The purpose of this paper is to empirically analize the economic potential associated with MERCOSUR. Simple import share analysis indicates increasing trade flows between the member states; ex post income elasticities of import demand fail to detect a clear pattern. Estimates of technological specialization reveal a great potential for intra-industry trade between member states. The most important challenge to MERCOSUR seems to be the still uncertain ability of member states to sustain macroeconomic stabilization in the long run.