The Spanish to an extent incorporated the Incan elite in order to manage their lands after rejecting the encomienda system in favor of repartimiento system. The effect was to switch from a system in which individual Spaniards were able to breakdown Incan society to one in which the relationship was ordered to the favor of the Spanish crown in exploiting native labor. In switching from slavery to serfdom the Spanish made it much easier for Incans to incorporate themselves into the superstructure of colonial society, which would in the 1820s morph into a revolution against the crown with a creole leadership. Incan culture was itself syncretic in some ways and so the evolution of culture in Peru was not so entirely shocking as say that which occurred in North America. The indigenous culture was better able to gain a stake in the colonial political economy/ The Spanish simply co-opted it to a great extent, except for the heavy emphasis on silver-mining at Potosi, which was a likely fatal enterprise: "Indian laborers, forced by Francisco de Toledo, Count of Oropesa through the traditional Incan mita institution of contributed labor, came to die by the millions,[2] not simply from exposure and brutal labor, but by mercury poisoning." - http://en.wikipedia.org/wiki/Potos%C3%AD#History_and_silver_extraction
The Indian nobility of the Andes--largely descended from the Inca monarchs and other pre-conquest lords--occupied a crucial economic and political position in late colonial Andean society, a position widely accepted as legitimate until the Túpac Amaru rebellion. This volume traces the history of this late colonial elite and examines the pre-conquest and colonial foundations of their privilege and authority. It brings to light the organization and the ideology of the Indian nobility in the bishopric of Cusco in the decades before the rebellion, and uses this nobility as a lens through which to study the internal organization and tension of late colonial Indian communities.
http://www.amazon.com/Shadows-Empire-Nobility-1750-1825-Cambridge/dp/052184634X/ref=sr_1_1?ie=UTF8&qid=1328694952&sr=8-1
The encomienda (Spanish pronunciation: [eŋkoˈmjenda]) was a system that was employed mainly by the Spanish crown during the colonization of the Americas to regulate Native American labor.
In the encomienda, the crown granted a person a specified number of natives for whom they were to take responsibility. In theory, the receiver of the grant was to protect the natives from warring tribes and to instruct them in the Spanish language and in the Catholic faith: in return they could extract tribute from the natives in the form of labor, gold or other products.[1] In practice, the difference between encomienda and slavery could be minimal.[1] Natives were forced to do hard labor and subjected to extreme punishment and death if they resisted.[1]
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The encomienda system was succeeded by the crown-managed repartimiento and the hacienda, or large landed estates, in which laborers were directly employed by the hacienda owners. Like the encomienda, the new repartimento did not include the attribution of land to anyone, only the allotment of native workers. But they were directly allotted to the Crown, who, through a local crown official, would assign them to work for settlers for a set period of time, usually several weeks. The repartimiento was an attempt "to reduce the abuses of forced labour."[14] As the number of natives declined and mining activities were replaced by agricultural activities in the seventeenth century, the hacienda arose because land ownership became more profitable than acquisition of labor force.[15]
The encomienda was strongly based on the encomendado's tribal identity. Mixed-race (Mestizo) individuals, for example, could not by law be subjected to the encomienda. This moved many Amerindians to deliberately seek to dilute their tribal identity and that of their descendants as a way for them to escape the service, by seeking intermarriage with people from different ethnicities, especially Spaniards or Creoles. In this way the encomienda somewhat weakened Amerindians' tribal identification and ethnicity, which in turn diminished the pool of available encomendados.
More:
http://en.wikipedia.org/wiki/Encomienda
http://en.wikipedia.org/wiki/Repartimiento