Although he was supposed to be administering the lands he encountered, Columbus made a series of blunders, including leaving his brother in command of La Isabela. It's said he also adopted harsh measures against the natives and had a heavy hand when it came to disciplining his own men. Rather than sending gold back to the Spanish court, Columbus captured natives, sending them home to be sold as slaves. The Crown also authorized the encomienda system, which, instead of being a grant of land, was a grant of a type of slave labor. The natives revolted, skirmishes ensued at the colony, and Queen Isabella objected to the slaves, sending a royal commission to investigate the situation. Because of the criticism he received, Columbus established a new capital, calling it Santo Domingo. He then retreated to Spain to plan yet a third voyage.

Not long before this time, a decree called the Treaty of Toledo, signed in 1480, had divided Portuguese and Spanish territories. This gave Portugal territorial rights to Morocco and other areas, and prohibited Spain from sailing beyond the Canary Islands.

It is thought that Columbus may have intentionally reported the latitude of his discoveries incorrectly, knowing full well that these islands belonged to Portugal by the terms of the treaty. Remember, there was no love lost between Columbus and the Portuguese, who had rejected his voyage plans years before.

But in 1493, Pope Alexander VI issued a papal bull (decree) that a line be drawn from north to south dividing the Atlantic Ocean. He decreed that all lands that were situated east of that line would belong to Portugal. Everything to the west would be property of Spain. This resulted in passing legal possession of the New World to Spain. It was quite convenient for Columbus that the new pope was Spanish!