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Economy in Colonial Spanish America (revised)

© 2001 Donald J. Mabry

1.    The Spanish ideal was to regulate everything but trying to do so made trade, manufacturing, and other activity more difficult.

2.    Enormous amount of land use: have to be able to work it, make some use of it and use of its products.

3.    All kinds of crops could be grown in various places.

4.    Labor supply was not very efficient. Subsistence farming about as good as subsistence farming anywhere. Forced or  slave labor is inefficient and  irresponsible. Results in the irresponsibility of employers. The technological level of America was low, and they carried this low productivity into the republican period.

5.    The purchasing power of populace was very low. Most of the population was almost completely outside the money economy.

6.    In theory, heavily affected by mercantilist combination of  ideas, but subjected to substantial modification in practice. Less real restriction in practice but had to pay to escape it. This is essential to understand economic life.

Poor or no records for most of the period which presents a problem in trying to do research.

In the value of economic activity, agriculture was the most valuable. Alexander von Humboldt asserted that it was 25% higher than mineral production. Bulk of the population was in agriculture, maybe 90%.


Different kinds of land holding:

    Single most important type of land holding was the great estate or hacienda or latifundia or estancia. Some great estates produced export crops. Agriculture meant a lot to the oligarchy. The great estate was typically badly worked. Tremendous amount of  land was idle. Owners had very little incentive to maximize production.They didn't have much or enough personal interest to improve profits. They could live very well on what they earned. Hacendados lived in towns and employed mayordomos to run things on the hacienda.

    Indian villages owned land. The conquerors left village land in the hands of the villagers, but villagers were often depopulated by the spread of fatal diseases. Crown policy was to congregate Indians to facilitate control, which, unbeknownst to the Crown, meant more depopulation. There was conflict between Spanish and Indians over land.

    Spanish towns granted land titles, which was one of the reasons the conquistadores founded towns. These towns also controlled common pastures and woodlands. Conquistadores gave rural lands to cavalry (caballerías) and foot soldiers (peonías, about 20% of the amount given to cavalry).  After the Conquest, Spanish towns got land by royal warrant, which sometimes meant that they took it from Indians and had the Crown ratify their action.

    There were other types of land tenure. The baldío was vacant public land whereas the realongo was vacant royal land. In New Spain, a rancho was a small holding. A merced was a grant, sometimes for use and sometimes for ownership. Had to pay to pass a mercedes on to one's heirs. They were not entailed.  Governor Velásquez divided Cuba into seven towns and handed out mercedes . Sometimes didn't mention boundaries at all. There were some  circular grants. In 1573, the Audiencia of Santo Domingo sent someone to do something about the mess. It issued rules in 1574. Didn't accomplish anything. A hato  was a cattle ranch. Upper class thing to have cattle.   For private estates, one had to leave to all the real property to one's heirs. Some heirs squatted and then claimed squatters' rights.

    Composición was the way the Crown cleaned up land titles. In 1571, there was a great big composición. Too much land to survey so  granted general titles in return for contribution to treasury.

    System  of Indian community property was good for  Indians because they were better able to keep it. Didn't have many draft animals and few wheeled vehicles because of the terrain.  Even after the Spanish brought draft animals, there weren't many because they were  expensive to buy and maintain. Indians had the tradition of preparing land by hand with digging sticks or hoes. How much plowing was done when the Spanish came? We don't know.

Agricultural production by areas

    The provinces or realms were not alike. Therefore, there was  specialization to some extent. In New Spain, maize was  the chief crop. Suffered endemic trouble with maize prices because of the poor distribution system and production problems. This created difficulties and people might riot if maize prices were too high. Labor must have cost something; the cost of muleteers, wages, and such must have added up. New Spain was the single most  important wheat growing area but not actually big.

    Timber products were important in Cuba in the late colonial period. Imported barrels from the US. Started campaign to cut Cuban timber and make lumber. The problems of tools, inefficiency, etc. caused the effort to collapse.

    Maguey was used by pre-Columbian Indians for paper, pulque, and tequila. Spanish created big maguey plantations. Church and, sometimes, civil government tried to stop the consumption of pulque. Failed because the Indians liked to drink, plantation owners liked revenue , and the Crown liked money for the treasury.

