In the terrible civil war which broke out about 1525 between Atahuallpa and Huascar, Bolivia suffered less than the Peruvian and Ecuadorean provinces, but thousands of her sons were drafted into the armies which Huascar successively launched against Quizquiz and the horde of northern tribes which relentlessly marched from Quito to Cuzco, and after five years of slaughter captured the southern capital and the legitimate emperor. But before Quizquiz had had time to pursue his conquering way into Bolivia, news came that Pizarro had imprisoned and murdered Atahuallpa, and that the Spaniards were on their way to Cuzco to give battle to Quizquiz and restore the legitimate succession. The northern Indians were defeated and at the close of 1533 Pizarro entered Cuzco in triumph riding at the side of Huascar's heir. The people of southern Peru, Bolivia, Tucuman, and Chile regarded the Spaniards as deliverers and allies. Within a few months after the occupation of Cuzco the strangers rode out of the city along the splendid stone-flagged Inca roads, crossed the transverse range into the Titicaca basin, and followed south-east to the extremity of the plateau, encountering little resistance and regarded as ambassadors from the Inca emperor. They found the country teeming with a docile and prosperous population, and the mountains on its borders were reported to abound in silver, gold, and copper. Almagro, Pizarro's partner and associate, to whose share had fallen the southern half of the empire, resolved not only to take possession of Bolivia, but also to conquer the great province which the Indians told him lay far to the south in fertile valleys on the western side of the Andes and hard by the Pacific Ocean.

In 1535 Almagro marched from Cuzco with five hundred Spaniards and ten thousand Indians, the latter under the command of a brother of the Emperor. After crossing the Titicaca basin, he surmounted the difficulties of the bleak and icy Puna, the snowy passes, and the Atacama desert, and descended finally into Chile. But he found the people poor and warlike, and encountered little gold. Returning in 1538 to make war on Pizarro, he was defeated and died strangled in prison by his relentless rival. Hernando and Gonzalo Pizarro, Francisco's brothers, became dominant on the Titicacan plateau, and began establishing great feudal lordships, dividing the country among their followers and exacting tribute and forced labour from the Indians. In 1540 the great Marquis himself visited Charcas, the southern capital and only large Indian city in Bolivia.

Late that same year his quartermaster, Pedro de Valdivia, led another expedition along the route over the Bolivian plateau into northern Chile. Meanwhile the Spaniards were diligently searching Bolivia for the Indian gold mines. Though the Incas were known to have extracted immense quantities of the metal from the placers around Lake Titicaca, the surface deposits had been pretty well exhausted, and the Spaniards were disappointed. Silver, however, existed in abundance and the strangers began to work the mines shortly after they reached the plateau. About 1545 the great deposits of Potosí were discovered on a bleak mountainside four hundred miles south-east of Titicaca and near Charcas, in the regions where Gonzalo Pizarro possessed immense estates. At that time Gonzalo was virtually independent monarch of the whole Inca empire, having headed a successful revolt against a viceroy sent out to reorganise the country and put a stop to Indian slavery. But he did not long enjoy his riches, for in 1548 he risked his all in a hopeless battle with a new Spanish governor and ended his stormy life on the scaffold.

The discovery of Potosí revolutionised Upper Peru—as Bolivia was then called. It is probable that the high and inaccessible plateau would have largely escaped Spanish settlement if it had not been for the marvellous riches now offered to Spanish cupidity. Pizarro's original followers came as conquerors and not as settlers. They overran a great and civilised empire whose revenues they proposed to absorb and whose inhabitants they subjected to tribute, but after they had obtained all the gold accumulated in the hands of the Indians there would have been little to have induced them to remain in Bolivia. But as soon as the unprecedented extent of the silver deposit at Potosí was recognised, Bolivia became the greatest source of that metal in the known world and the most important province of the transatlantic dominions of the Castilian king. That one mountain has produced two billion ounces of silver. Even by the early rude processes which the Spaniards found in use among the Indians seventy million ounces were taken out in the first thirty years, and the discovery of quicksilver in Peru, with the invention of the copper-pan amalgamation process in 1575, quadrupled the output. A great mining camp sprang up on the Potosí mountainside; royal officials, contractors, and merchants flocked to this Eldorado; the mountain roads to Lima swarmed with mule trains, carrying down silver and painfully toiling back again laden with supplies; the routes of the Bolivian plateau became the greatest arteries of travel in Spanish America.

