It was, indeed, in pursuance of this policy of commerce with the countries at the south and west of the Caribbean that Santiago de Cuba was founded as the seventh of the seven cities among which the island was partitioned, and that it was made the insular capital. The site was, as already stated, the only one at which gold was not found. It was selected partly because of the secure and commodious harbor, one of the finest anywhere on the shores of the Caribbean, and partly because its situation on the south coast made it particularly accessible to and from Jamaica, Darien and the other regions in which the Spanish crown was interested. As soon as it was founded, the seat of civil, military and ecclesiastical authority was transferred thither from Baracoa, and Santiago de Cuba became the second capital of the island. Meantime Narvaez, at the north, had founded Havana, which was destined to be the third and final capital.
Each city or town was made, however, a capital unto itself. The principle of local autonomy or home rule had long been cherished by the Spanish people in the Iberian Kingdom, and it was transplanted by them in an increased degree to their Antillean colonies. In accord with that principle, these first seven cities were planned and arranged with a view to civic self-sufficiency. The plan was uniform. Each place had its central park or plaza, upon which fronted the town hall, the parish church and the residence of the governor or the alcalde. The plan of government was also uniform. In each place Velasquez appointed an Alcalde, who was not a mayor but a judge of first instance; a Deputy Alcalde, and three regidores or councillors; the Alcalde and the regidores sitting together forming the Town Council. There were also a procurador, or public prosecutor; an alguacil, or sheriff; and one or more escribanos, or notaries public.
There was also at this time established throughout the island a social and economic system borrowed from Hispaniola, where it had not been in operation long enough for its evil effects to be demonstrated. Its intention was unquestionably benevolent, and, given a sufficiently altruistic quality of human nature, its results might have been good. With human nature what it was, it became almost unrelievedly evil. This was known as the system of Repartimiento, or Encomienda. First of all, the whole territory of the island was partitioned among the seven cities. Then in each there were appointed persons whom we might describe as land-holders and slave-holders. The former, known as vecinos, were the representatives of the king in ownership of the land, all of which was regarded as the property of the crown, to be apportioned for working to suitable loyal subjects. The latter were called encomenderos, and to them were apportioned the native population, in tutelage and servitude.