    Sugar was produced and consumed in tremendous amounts. There were lots of products. The production and export of sugar in the colonial period highly specialized. Ortiz Fernando, Cuban Counterpoint  (New York, A. A. Knopf, 1947) argues that tobacco and coffee are grown on little estates. They are grown by small farmers on vegas but sugar requires large estates and a huge labor force, which people used slaves to supply. Fantastic increase in the number of slaves in Cuba. Blames a lot of Cuba's ills on slavery

    Cotton production was fairly large; in 1790, Spain exported six 6 times as much as that of US. Cacao was cultivated in pre-colonial times in in some areas, such as Mexico. The Europeans developed a taste for it, for chocolate.

    Coffee was non-native and not important until the end of the colonial period.

    Vanilla was grown and produced. Used a credit system with merchants functioning as bankers. Lent money to growers, who were Indians.

    Tobacco was a late colonial crown monopoly. The monopoly became one of the most hated fiscal devices of the Crown and contributed to the coming of Independence .

    Livestock was very important. Not blooded cattle. People weren't demanding what we consider good meat--tender and marbled with fat. Meat was difficult to ship. Tried various preservative techniques. Used meat salting plants, particularly in the Río de le Plata viceroyalty. The worst of it was sold to feed slaves. They sold cattle hides, tallow, and grease. Cattle business was tremendous business. A subculture revolving around cowboys (vaqueros) was created in many parts of Latin America. Cowboys tended to be quite different from peasants in being more independent, ambitious, and having wider horizons. They played an important role in the Independence period and in the republican period of some countries.

    Spanish raised other livestock and crops. Mules were used a lot in Panama, and were raised in the highlands of Costa Rica and Nicaragua. They were raised in northwest Argentina to supply the mines in Bolivia and Peru. the Spanish grew grapes, principally for wine. There was a lot of legislation preventing grape growing and making  wine outside of designated areas, but a lot of wine made. Olive trees and olive oil were important but the inferior production generally was the result of local conditions, not legislation. The removal of restrictions on grapes and olives didn't seem to  change production.


Three stages of  exploitation:

  1. accumulation
  2. placer prospecting
  3. vein mining 

    Vein mining involved shafts. There was some from 1530s, mostly silver. At first, value produced from gold was greater than silver. By  1560s, the value of silver shipments greater than gold. In 1540, 60% of the value was gold but, by the 1560s, silver was greater. Mountains of silver that made up the bulk of the bullion shipments. The great Potosí mine in Peru was discovered about 1545 and the great Zacatecas mines in New Spain in the 1550s.

    Vein mining was localized. There weren't many mines and only in a few places. Placer mining and panning on the northern frontier of New Spain. The technology of silver mining were quite poor by our standards. The Spanish were not innovators in silver mining. Vein mining creates the problem of dealing with water; flooding kept shafts shallow. Vein mining requires a concentrated labor force. Had a lot of people in Charcas in Peru but not in north central Mexico. The chichimecas were fierce and nomadic. Chichimecas around San Luis Potosí kept mine from being worked for a long time.

    Mining towns were disorganized, isolated and rough. Mining was quite a stimulus to other activities such as agriculture, meat production, and carpentry. Mining produced a great demand for leather for buckets, mercury flasks, straps, etc. Mine owners and managers brought in luxury goods, at least in Potosí, but the average work lived poorly.

    In the smelting processes, cost and efficiency important. By 1560's the patio process was used. Learned it from Germans. Used  mercury in amalgamating ore. Did it in New Spain, carried by Viceroy Toledo to Peru.* Spain, Austria, and Peru had mercury. New Spain imported its mercury from Spain. Other colonies imported it from Peru. It was a state-owned monopoly, which was one way the Crown could determine how much silver was mined.

   Mines required various kinds of labor, much of it unskilled. Had to use force to get labor. Used the mita in Peru. Repartimientos.  Also required skilled workers and had to pay them reasonably well to hire them. Could not use encomienda Indians and eventually these people began dying out because of the spread of disease that the Spanish had introduced into the New World.

    Silver production declined some in the 17th century decline. Had some effects on  Spanish and America. Then silver production increased by latter part of 17th and boomed in 18th century. In late colonial period,  Spain produced more silver than Peru. New Spain was more important because of new mines, new population, and territorial expansion. There was also improved technology and better organization.

Bourbon changes/reforms in mining:

    A mining guild was created in 1777 in New Spain to settle disputes. Crown set up investment bank for mines. In 1783, new mining ordinance served as a basis for all mining legislation until late 19th century. Experts were sent from Germany. Students students sent to study in Germany and Sweden . School of  Mines established in Mexico City in 1792.

