The Sack of Portobello
Morgan ran up the English flag on the three forts, giving his ships the sign they had been waiting for. As the fleet arrived, the jubilant invaders set about sacking the town, looking for loot and alcohol. All of the loot was brought together: under the strict code of the privateers, any man who withheld treasure was severely punished. Prisoners were tortured to get them to reveal the whereabouts of any hidden treasure.
Captain Morgan ordered the forts manned. With the pirates in charge, Portobello did indeed become a formidable target: Morgan had twice as many able soldiers as had been there when he arrived.
The Ransom of Portobello
Meanwhile, the Governor of Panama, Don Agustín de Bracamonte, had heard of the attack on Portobello and swiftly organized a relief column to march to the aid of the city, some 70 miles away. He had 800 men and they marched quickly, hoping to catch the pirates before they could secure their victory. When they met up with the soldiers from San Felipe who had been allowed to leave, their spirits sank. It would be next to impossible to take the city back with only 800 men if Morgan was expecting them. They tried to assault the city a couple times but were quickly driven back by Morgan's sharpshooters.
Morgan sent a letter to Bracamonte demanding 350,000 pesos as a ransom for Portobello. If Bracamonte did not pay, Morgan claimed, he would burn the town to the ground and take the prisoners away, where they would get the same treatment as the English prisoners that Morgan had liberated (which was forced labor). Bracamonte replied that he would never deal with a corsair, and Morgan dared him to re-take the city.
When the Spanish heard a rumor (incorrect, as it turns out) that the whole Portobello attack was simply a diversion for Morgan's French allies to attack an unguarded Panama, they hurried back. Bracamonte left behind a representative to negotiate: eventually Morgan agreed to 100,000 pesos for the city.
The ransom was brought by mules in the first week of August: 27 bars of silver worth 43,000 pesos, silver plate worth 13,000 pesos, and 44,000 pesos worth of gold and silver coins: 100,000 pesos in total. Morgan kept his promise: he loaded the treasure (plus what had been found in the city), freed the prisoners and set sail, leaving the city and forts intact (or at least not damaging them any further). One of the greatest raids of the Age of Piracy was in the books.
Legacy of the Sack of Portobello
When news spread of the attack, Spain at first sent reinforcements, but Morgan was long gone before anyone got there. The privateers once again disbanded, with individuals finding work elsewhere: the Spanish could not have their revenge.
Henry Morgan's invasion of Portobello had big consequences on both sides of the Atlantic. In Europe, the on-again off-again alliance of England and Spain took a big hit. The Spanish were outraged. Even though they were technically at peace with England, the Queen of Spain allowed privateering commissions to be given in the New World. A couple of Spanish captains would take advantage of this and sack small towns in Jamaica, which in turn led to further English attacks including Morgan's legendary sacking of Panama.
In Jamaica, Morgan was hailed as a hero. The raid was hugely successful: each privateer made more than he could have doing honest work in a year, and the taverns and brothels of Port Royal did booming business for a while. With each telling, the Spaniards grew tougher, the castles stronger and the loot more valuable, and the legend of the attack grew quickly.
Morgan settled down and invested his money in land in Jamaica, but he soon came out of retirement, first to attack Maracaibo in 1669 and then Panama itself in 1671. On each occasion, when it was learned that Captain Morgan himself was leading the raid, hundreds of privateers, pirates and other rogues flocked to his banner. For his assault on Panama he had over 2,000 men, an unheard of number at the time. Although these other raids were successful, Portobello would always remain Morgan's biggest score in terms of loot.
Spanish power in the New World was weakening, and Portobello made them admit it. They could no longer be in denial that the English (and the Portuguese, French and Dutch) had established bases in the Caribbean and that they would continue to steal from the Spanish as long as they could get away with it, European treaties notwithstanding.
Cordingly, David. Under the Black Flag New York: Random House Trade Paperbacks, 1996
Earle, Peter.The Sack of Panama New York: St. Martin's Press, 1981.