount Kumgang tourist zone is a symbol of Korean cooperation. Developed by South Korea's Hyundai Asan Corp. at a cost of more than $400 million, the resort illustrates the contrasting approaches to dealing with North Korea: While the United States tries to pressure and isolate the regime, South Korea is promoting business, cultural and family exchanges.

Most South Koreans believe one day the two countries will be reunified, whether in five years or 50.

To avoid the costly burden of merging with a collapsed nation, many hope to strengthen North Korea's almost nonexistent economy.

Washington, on the other hand, has refused to negotiate with North Korea until it abandons its nuclear weapons program and would not mind if the dictatorship in Pyongyang, led by Kim Jong-il, collapsed.

Many younger South Koreans see President Bush as a bigger obstacle to peace than Kim Jong-il.

On the snow-covered trails of Mount Kumgang, North Korean park guides argue that the United States is the only thing standing in the way of unification.

"I didn't have a chance to ask him about his life because he kept talking about American interference," said Park Jong-sun, a 50-year-old South Korean businessman who had a lengthy political discussion with a guide. "He said our country was divided by America, but I told him our country was divided by America and the Soviet Union."

The resort at Mount Kumgang, on a range that rises dramatically from the eastern coastline, is a tightly controlled zone where visitors are not allowed beyond Hyundai-built roads and facilities.

The reality of North Korean life can be gleaned only from the bus window: Villages are pitch-black at night, just about everyone is walking or, occasionally, bicycling, and slogans are everywhere.

Stern-faced North Korean soldiers stand guard along the roads.

Hyundai paid North Korea $308 million for the right to develop the area and pays $100 per tourist. It spent another $104 million building the facilities. In the project's first four years, visitors had to travel by a costly, time-consuming cruise ship. But starting last month, for under $300, they could go overland through the Demilitarized Zone, the first border crossing by civilians in 50 years.

The project is an important source of foreign currency for Pyongyang, but critics say it only helps to maintain a brutal dictatorship.

Hyundai said it is losing money on the project. It needs 350,000 visitors annually to break even; so far, 550,000 have visited in the past four years. Plans to open a ski resort and golf course are proceeding despite a payoff scandal.

Hyundai has admitted making a secret $500 million payment to the North just days ahead of the historic 2000 summit between former South Korean President Kim Dae-jung and Kim Jong-il. The legislature has passed a bill to appoint a special prosecutor to investigate the so-called "cash for summit" deal.

Hyundai isn't the only South Korean company doing business in the North. About 180 companies have launched projects, mostly small-scale, labor-intensive manufacturing ventures. They are drawn by cheap labor and a common language and are often undeterred by such problems as sickly workers, lack of electricity and unreliable transport.

The Koreas are also moving forward on other projects, including road and rail links near the west coast and a huge industrial zone in Kaesong, North Korea, 60 miles north of Seoul. They are the fruits of Kim Dae-jung's "sunshine policy" of engagement with the North, which newly inaugurated President Roh Moo-hyun has vowed to carry on.

The North Koreans have quickly learned the art of tourist gouging. Use of the bathroom atop Mount Kumgang costs $4. Only U.S. dollars are accepted. A multicourse meal at Kumgang House, which most South Koreans rated as bland and disappointing, costs $25. A bottle of beer is $5 extra; a can of Coke costs $1. Salt is rationed.