The economic impact of the Spanish Conquest of Mexico


The economic impact of the Spanish Conquest of Mexico

As I am sure all reading this article know, Latin America consists of many poverty-stricken nations and is said to be ‘one of the most unequal places in the world.’ But why is that the case? In this article, I will be focussing on the Short-Term economic changes that the Spanish Colonisation of Mexico brought, and how that led to the exploitation of the indigenous people of Mexico for Spanish benefit, and then also explore the longer-term legacy of the Spanish through the institutions they left behind which resulted in the unequal nation present today.


The Spanish Conquest of Mexico, and later most of Latin America can be attributed to Hernan Cortez and his crew who conquered the Aztec empire. In 1521, after a siege and multiple battles and the aid of Smallpox that killed nearly half of the Aztec Population, the colony of New Spain was founded with Cortez as the governor. This event set in motion the dismantling of the old Aztec empire over the next three years that controlled much of modern-day Mexico, and placed trustworthy Spanish men in positions of power.

Short term Economic Impact

With Spain now controlling much of Mexico, the plundering of valuable Aztec monuments such as the Teocalco which stored much of the emperor’s golden jewellery occurred making the Spanish colonisers extremely rich. There are many accounts such as in New Granada where the Spanish captured the local chief and forced him to fill a full house with gold and silver, or else be tortured and killed. As a result of these demands all over Mexico and Latin America, the continent as a whole became increasingly poorer for the duration of colonialism, as more and more precious metals and objects were seized to be taken to Spain.

After the Spanish’ initial greedy desires were fulfilled, they moved on to dividing up the most valuable resource; the indigenous population. This was done through the institution of ‘encomienda,’ which was a grant in which indigenous people had to give labour services in return for the Spanish converting them to Christianity. This system essentially turned most of the indigenous people into slaves that worked for the Spanish, resulting in their complete and utter exploitation with ‘dignitaries, old men, women and children labouring night and day,’ with no benefit to them as put by Bartolome de las Casas in 1542 (a Spanish Priest who became disturbed by the excessively cruel treatment of the indigenous people). However, whilst this explains how Mexico was impacted by the Spanish Conquest whilst they were still under extractive colonial rule, this doesn’t explain why Mexico didn’t experience exponential economic growth once it gained independence in 1821.

Long Term Economic Impact

As explored by the book ‘Why Nations Fail,’ one of the biggest reasons for global inequality is whether countries have extractive political and economic institutions or inclusive political and economic institutions. Whilst the Spanish left, the extractive institutions they created such as the ‘encomienda’ stayed albeit in a different form, ready to be exploited by the next elite at the expense of the rest of the population. After the Spanish departure from Mexico experienced almost nonstop instability for its first 50 years of independence with there being 52 Presidents between 1824 and 1867, all fighting for control of institutions that they will be able to gain profit out of.

Firstly, with such a severe amount of political instability, there was highly insecure property rights as well as the Mexican state itself being severely weakened, now having little authority/ability to raise taxes, let alone offer public services. As a result of these issues, sustained periods of economic growth were rare and Mexico lagged behind many Western European countries and America in bringing about the Industrial Revolution, setting it back many years and not improving living standards.

Additionally, whilst modern-day Mexico is much more democratic than previously, the long-term impact of these extractive institutions was that there is widespread corruption as politicians and powerful people place/bribe individuals for their own benefit even if the politician was democratically elected. Furthermore, extractive institutions in Mexico; a direct influence of the Spanish Conquest further set it back such as in the banking sector when in 1910 there were only 42 banks in Mexico compared to 27,864 in the USA in 1914. This severe lack of competition resulted in extremely high-interest rates for Mexican customers and meant only the already wealthy and privileged members of society were able to take loans to increase their grip over various sectors in the economy. The banking sector is just one of many examples of the extractive institutions in Mexico even today, which stifles growth whilst enriching a minority of the population and has resulted in Mexico being one of the most unequal countries in the world.


Overall, the economic impact of the Spanish Conquest on Mexico is the extractive institutions that it introduced and first used for their own benefits, later becoming their legacy as the political elite first battled over and then exploited the same institutions for their own personal benefit.