This paper estimates the potential bilateral trade flows for the MERCOSUR members, through a panel of data with fixed and random effects, based on a gravity model. The results show a considerable approximation between the estimate potential flows and the real bilateral trade flows in 2009, when estimated using random effects. The trade flows with the larger trade potential were Argentina x Paraguay and Argentina x Uruguay, while Brazil showed larger effective trade flows than potential flows for most block partners.
Bilateral Trade Flows; Mercosur; Gravity Model