In Venice at the time of Shakespeare, there were many merchants who were Jewish.  These Jews were confined to a ghetto, and the merchants, who were extremely unethical and greedy, were not allowed to profit as much as the Ventian merchants were.  In addition to these conditions, there were many highly political dealings in Venice, a site of dissension between its leaders and those in Italy.

Thus, Venice is an appropriate setting for Shakespeare's theme of compassion.  It is in love of one's friends and compassion for those in difficulty that humanity achieves its greatness, a reverence for God's will.  Perhaps, the most famous passage from "A Merchant of Venice" best expresses this theme as Portia declares,

The quality of mercy is not strained,/It droppeth as the gentle rain from heaven/Upon the place beneath.  It is twice blest:/It blesseth him that gives and him that takes./'tis mightiest in the mightiest, it becomes/The throned monarch better than his crown./His sceptre shows the force of temporal power,/The attribute to awe and majesty,/Wherein doth sit the dread and fear of kings./But mercy is above this sceptred sway,/It is enthroned in the hearts of kings,/It is an attribute to God himself;/And earthly power doth then show likest God's/When mercy seasons justice:  therefore, Jew,/Though justice be thy pleas, consider this,/That in the course of justice, none of us/Shouls see salvation.  We do pray for mercy,/And that same prayer doth teach us all to render/The deeds of mercy (IV,i,184-202)