Hindrances to mining reform:

  1. conservatism
  2. financial straits of the Crown
  3. lack of investment
  4. mining property divided among too many heirs which made it difficult to have unified management.

    The exception was in Guanajuato. The Valenciano mine was first tapped in 1769. It had a single management, which was ruthless. It produced 25% of all silver exported from New Spain. Tremendous wealth from the mine. A lot of investment came from individual investors (rich people), merchants for example, especially in the late colonial in New Spain. In late colonial period in New Spain, there were three silver banks. Made loans to miners on the basis of partnership or mortgages.  Mining guild of Mexico had banking as one of its functions. Supposed to raise two million pesos. Didn't. Went into bankruptcy. Didn't have great effect.

    By the late colonial period,  there were economists in Spanish and America who thought the legislated privileges for mining were detrimental but mining stimulated other enterprises.

Other Extractive Industries

Fishing. Piddling amount of it. Not well-organized. They weren't fish eaters. Fed fish to Cuban slaves. Off the coast of Chile, fishing was done by Catalans, an energetic people from in and about Barcelona.. In the1770s, commercial fishing began at Chiloe. Fished the Humboldt Current, which was very cold and in which fish thrived, as well as birds which fed on the fish. Today, Peru has a very large fishing industry which fishes the Current.


The Catalan Royal Maritime Fishing Company of Barcelona did whaling  Processed the catch in Patagonia. Had a Crown monopoly.


    From this beetle, they extracted a blood-red dye. It was a valuable commodity. It was the second most valuable export from New Spain.

Logging and lumbering

    Quite a lot. Spanish were great builders and liked heavy furniture.

Pearling in Venezuela and Colombia

Salt gathering/mining. Evaporative. Good-sized activity. Growth of salt meat industry in late colonial period in Rio de la Plata, related to the discovery of salt deposits.


    Spain, as all authors point out, was unable to supply enough manufactured goods to supply America, which caused problems. Spanish industries did grow in the 16th century but the growth didn't last. In the 17th century there was a catastrophic decline. The Crown expelled the Moriscos, perhaps 400,000,  who were an important economic factor, especially in Valencia.  Meant that the colonies couldn't expect to get aid and technology from Spain. There was some cotton manufacturing in Catalonia which benefited from tax advantages. 

    Manufacturing in America was limited; it was more the growth of craftsmanship and artisanry. There were sadlers (saddle makers), weavers of fine cloth (Peru), silversmiths, goldsmiths, sugar making, distilling, and tobacco processing (which was hurt by the Crown tobacco monopoly in the late colonial period. Craftsman were generally organized into gremios (guilds).

    Inhibitions upon manufacturing production in America were not caused so much by Spanish prohibitions but the lack of the ability to compete. The colonies lacked capital, skilled workmen, and distribution networks. Transportation within colonies was expensive and difficult; among the various colonies it was virtually non-existent. The chief manufacture was textiles, for there were local markets for such things as clothing. The work was done in obrajes, workshops, which existed all over the Spanish New World. There were looms in homes.

    Obrajes were tough places to work. In 1609, legislation was passed to stop the abuses. Other laws were passed later. The viceroys wouldn't enforce these laws, however. Upper-class people didn't care what happened to the workers, who were lower class; besides, the output was needed.


    Gremio records provide historians with some of the best knowledge of economic activity. There were one hundred gremios in Mexico City alone. Gremios frequently wrote and published elaborate ordinances governing their activity. The ordinances covered such matters as the conditions of labor, the interests of the consumer, of the masters, and of the Crown, and control of apprentices (who hoped to become masters). Most of the people below  the masters were castas, the "other" of colonial life. The gremios passed laws regulating their hours of work and the conditions of work. Many of these laws were never enforced, however, and the workers were exploited terribly. Gremios were monopolies and their monopolistic character proved to be a barrier to innovation.

    Workers belonged to confradías, religious brotherhoods, of crafts. Sometimes these were established before the gremio. They were important to the workers because they provided hospitals, processions, and burials.   And, of course, they provided for group worship.

    Silversmiths are a good example of a gremio. By 1537, they were working in  New Spain even though a 1526 order forbade them in Spanish America. The order had to be revoked, first for all the colonies except New Spain but then for New Spain in 1559. By 1685, there were over seventy silver shops in Mexico City. By 1600, there were eighty in Lima. Why so many? Spaniards enjoyed the ostentatious display of wealth; creoles did especially.

