7.2 Mercantilism and trade monopolies

Mercantilism shaped colonial trade in Latin America. Spain established strict monopolies and institutions like the Casa de Contratación to control the flow of goods and wealth from its colonies. This system aimed to enrich the Spanish Crown through regulated trade routes and ports.

The economic policies of mercantilism led to exploitation of colonial resources and labor. Spain granted royal monopolies on key commodities and used the asiento system to control the slave trade, fueling the forced migration of Africans to the Americas.

Colonial Trade Monopolies

Spanish Institutions for Regulating Trade

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• Casa de Contratación established in 1503 to regulate and control trade between Spain and the New World colonies
  • Located in Seville, Spain and served as a clearing house for all goods and precious metals entering or leaving the Spanish colonies
  • Maintained detailed records of ships, cargoes, and passengers traveling between Spain and the colonies
  • Ensured that the Spanish Crown received its share of the wealth generated from colonial trade (quinto real, or royal fifth tax on precious metals)
• Consulados were merchant guilds that represented the interests of Spanish merchants involved in colonial trade
  • Advised the Spanish Crown on commercial matters and helped regulate trade in the colonies
  • Established in major colonial cities such as Mexico City and Lima to oversee local trade and resolve disputes among merchants

Regulated Trade Routes and Ports

• Flota system established in the 16th century to protect Spanish ships from pirate attacks and ensure the safe transport of goods and precious metals
  • Consisted of large, well-armed convoys (flotas) that sailed between Spain and the colonies on a regular schedule
  • Two main flota routes: the Flota de Nueva España (New Spain Fleet) which traveled to Veracruz, Mexico and the Flota de Tierra Firme (Mainland Fleet) which sailed to Cartagena, Colombia and Portobelo, Panama
• Monopoly ports designated by the Spanish Crown as the only authorized entry and exit points for colonial trade
  • Veracruz, Mexico and Portobelo, Panama served as the primary monopoly ports for the Spanish colonies
  • Concentration of trade through these ports allowed for easier regulation and taxation by colonial authorities
• Carrera de Indias refers to the trans-Atlantic trade route between Spain and the Americas
  • Included stops in the Canary Islands, the Caribbean, and the monopoly ports of Veracruz and Portobelo
  • Became the primary route for the exchange of European goods, African slaves, and American silver and other raw materials

Economic Policies and Systems

Mercantilism and Colonial Exploitation

• Mercantilism was the dominant economic theory in early modern Europe which viewed colonies as sources of wealth and raw materials for the mother country
  • Emphasized the accumulation of precious metals (gold and silver) as a measure of a nation's economic strength
  • Encouraged the establishment of trade monopolies and the strict regulation of colonial economies to benefit the mother country
  • Led to the exploitation of colonial resources and labor for the enrichment of European powers (Spain, Portugal, England, France, and the Netherlands)
• Royal monopolies granted by the Spanish Crown to individuals or companies for the exclusive right to trade in certain goods or regions
  • Examples include the tobacco monopoly in Cuba and the mercury monopoly in Almadén, Spain (mercury was essential for the extraction of silver from ore)
  • Allowed the Crown to control the production and distribution of key commodities and generate revenue through licensing fees and taxes

Asiento System and the Slave Trade

• Asiento system refers to the contracts granted by the Spanish Crown to foreign companies for the exclusive right to supply African slaves to the Spanish colonies
  • First asiento contract granted to the Portuguese in 1518, followed by the Dutch, French, and English in the 17th and 18th centuries
  • The British South Sea Company held the asiento contract from 1713 to 1750, during which time it supplied over 100,000 African slaves to the Spanish colonies
• The asiento system played a critical role in the development of the Atlantic slave trade and the forced migration of millions of Africans to the Americas
  • Slaves were used as labor in the mines, plantations, and households of the Spanish colonies
  • The profits generated from the slave trade helped finance the growth of European economies and the expansion of colonial empires