After Cortés toppled Moctezuma and Pizarro defeated Atahualpa (see The Spanish Invasion), leading conquistadors received encomiendas from the crown, which allowed them to claim tribute in labor and goods from Indian communities. Later these grants were repartitioned, but the pattern was set early: prominent men controlled vast resources and monopolized Indian labor. The value of these grants was dramatically enhanced by the discovery of gold and, especially, silver deposits in both Mexico and the Andes. In the decades after the conquest, mines were developed in Zacatecas, in Guanajuato, and — most famously — at Potosí, high in the Andes. Spanish officials co-opted the mita system, which made laborers available to the Inca Empire, to force Indian workers into the mines. At its peak, Potosí alone produced 200 tons of silver per year, accounting for half the world’s supply.

The two great indigenous empires of the Americas thus became the core of an astonishingly wealthy European empire. Vast amounts of silver poured across the Pacific Ocean to China, where it was minted into money; in exchange, Spain received valuable Chinese silks, spices, and ceramics. In Europe, the gold that had formerly honored Aztec and Inca gods now flowed into the countinghouses of Spain and gilded the Catholic churches of Europe. The Spanish crown benefitted enormously from all this wealth — at least initially. In the long run, it triggered ruinous inflation. As a French traveler noted in 1603: “Everything is dear [expensive] in Spain, except silver.”

A new society took shape on the conquered lands. Between 1500 and 1650, at least 350,000 Spaniards migrated to Mesoamerica and the Andes. About two-thirds were males drawn from a cross section of Spanish society, many of them skilled tradesmen. Also arriving were 250,000–300,000 Africans. Racial mixture was widespread, and such groups as mestizos (Spaniard-Indian) and mulattos (Spaniard-African) grew rapidly. Zambo (Indian-African) populations developed gradually as well. Over time, a system of increasingly complex racial categories developed — the “casta system” — buttressed by a legal code that differentiated among the principal groups.

Indians were always in the majority in Mexico and Peru, but profound changes came as their numbers declined and peoples of Spanish and mixed-race descent grew in number. Spaniards initially congregated in cities, but gradually they moved into the countryside, creating large estates (known as haciendas) and regional networks of market exchange. Most Indians remained in their native communities, under the authority of native rulers and speaking native languages. However, Spanish priests suppressed religious ceremonies and texts and converted natives to Christianity en masse. Catholicism was transformed in the process: Catholic parishes took their form from Indian communities; indigenous ideas and expectations reshaped Church practices; and new forms of Native American Christianity emerged in both regions.