IV. The Early Modern Period, 1500–1800 > H. Latin America, 1500–1800 > 8. The Spanish Colonial System, 1550–1800 > d. Economic Conditions
  The Encyclopedia of World History.  2001.
d. Economic Conditions
The crown fostered gold and silver mining in its colonies. Rich silver deposits were first discovered in Peru, where POTOSÍ became the most important mining center from 1540 to 1585. During the early years of silver extraction, wage labor predominated, but with the organization of the mita (forced labor) in 1574 by Viceroy Toledo, workers were recruited on a compulsory basis. Indian communities also had to provide a fixed allocation of workers to Huancavelica to extract mercury, an essential element for silver amalgamation. Forced recruitment mainly affected provinces in the southern highlands. After 1590, Peruvian silver production decreased, partly owing to irregular mercury production. Only at the beginning of the 18th century did Peruvian silver mining show signs of recovery, encouraged by improvements in mercury production in Huancavelica. From the 1770s on, the steady supply of mercury propelled a silver boom in Peru.  1
Between 1590 and 1630, Mexico's mines became the most productive, with important mines in the districts of Zacatecas, Guanajuato, Pachuca, Taxco, and San Luis de Potosí. Mestizo and Indian workers went to the mines as free laborers attracted by higher wages, though eventually many became trapped in their place of employment by debts, and a system of debt peonage developed. From 1640 to 1680, mining production contracted, recovering in the last decades of the 17th century with the return to smelting techniques to offset mercury shortages. In the 18th century, silver production increased decisively, owing to the steady influx of mercury from the Almadén and Idrija mines in Spain.  2
Agricultural and pastoral landholdings developed. In New Spain, Spanish-creole sectors and religious corporations increased their estates (haciendas) during the second half of the 16th century in vast areas, especially in the Bajío region. As a result, white landowners controlled Indian crops such as maize and pulque (alcoholic drink made from maguey), which led to profiteering and price speculation highly beneficial to the elite. In Peru, great landowners made more limited advances, and middle-size haciendas predominated. Throughout the Spanish domains—especially in the Caribbean and coastal areas—sugar plantations and mills evolved on the basis of slave labor, while haciendas used forced Indian labor (mita in Peru and repartimiento in New Spain) and resorted to debt peonage to retain workers. Between 1590 and 1620, the crown ordered legalization of illegal occupation of land through a procedure called composiciones de tierras, which allowed the consolidation of haciendas.  3
Mestizo and Indian peasants also participated in the commercial economy, producing foodstuffs for the market and working in haciendas, mines, and transport as wage laborers. Indian villages were the main source of temporary and low-cost labor for all Spanish-creole enterprises.  4
During the 16th century, silk production developed in Mexico, Puebla, and Oaxaca for the internal market and export to Peru, but it was soon replaced by Chinese silk in the Peruvian market. Cochineal and indigo were important export commodities in Yucatán and Guatemala. In Peru, New Spain, and Nueva Granada, textile factories (obrajes) produced cheap textiles for the internal market. Muleteers' convoys provided transport connecting the diverse economic areas of the viceroyalties.  5
Overseas trade was under direct crown control, and Seville, seat of the Casa de Contratación, had the monopoly of the American trade during the 16th century. An influential merchant class developed in Sevilla with connections to the designated trading ports in the colonies: Vera Cruz, Cartagena, and Porto Bello, which alone were allowed to trade directly with Spain. They imposed restrictions on intercolonial trade and limited trade with the Philippines for the colonies. Naval warfare and attacks by corsairs led to the creation of a system of convoyed fleets for the protection of gold and silver shipments, one each year for New Spain and one for Peru (1543–61). For the return trip, the fleets united at Havana and sailed together for Spain. Market fairs were held annually at Porto Bello and Jalapa (Mexico). Peru had the greatest trade volume and value between 1540 and 1585, but New Spain surpassed them between 1590 and 1620. After 1620, transatlantic trade suffered a contraction owing to the decline of mineral production. Recovery began about 1660 in Mexico. In the 1670s, because of peace treaties, privateering subsided. A new contraband trade developed that was mutually advantageous to Spanish merchants and to British, Dutch, Portuguese, and French smugglers trading manufactures and slaves.  6
Wholesalers dominated merchant guilds (Tribunal del Consulado) organized in the main capitals of the Spanish colonies (Mexico, 1592; Lima, 1613). Big merchants based in the colonies carried out a vigorous intercolonial trade despite restrictions. Chinese textiles reached Acapulco via the Philippines and were reexported to Peru in exchange for silver, mercury, and wines. In Central America, Santiago de Guatemala became a significant commercial entrepôt, exporting cacao, cochineal, indigo, and livestock to New Spain in exchange for silver, Mexican textiles, Chinese silk, and mules. Venezuela and Guayaquil exported cacao to New Spain in return for silver. Havana and Guayaquil became the most important shipbuilding centers, followed by Realejo, Maracaibo, and Cartagena. After 1640, trade with Asia decreased and interregional commerce lost vigor.  7
Under the Bourbon dynasty new policies, known as the Bourbon Reforms (See Administration), were introduced. The Treaty of Utrecht (1713) > (See 1713, April 11) granted Great Britain the monopoly of the slave trade with the colonies and the right to send one vessel each year to Porto Bello to trade. The Casa de la Contratación was transferred to Cádiz in 1717. Monopolistic chartered companies were established in Honduras (1714), Caracas (1728), Havana (1740), and Santo Domingo (1757). In 1763, Charles III abolished the system of fleets and authorized eight other Spanish ports, besides Seville and Cádiz, to trade with the Indies. He also permitted intercolonial trade between New Spain and Peru and between Guatemala and Nueva Granada (1764–82), but internal custom houses were established and state monopolies of certain goods reinforced. The Casa de Contratación was abolished in 1790. Under the Bourbons, areas previously marginal in the colonial system were transformed into dynamic economies (Buenos Aires, Venezuela, Chile), while Peru and Upper Peru declined.  8
The Encyclopedia of World History, Sixth edition. Peter N. Stearns, general editor. Copyright © 2001 by Houghton Mifflin Company. Maps by Mary Reilly, copyright 2001 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.