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Chile's Spanish Colonial Economy

The government played a significant role in the colonial economy. It regulated and allocated labor, distributed land, granted monopolies, set prices, licensed industries, conceded mining rights, created public enterprises, authorized guilds, channeled exports, collected taxes, and provided subsidies. Outside the capital city, however, colonists often ignored or circumvented royal laws. In the countryside and on the frontier, local landowners and military officers frequently established and enforced their own rules.

The economy expanded under Spanish rule, but some criollos complained about royal taxes and limitations on trade and production. Although the crown required that most Chilean commerce be with Peru, smugglers managed to sustain some illegal trade with other American colonies and with Spain itself. Chile exported to Lima small amounts of gold, silver, copper, wheat, tallow, hides, flour, wine, clothing, tools, ships, and furniture. Merchants, manufacturers, and artisans became increasingly important to the Chilean economy.

Mining was significant, although the volume of gold and silver extracted in Chile was far less than the output of Peru or Mexico. The conquerors appropriated mines and washings from the native people and coerced them into extracting the precious metal for the new owners. The crown claimed one-fifth of all the gold produced, but the miners frequently cheated the treasury. By the seventeenth century, depleted supplies and the conflict with the Araucanians reduced the quantity of gold mined in Chile.

Because precious metals were scarce, most Chileans worked in agriculture. Large landowners became the local elite, often maintaining a second residence in the capital city. Traditionally, most historians have considered these great estates (called haciendas or fundos) inefficient and exploitive, but some scholars have claimed that they were more productive and less cruel than is conventionally depicted.

The haciendas initially depended for their existence on the land and labor of the indigenous people. As in the rest of Spanish America, crown officials rewarded many conquerors according to the encomienda system, by which a group of native Americans would be commended or consigned temporarily to their care. The grantees, called encomenderos, were supposed to Christianize their wards in return for small tribute payments and service, but they usually took advantage of their charges as laborers and servants. Many encomenderos also appropriated native lands. Throughout the sixteenth and seventeenth centuries, the encomenderos fended off attempts by the crown and the church to interfere with their exploitation of the indigenous people.

The Chilean colony depended heavily on coerced labor, whether it was legally slave labor or, like the wards of the encomenderos, nominally free. Wage labor initially was rare in the colonial period; it became much more common in the eighteenth and nineteenth centuries. Because few native Americans or Africans were available, the mestizo population became the main source of workers for the growing number of latifundios, which were basically synonymous with haciendas.

Those workers attached to the estates as tenant farmers became known as inquilinos. Many of them worked outside the cash economy, dealing in land, labor, and barter. The countryside was also populated by small landholders (minifundistas), migrant workers (afuerinos), and a few Mapuche holding communal lands (usually under legal title).

While the provinces of southern Chile were desolated and depopulated by a continual warfare, the same causes that threw back the other Spanish provinces operated also upon this small state. The unnatural aggrandisement of Spain during the reign of Charles V. involved it in all the wars of the continent of Europe; and as it had lost the advantages it had derived from the arts and agriculture of the Moors, which were never replaced by any corresponding industry, the sole resources whence the long and expensive contests of that prince could be supplied, lay in the quantity of the precious metals imported from the new world. Hence the short-sighted policy of repressing all industry in the colonies, that was not directly applied to the procuring gold and silver, the jealous exclusion of commerce, and the prohibitions of manufactures, excepting the very coarsest for home consumption.

The misfortunes which attended the successors of Charles in some measure fell also on their foreign possessions; and as the demand for treasure became more urgent, the circumstances of South America became such as to render the supply more difficult. The wars and the cruelties of the Spaniards had destroyed so many of the Indians, that there were scarcely any left to labour in the mines; and though a bargain was made with the Dutch to supply African negroes for the purpose, the number of these, in Chile at least, was never great.

The first viceroys and governors had been men of .enterprise and talents; and although the character of Valdivia is not free from the imputation of cruelty, yet the building of towns, establishing something like lawful tribunals, and a disposition to win over, if possible, the natives, which form the principal object both of his government and that of some of his immediate successors, were highly beneficial. But before the accession of Philip V. the wants of a needy court had set up the high offices of the Indies to sale. The viceroys no longer sought to distinguish themselves by arms or policy; and they jealously guarded commerce from the intrusion of strangers only that they themselves might become the sole monopolists.

The whole system of Spain, while the colonies were kept close, was, with regard to them, commercial, and not political. The viceroys were, in fact, after the first wars with the natives were over, no more than the presidents of a set of monopolists; their views were bounded by their sordid and narrow mercantile interests, and the government and occupation of Mexico and Peru were never looked upon otherwise than as a means of acquiring riches, while the freedom, happiness, or interest of the inhabitants was neglected.