The first Spaniards arrived in the Philippines in 1521, when Magellan and his crew landed on Homobon Island and then proceeded to Cebu. However, the conquest of the Philippines only began in 1565, when Miguel Lopez de Legazpi arrived in Cebu and established the first Spanish settlement, which he named Villa de San Miguel. This settlement, which later became Cebu City, was the first capital on the Spanish Philippines. In the next few years, Legaspi established a settlement on Panay in 1569, and from there he captured Manila in 1570. Shortly thereafter, he transferred the capital from Cebu to Manila. Of course, it took many years for the Spanish to control the Philippine archipelago and even than, their impact Spanish was minimal except in the larger populated areas.
One major objective of the Spanish in conquering the Philippines was to use it as a base for trade China, and thereby to participate in the lucrative trade in spices, silk and other luxury goods. While Chinese traders had long visited Philippine ports, including Cebu, under Spanish rule the amount of trade increased substantially and Chinese merchants began to settled in Cebu and other ports. These changes were particularly important for the early history of the Cabahug family. Being of Chinese mestizo origin, the Cabahug family was directly affected by the activities of the Chinese community and by its treatment by the Spanish authorities. Initially, Cebu benefitted from the increased trade with China. Its prosperity, however, began to evaporate when the capital moved to Manila. Restrictions on the number of ships and type of trade goods Cebu could contribute to the annual Galleon trade, severely limited its participation. Thus, by the 1620's, there was little activity in the port of Cebu, the population of the port was greatly decreased and few Spanish or Chinese merchants remained. Manila was the center of economic activity and the Spanish administration did nothing to encourage inter-island trade. Effectively, Cebu returned to subsistence farming and barter trading. This situation continued until the mid-1700's.
For much of the colonial period, it was Spanish policy to maintain separation of ethnic groups. In 1565, Legaspi established the first capital, Villa de San Miguel, as a Spanish town. The local Filipinos lived in San Nicolas, just south of Villa de San Miguel.  And, as number of Chinese settling in Cebu increase, they were restricted, along with their descendants, to the Parian, a district north of Villa de San Miguel, and connected to the port by river. In addition, Chinese immigrants were subjected to periodic, forced deportations, the last of which occurred around 17704,17. As a result of these deportations and the lack of opportunity, the Chinese population of Cebu was greatly decreased.
In the mid-1700's economic activity began a slow recovery, which led to a vibrate economy in the second half of the 1800's. This was due to several factors: Beginning in 1760, government policy began to encourage commercial and agricultural activity throughout the islands. Foreign merchants were permitted to begin trading at Manila in 1790.  Manila was opened to ships from all nations in 1803. The galleon trade was officially ended in 1813, after years of decline. Foreign firms were established in Manila by 1820, and Manila was essentially an open port. The Port of Cebu was opened to foreign trade in 1860. These changes encouraged development of commercial agriculture throughout the Philippines. In Cebu produce of commercial crops, which included abaca (manila hemp), bananas and sugar, began in the towns bordering Cebu City and spread north and south along the coastal towns during the 1800's17.
Chinese immigrants and particularly their Chinese mestizo descendants played an important role in this economic activity. Historically, members of the mestizo community of the Parian were important middlemen in the Cebu economy. Beginning in the last 1700's they began to dominate economic activity in Cebu. Although their influence was partially curtailed in early 1800's, they remained a major force throughout the century. The wealthiest families lived in the Parian and supplied local product to Manila and the international market.  However, after the arrival of foreign firms, the mestizo businessmen became the middlemen between production and shipping of agricultural products18.
Finally, the economic activity in the Chinese mestizo community was a family affair. A family involved in agricultural production and trade would have a core member or members in Cebu City who dealt with the international trading houses. Agricultural products were funneled to Cebu City by other family members in the towns, who purchased or rented land and managed the production. The local fields were generally worked by tenant farmers, who tended smaller plots for a share of the profits. In the case of the Cabahug family, as with many other mestizo families, family members began moving north out of the Parian, mainly into Mandaue, in the late 1700's. By the later 1800's, family members had moved up the north coast of Cebu and were beginning to transfer to other islands of the Visayas. Today, many family members and found in the central and eastern Visayas and northern Mindinao.