See L. B. Simpson, The Encomienda in New Spain (rev. ed. 1966); J. F. Bannon, Indian Labor in the Spanish Indies (1966).
In the papal bull Inter caetera (1493) the Borgia Pope Alexander VI had granted the western newly found lands to the Castilian Crown, on the condition that it evangelize these new lands. "...By this he allocated everything discovered by Columbus to the Crown of Castile, on the condition that the monarchs set about propagating the Christian faith there, and provided the lands concerned… Because the ultimate title of the Amerindian's land lay with the Castilian Crown, the system in the New World differed in that it did not entail any direct land tenure by the encomendero. Amerindian lands were to remain in their possession, a right that was formally protected by the Crown of Castile's initial title.. These were laws that the Crown attempted to impose in all of the Spanish colonies in the Americas and in the Philippines.
By reading the Requerimiento, which ordered defiant Indians, in Spanish, to accept Spanish rule and the Christian God as greater than their own. If the Indians ignored this order, they deserved the harsh punishments of a “just war.” The requerimiento was, therefore, a justification of conquest on account of being denied right of way.
This exploitation of the indigenous natives and the other negative influences of the European presence of encomenderos were some of the factors that led to the breakdown of the entire encomienda system, which ceased to exercise any vital function in New Spain by the end of the sixteenth century, though the institution was not abolished. Another equally important factor was the scrupulousness of the Spanish laws governing the encomienda system, which made it difficult for mestizos or people with no clear Amerindian lineage to be liable to encomienda service. The breakdown of tribal lineages coupled with European intermarriage undermined the labor pool available by the end of the 16th century.
The downfall of the encomienda system began in 1544, when Blasco Núñez Vela, the first viceroy of Peru, tried to enforce the New Laws, which provided for the gradual abolition of the encomienda. Many of the encomenderos were unwilling to comply with the New Laws and soon revolted against Núñez Vela.
Other problems of the encomienda system in Peru resulted from the breaking up of extended families, or ayllus, bringing an end to their economic system of vertical exchanges. Further, epidemic diseases that the Europeans brought to America - such as the plague and smallpox - killed a large percentage of the indigenous population, which had no natural defenses against them. (See Population history of American indigenous peoples.) According to Leslie Byrd Simpson, "the catastrophic decline of the native population during the sixteenth and seventeenth centuries... doomed thew encomienda as a device for procuring cheap labor". It must be noted, however, that the reorganizing of ayllus and geographical relocation of entire communities was a practice already put in place by the ruling Inca in order to control a vast population. The Spanish simply continued the practice. The reality of this system, arbitrary as it was, was complex and never one-sided in terms of ethnicity. Among the principal social actors interested in the continuation of the encomiendas one could usually find the pre-Incan tribal chiefs or curacas themselves, eager to be assigned encomiendas.
The encomienda system was also introduced to the Philippines when Legazpi started to give lands to Spaniards who helped enrich Spain. Encomienda were a reward of the King of Spain to Spaniards who acted for the benefit of the name of Spain. Taxes came from Filipinos.
The encomienda system was essential to the Spanish crown's sustaining its control over North, Central and South America in the first decades after the conquest, because it was the first major organizational law instituted on a continent where disease, war and turmoil reigned. The encomienda system was succeeded by the crown-managed repartimiento and the privately-owned hacienda as land ownership became more profitable than acquisition of labor force The last encomiendas were abolished in 1791.
The standard history in English of the encomienda system is Leslie Byrd Simpson, The Encomienda in New Spain: The Beginning of Spanish Mexico (1950), a through revision of his work of 1929, which scholarship in the past half century has modified in approach and deepened in local depth.