During the period from the 1970s to 1995, the relative importance of the European Economic Community (EEC; now the European Union--EU) as a trading partner with Brazil was reduced, but increased in the mid-1990s. By 1995 German investments in Brazil were second only to the United States, but Britain, Italy, and France also have important investments, mostly in industrial manufacturing, heavy equipment and automobiles, and consumer goods. In mid-1995 negotiations advanced toward establishing a free-trade association between the EU and Mercosul. In December 1995, the EU signed an important free-trade protocol with Mercosul, the first ever between two regional trading blocs. Since then Brazil has adroitly used the EU card to force a slowdown of the United States pressure to "fast track" the Free Trade Area of the Americas (FTAA) expansion of the North American Free Trade Agreement (NAFTA).

Relations with the EU are economically important, but even more so from a North-South political perspective. Brazil and its Mercosul partners want to strengthen their trading bloc to include not only Chile but also Bolivia, Colombia, Ecuador, Peru, and Venezuela before 2005, to be able to negotiate as a bloc with NAFTA, as opposed to bilateral negotiations as favored by the administration of President William Jefferson Clinton. The United States view is that 2005 is the date for the FTAA to be "fully operational," whereas Brazil and its Mercosul partners view the year 2005 as a "starting point" for the FTAA process.

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Source: U.S. Library of Congress