Colonial economic systems: Spanish Territories
Spain had an advantage over other European colonial powers because its empire controlled areas where a settled indigenous population could be plundered of its accumulated treasures and then heavily exploited for its labor, and where gold and silver could be mined. Organizing strict bureaucratic control of its empire, Spain achieved results consistent with mercantilist theory to a greater degree than any other colonial power.
Spain began constructing a centralized, bureaucratic structure in 1503 with the creation of the Casa de Contratación, or House of Trade, located in Seville, with authority over commerce, shipping, and finance related to America. The Casa granted a monopoly on trade with America to the merchant guild of Seville, which was expected to provide capital for the trade in return for protection from the Crown. The Casa organized traffic to the NewWorld by a “flota” system, limiting shipping to fleets or convoys sailing at regular intervals to a limited number of harbors.
The flota system had obvious advantages in protecting shipments of gold and silver from the New World, but it failed to satisfy the trade needs of the colonies. Both merchants and the Crown held mercantilist ideas that claimed that the business practice of limiting production and charging high prices was the most profitable. This opened the way for interlopers from other European powers, often welcomed in cities far removed from the main trade routes. Because all ships were armed, it was not easy to tell if a non-Spanish vessel was a trader or a raider hoping to loot ill-defended Spanish cities.
The Spanish colonial economic system was more profitable to the home country than those of other European nations. However, it did little for Spain in the long run, since Spanish kings spent much of their revenue sending armies to fight endless European wars.