In answering this question about the short story "The South" by Jorge Luis Borges, it is important to first note that in the foreword to the collection Artifices, in which the story first appears, Borges points out that this story can be interpreted in two ways: either as a straightforward narrative or as something else. He writes:
Of "The South," which may be my best story, I shall tell the reader only that it is possible to read it both as a forthright narrative of novelistic events and in quite another way, as well.
This is typical of the magic realism of Borges, in which stories are often open to various interpretations. In the case of "The South," we read early on that a man named Juan Dahlmann, a secretary in a library in Argentina, lives in the city but also owns a run-down ranch in the South about which he daydreams often. One afternoon, he receives a severe cut in the head while running up the stairs to retrieve a copy of The Thousand and One Nights. The mention of this volume of fantasy stories is the first clue that Borges is planning to indulge in more than literal reality. He lies in bed deathly ill for over a week, and then doctors arrive to take him away to a sanitarium, where he is operated on.
After the operation, he realizes that what he has suffered up until then has been only a "suburb of hell," but his situation now is immeasurably worse. He despises himself and endures the painful "curative measures" that he is forced to undergo. The surgeon tells Dahlmann that he has been at the "point of death from septicemia," but he is now recovering and he will soon be able to convalesce on his ranch.
This time in the hospital is Borges's turning point at which the rest of the story can either be taken literally or as the elaborate fantasy of a dying man. Here Borges uses deliberately vague language to suggest that Dahlmann may be fantasizing. For instance, in Dahlmann's recognition of the city, "a second before his eyes registered the phenomena themselves" his memory constructs the details of the scenery. He imagines that crossing a street will allow him to enter "a more ancient and sterner world." In a café while waiting for a train, he pets a cat but notes that "this contact was an illusion and that the two beings, man and cat, were as good as separated by a glass."
On the train, we find that The Thousand and One Nights book is in Dahlmann's valise, renewing or continuing his association with fantasy. He compares the magic in the book with the reality he is experiencing. Borges reveals his inner thoughts:
Tomorrow I'll wake up at the ranch, he thought, and it was as if he was two men at a time: the man who traveled through the autumn day and across the geography of the fatherland, and the other one, locked up in a sanitarium and subject to methodical servitude.
During Dahlmann's musings about the isolated countryside, a railroad inspector tells him he has to get off at an unfamiliar station. He goes into a general store and thinks he recognizes the shopkeeper, but "he had been deceived by the man's resemblance to one of the male nurses in the sanitarium." While eating, he again opens The Thousand and One Nights. Soon afterwards, Dahlmann is challenged to a knife fight, and as he goes to his almost certain death he considers that "if he had been able to choose, then, or to dream his death, this would have been the death he would have chosen or dreamt."