Trading Activity

    Regulated in theory. There was a system of tight channels in Spain. Consulado de Sevilla through which all trade to the Americas had to pass. When the Guadaquivir River silted up, the consulado was moved to Cádiz. The system was used mostly from the mid-16th century to mid-18th century. There were three ports in the New World to which ships could go. The small ships that split off from the convoy in the Caribbean were not important. There were three consulados: Sevilla, Mexico City, and Lima. Merchants who belonged to a consulado were interested in monopoly. They wanted the highest possible profit with the least amount of effort. They concentrated on luxury goods. They wanted to supply those who had money, which was a  very few number. Fairs were the typical means of disclosing of the goods. Big fair at Porto Bello, Panama, when the fleet arrived. Fait at Vera Cruz but moved it to the highland town of Jalapa to escape the vagaries of a tropical port.

Holes in the System

  • Holes of contrivance. Some mercantile houses in Sevilla became dummies for foreign mercantile houses.
  • Smuggling proper. Done in a variety of ways including  the infamous asiento that Britain acquired from Spain. Spain couldn't supply enough goods even with foreign help.

    Bulk of the trade between Spain and its colonies went in fleets; the rest in registros (registered ships). The use of registros indicated faults in the fleet system. The number of fleets is known but not the more important issue of how much tonnage. fleets from Spain the the 17th century seemed to average ten thousand tons, two-third of which went to New Spain. There was more demand in the Circum-Caribbean area. Registros tended to go more to Buenos Aires.  The fleets suffered numerous interruptions. Spain was almost constantly in international wars from 1689 to 1815. Only two fleets were lost to an enemy, however. Storms were a more serious threat.


One of the most important aspects of the economic history of the colonial period. Hard to investigate, however, because the people who engaged in it tried to hide what they were doing. Figures on contraband are dubious. The chief contrabandists were the Dutch, French, and English. There were lots of privateers and buccaneers; some settled in the New World. A lot of contraband trade flowed through Portuguese America or Portuguese trading houses. In the late colonial period, began to get trade from English America, mostly from the United States after 1783.

    Contraband trade represented more of European trade with America than Spanish trade with America. The trading system was not successful; in fact, it wasn't really a system.


    Had judicial functions. Settled fast before goods rotted. Set rates; decided on bankruptcy; and regulated transportation. Had deputies in every town within its jurisdiction. Administered various kinds of public funds. Had endowments to manipulate. Built roads, custom houses, and other infrastructure.  Contributed money to various things.  Was a source of conservatism.

    Eight consulados were created in a great hurry in the colonial period. It is a measure of the inflexibility of Spanish economic policy that it took so long to make the change.


    Water was the cheapest. Used humans, mules, and donkeys. Roads were terrible and the best ones were on the most heavily traveled routes.


    The postal system didn't mean much until the 1765 improvements. Mail distribution was fairly efficient in Peru.

Service and Professional Occupations

    Hordes of servants of all kinds. Lots of women in domestic service. Servant families usually lived on the premises. Most were non-white.

    Some teachers but the school system was very small.

    Estates managers, entertainers, physicians, lawyers, pharmacists, etc.

    It is hard to know the economic contributions of these people.

Economic Reforms of the 18th century

     Spanish economists were in no doubt about what was wrong. Bourbons brought more talented and energetic kings and French ideas. It took half a century to get this cranked up because of Spanish conservatism. Charles III was the best. In the period of reform there were economic improvements but it  isn't clear why. Were they the result of the reforms or just a natural outcome? Were the reforms tinkering with the system or were they substantial? Why did royal revenues increase?

    Free trade meant permission to trade within the empire. Probably increased trade but did it increase production? Between 1778c and 1788, trade increased from 78 million reales to 300 million reales. Revenue jumped from 4 million pesos in the 1760s to 70 million later. 


    In 1556, an unskilled field laborer earned 5 granos a day. There were 14 granos per real. Took the worker 2.5 days to get a real, 20 days to get a peso. This peso was the minimum Amerind tribute. A chicken cost three days labor or one real and two granos.

How well were people living in America? Colonials didn't live worse than people in Spain. The urban upper class, especially in the big towns. lived luxuriously.

    By the end of the colonial period, it was becoming clear that colonials were living better than the people on the Iberian Peninsula.

*   Toledo was one  of the great administrators of human times. He found an almost impossible situation in Peru and made it possible. He spent a whole five years on a visita and had a rough time of it. He succeeded in solidifying royal rule.

You can read about other topics in colonial Latin American history by buying and reading Colonial Latin America by Don Mabry.

Click on the book cover or the title to go to Llumina Press.