The first recorded sighting of the Philippines by Europeans was on March 16, 1521, during Ferdinand Magellan's circumnavigation of the globe. Magellan landed on Cebu, claimed the land for Charles I of Spain, and was killed one month later by a local chief. The Spanish crown sent several expeditions to the archipelago during the next decades. Permanent Spanish settlement was finally established in 1565 when Miguel López de Legazpi, the first royal governor, arrived in Cebu from New Spain (Mexico). Six years later, after defeating a local Muslim ruler, he established his capital at Manila, a location that offered the excellent harbor of Manila Bay, a large population, and proximity to the ample food supplies of the central Luzon rice lands. Manila remained the center of Spanish civil, military, religious, and commercial activity in the islands. The islands were given their present name in honor of Philip II of Spain, who reigned from 1556 to 1598.
Spain had three objectives in its policy toward the Philippines, its only colony in Asia: to acquire a share in the spice trade, to develop contacts with China and Japan in order to further Christian missionary efforts there, and to convert the Filipinos to Christianity. Only the third objective was eventually realized, and this not completely because of the active resistance of both the Muslims in the south and the Igorot, the upland tribal peoples in the north. Philip II explicitly ordered that pacification of the Philippines be bloodless, to avoid a repetition of Spain's sanguinary conquests in the Americas. Occupation of the islands was accomplished with relatively little bloodshed, partly because most of the population (except the Muslims) offered little armed resistance initially.
Church and state were inseparably linked in carrying out Spanish policy. The state assumed administrative responsibility--funding expenditures and selecting personnel--for the new ecclesiastical establishments. Responsibility for conversion of the indigenous population to Christianity was assigned to several religious orders: the Dominicans, Franciscans, and Augustinians, known collectively as the friars-- and to the Jesuits. At the lower levels of colonial administration, the Spanish built on traditional village organization by co-opting the traditional local leaders, thereby ruling indirectly.
This system of indirect rule helped create in rural areas a Filipino upper class, referred to as the principalía or the principales (principal ones). This group had local wealth; high status and prestige; and certain privileges, such as exemption from taxes, lesser roles in the parish church, and appointment to local offices. The principalía was larger and more influential than the preconquest nobility, and it created and perpetuated an oligarchic system of local control. Among the most significant and enduring changes that occurred under Spanish rule was that the Filipino idea of communal use and ownership of land was replaced with the concept of private, individual ownership and the conferring of titles on members of the principalía.
Religion played a significant role in Spain's relations with and attitudes toward the indigenous population. The Spaniards considered conversion through baptism to be a symbol of allegiance to their authority. Although they were interested in gaining a profit from the colony, the Spanish also recognized a responsibility to protect the property and personal rights of these new Christians.
The church's work of converting Filipinos was facilitated by the absence of other organized religions, except for Islam, which predominated in the south. The missionaries had their greatest success among women and children, although the pageantry of the church had a wide appeal, reinforced by the incorporation of Filipino social customs into religious observances, for example, in the fiestas celebrating the patron saint of a local community (see Religious Life). The eventual outcome was a new cultural community of the main Malay lowland population, from which the Muslims (known by the Spanish as Moros, or Moors) and the upland tribal peoples of Luzon remained detached and alienated.
The Spanish found neither spices nor exploitable precious metals in the Philippines. The ecology of the islands was little changed by Spanish importations and technical innovations, with the exception of corn cultivation and some extension of irrigation in order to increase rice supplies for the growing urban population. The colony was not profitable, and a long war with the Dutch in the seventeenth century and intermittent conflict with the Moros nearly bankrupted the colonial treasury. Annual deficits were made up by a subsidy from Mexico.
Colonial income derived mainly from entrepôt trade: The "Manila galleons" sailing from Acapulco on the west coast of Mexico brought shipments of silver bullion and minted coin that were exchanged for return cargoes of Chinese goods, mainly silk textiles. There was no direct trade with Spain. Failure to exploit indigenous natural resources and investment of virtually all official, private, and church capital in the galleon trade were mutually reinforcing tendencies. Loss or capture of the galleons or Chinese junks en route to Manila represented a financial disaster for the colony.
The thriving entrepôt trade quickly attracted growing numbers of Chinese to Manila. The Chinese, in addition to managing trade transactions, were the source of some necessary provisions and services for the capital. The Spanish regarded them with mixed distrust and acknowledgment of their indispensable role. During the first decades of Spanish rule, the Chinese in Manila became more numerous than the Spanish, who tried to control them with residence restrictions, periodic deportations, and actual or threatened violence that sometimes degenerated into riots and massacres of Chinese during the period between 1603 and 1762.