To allow legal free trade among the colonies of Spain, instead of forcing it to go through mainland spain.
Pretty much all the European countries were doing the same thing in the period. Spain's direction of trade was no different with Portugal in regards to Brazil, Britain with the Seventeen Colonies, and even France with Quebec. Mercantilism was the word of the day until the 19th century.
Free Trade was considered an awful idea as economists of the day saw it as buillon leaving the country and enriching enemies. HMercantilism was tied to bullionism, were a country wanted lots of precious metals entering it but few leaving it. Colonies in the period existed as a means of raw material for the motherland, not a trade preference zone. Not to mention, Charles IV
did allow free trade amongst the colonies in the 1780s. He even began to loosen restrictions with foreign countries until the Napoleonic Wars severed the colonists from the metropole.
The biggest issue with Spanish colonization, invasions and plagues aside, was almost two centuries down the line, in the 18th century. The newly installed Spanish Bourbons, keen modernizers were desirous to see a profit milked out of their colonies -- the annual treasure fleets and the Manilla Galleons just weren't cutting it. The colonies, having been left to their own benign neglect much as Britain ignored hers prior to the Seven Years War found themselves up for a rude awakening as the Bourbons were increasingly centralizing in regards to the American Administration. Distrustful of the
Criollos, the tiny middle class that had grown up in the heydey of Habsburg neglect, those of Spanish descent who had settled in the colonies and had become fixtures of powers, either through appointments by the crown or through the out right purchase of offices found themselves marginalized as the Spanish Bourbons preferred to send loyal lieutenants from Spain to govern the Americas.
This was especially well shown in the audiencia, or the court system which also functioned as a sort of legislative body. On the eve of the War of the Spanish Succession, the Criollos overwhelmingly dominated these bodies and had an immense say in the day to day governance: this was especially important in Mexico. A century later, on the eve of the French Revolution, only a tiny portion of Criollos still sat on the audiencias: they had largely been replaced by men from Spain, men who were neither born in the colonies or really had no interest or idea in how to govern it.
Of course, trade did a role, and there were clamors for the system dominated around the Casa da Indies to be abolished, and it eventually was. Too late, of course, but that was really only part of the problem. Liberalizing trade won't make Spanish rule in Mexico any better when Charles IV is still sacking and overlooking the criollos for his Spanish born courtiers.
