Okay, I did the thing historians do and did my own research. And while this is possibly against the spirit of the sub, I'm going to post it anyway, because the answer is money, magic, paranoia, and the Dutch.

Background: Catholic Christianity had long been a stronger component of Spanish political and imperial ideology than elsewhere, dating back to the Reconquista. Non-Christians were cast as an existential threat to the empire itself. In 1492, Isabella and Ferdinand infamously forced the Jewish population of Spain to convert or flee. But the conversos or New Christians who stayed behind never shook the air of suspicion. Indeed, one of the foundational targets of the Spanish Inquisition was the (generally) mythical "crypto-Jew": typically, someone with converso ancestry who was accused of practicing Judaism in secret. The threat was not simply divergent religious belief, but that she or he was actively working to convert others away from Christianity and Spain.

In the early 17th century Spanish colonies, three trends converged to ramp up paranoia over crypto-Jews to a level unprecedented in the New World.

First, in the 1610s and 1620s, missionaries finally had enough manpower in the colonies to pay more attention to the daily lives of indigenous converts, and they did not love what they saw. People had integrated traditional religious practices with their Christianity, such as making traditional offerings to their gods and spirits alongside celebration of key saints' days. Zealous missionary campaigns to extirpate this idolatry raged across the Andes. The friars perceived the Christianity of their new converts was hanging by the flimsiest thread.

Second, from 1580 to 1640 Spain and Portugal were united under one crown. Much of Portugal's New Christian community took the chance to flee to Spain, where--really--they enjoyed a bit more tolerance from the "Old Christians." As erstwhile citizens of the Spanish Empire, they also had free reign to travel overseas. Many with the financial wherewithal to do so headed for New Spain (Mexico) and the Andes, and set themselves up quite profitably in the trade/merchant community there. These are Christians, recall--but Christians with a taint of Jewish ancestry, Christians always perceived at risk of sliding back to Judaism and spreading the poison.

And third, the Dutch.

The early modern Netherlands, or at least part of it, was an early experiment in a certain degree of religious toleration. While Jews had spent the preceding centuries being progressively kicked out of more and more of western Europe, they were actually able to practice their religion openly in the Netherlands--and its colonies. Perhaps even more so in its colonies. And as I have just learned, for a quarter of the 17th century the Dutch actually controlled a sliver of Brazil. Specifically, the one bordering the Peru-Colombia crescent.

There were Jews on the border, and Christians perceived as teetering on the edge of relapse into Judaism within the borders, and a Spanish colonial leadership paranoid about the susceptibility of their population to everything against Christianity.

The stories they told--the stories they believed--are wild. The Jews used a "secret language" hidden within everyday words to reactivate the crypto-Judaism of the New Christians, and also to convert the impressionable, weak indigenous people away from true faith. The friars watched their congregations' everyday rituals and social lives, and decreed their activities to be clearly Jewish practices. You know, those ancient Near Eastern traditions of smoking tobacco and drinking cocoa.

It was the latter that got the colonial New Christians into trouble. Everyone was smoking tobacco and drinking cocoa. Boom, you have Jewish ancestry; boom, you're a Jew.

The Inquisition in Latin America orchestrated far fewer executions for crypto-Judaism than Spain itself, but there were still a few (of course the Church could not kill, but the inquisitors handed their prey over to the secular authorities to finish the job). Forced confession, public repentance and shaming, and subsequent loss of stature in the community was more common. Seizure of property frequently accompanied suspicion and arrest, regardless of guilt or innocence.

Right. Seizure of property. It turns out colonial authorities gathered very detailed records of the financial assets of many of the people they arrested and accused of crypto-Judaism. It also turns out the authorities were not so reliable in passing on those records to their superiors back in Madrid, and somehow emerged from each set of accusations rather enriched.

The tension settled down in the second half of the 17th century. The Dutch left Brazil in 1654, the main promoter of the idolatry extirpation campaigns in Peru died in 1671, and a massive auto-da-fe in 1642-1649 Mexico eliminated most of the prime 'suspects'. Still, while it lasted, the Spanish colonial campaign against Judaism in the New World united religious, political, and economic motivations within a hurricane of paranoia.