The year of Gonzalo's execution the city of La Paz was founded in a valley lying in the open plains just south of Lake Titicaca, and soon became a great emporium of Spanish trade. On the fertile plateau to the east of Potosí the city of Charcas flourished and was made the political and ecclesiastical capital of Upper Peru, Potosí being too high for Europeans. Soon other great mines were found, among which those of Oruro, on the south-eastern edge of the Titicaca basin, proved especially rich. Nearly ten thousand abandoned silver mines testify to the activity of the Spaniards in hunting the precious metal, and the total production of silver in Bolivia during the colonial period exceeded three billion ounces. To work these mines the Spaniards ruthlessly impressed the helpless Indians. Each village was required to furnish a certain number of labourers annually. Lots were drawn as if for a proscription, and the unhappy creatures who drew the bad numbers went off to meet a certain death in the dark wet pits and galleries, bidding good-bye to their wives and children like men stepping on the scaffold. The destruction of life was frightful, the official returns made by the officials charged with the impressment demonstrating that in the neighbourhood of Potosí the Indian population fell within a hundred years to a tenth of its original numbers.

The influx of Spanish adventurers and officials also stimulated the extension of the system of agricultural encomiendas—that is, the grants of large tracts of land with the privilege of enslaving the Indian occupants. Sheep were introduced from Spain within twenty years of the conquest, and immense herds belonging to the Spanish proprietors and tended by Indian slaves soon covered the vast pasture grounds which are found even on the higher and colder portions of the plateau. Horses had come with the first conquerors and the breeding of mules flourished, especially in Cochabamba, the great agricultural centre which was founded in 1573, as well as in Charcas and the far southern districts of Tucuman. Cattle spread quickly over these same regions, and their beef, maize, mules, and horses found a good market in the mining districts.

By the year 1580 the Spanish colonial system affecting the natives had been perfected, codified, and put into general operation. The whole country was divided into about thirty districts, each governed by a corregidor who in theory was controlled by a complicated and carefully drawn system of regulations, but who in practice was a petty tyrant against whom the white Creoles had little chance of redress, and who held the Indians absolutely at his mercy. The regulations framed by the distant viceroy at Lima for the protection of the natives were evaded by the corregidors, intent solely on extorting money from the poor creatures committed to their charge. Encomiendas had nominally been abolished, but landed proprietors still exercised the right to exact tribute from the Indians on their estates and great numbers were forced to serve as life servants under various pretexts. Those Indians who retained a semblance of freedom obeyed their own caciques, who were often the descendants of the royal Inca family. The principal duty for which the Spaniards held these chiefs responsible was the collection of the head-tax in their respective villages.

The letter of the law required a seventh of the adult male population to work for the benefit of the Government, and in practice this resulted in an unlimited farming out of Indians as slaves to the rural proprietors. As much as possible the Indians retired to their villages to escape the notice of the officials, hoping to find under their own caciques a measure of security and a chance to live in modest poverty. Misrule, slavery, labour in the mines, neglect of that intensive and government-directed agriculture which had alone rendered it possible to sustain the dense population of Inca times, decimated the Indians.

Few parts of the plateau escaped coming under Spanish rule, but the white conquerors, like their Inca predecessors, stopped short when they reached the dense forests and steep valleys, eroded by wildly rushing rivers, which cover the eastern slope of the great mountain region. Down these terrific gorges no progress was made, and only occasionally did some devoted priests manage to establish a mission among the intractable Indians who inhabit the open prairies interspersed among the beautiful forest-covered plains drained by the tributaries of the Madeira. The roads the Incas had built to the Pacific continued even in Spanish times to be the only practicable way of communication between Bolivia and the outer world. Transportation over the steep and tedious route from Potosí to La Paz, thence around Titicaca, and along the high valleys of southern Peru to the beginning of the tremendous descent to Lima, was too expensive to permit any export except of the precious metals. To the south there was a somewhat easier route to the valleys of north-eastern Argentina, into which the Spaniards had spread within a few decades after the discovery of Potosí, and whence food and pack animals were drawn for the mining regions. Spanish law forbade the use of the Atlantic ports at the mouth of the Plate, and for more than two centuries Bolivia continued under both administrative and commercial subordination to Lima.

Jesuit missionaries arrived in Bolivia within twenty-five years after Loyola had founded the order. They established an important mission on the banks of Lake Titicaca in 1577, and five years later introduced the printing-press in order to distribute among their proselytes grammars and catechisms in the native tongues. In the seventeenth century they succeeded in penetrating down the eastern slope of the Andes and across the great central plain to the outlying hills of the Brazilian mountain system where they established several missions among the Chiquitos Indians. They even reached the grassy prairies which lie three hundred miles north of the inner angle of the great plateau, converted the Mojos, and taught them to herd cattle. But in the forests and along the base of the Andes the fierce tribes held their own as they had against the Incas and as they have continued to do against the Spanish-Americans to this day.