At the beginning of the eighteenth century there was a change of dynasties in the Spanish Crown after the last Habsburg King of Spain, Charles II, left the throne to the Bourbon prince Phillip of Aunjou. The Bourbon government implemented a series of economic and political changes in the American colonies to stimulate its economy, improve its government and promote fiscal development. The objective of the reforms was designed to have a positive impact on the Spanish economy.
Most of the changes in the American colonies were implemented on the second half of the eighteenth century. The first set of measures was to split the Viceroyalty of Peru where Venezuela, Colombia, part of Ecuador, Guyana and part of northern Brazil would form the new Viceroyalty of New Granada with Bogota as its capital. The Viceroyalty of Rio de la Plata included Argentina, Paraguay, Uruguay and most of Bolivia and had Buenos Aires as its capital. These administrative changes brought the replacement of the corregidores and decentralized the power that viceroys, captains general and governors enjoyed. The new intendants were directly responsible to the Crown and were responsible for economic and political matters.
The government of the Bourbons created an organized military force in their colonies with an organization and hierarchy based on race with white, black, and mestizo groups. The higher ranks were peninsulares followed by criollos and blacks and natives at the bottom of the hierarchy. The Bourbons also wanted a more secular government in the colonies and in 1767 they expelled the Jesuits. In a short period of time the Jesuits had accumulated considerable wealth and power in the colonial government during which they had the support of the Habsburg to convert natives to Catholicism and do missionary work.
The new reforms partially liberalized the economy as new trading routes were created such as the ports of Buenos Aires and Caracas while Callao-Lima no longer held the trading the monopoly in South America. In 1778 King Charles III launched the Decree of Free Trade under which American ports were free to trade with each other and with ports in Spain. Taxes were increased and modified making tax collection more efficient. In order to promote some industries, such as silver mining and tobacco, the government granted them tax deductions. The local trading class, the criollos (Spanish born in Peru) and the mestizos (mix of Spanish and native Peruvians), were affected by the new changes that brought tighter control, more competition and less profits. The economy in the viceroyalty of Peru slowly started to decay, a situation that favored indigenous rebellions.
Many criollos had made advances in local government and bought positions in the high courts or audiencias. Under the new laws these advances were reverted and criollos were not permitted to reach high positions in government which were set aside for peninsulares (Spanish born in Spain). This situation contributed to the gradual discontent of the criollo society and consequently they grew to resent the Spanish government.