The deputy of Hinojosa affected to be astonished at the opposition of the governor and inhabitants of Panama, since he not only meant no harm to any one, but had come expressly to repair the injuries which had formerly been done by Bachicao, to purchase such provisions and clothing as they wanted, and to repair their ships; declaring that their only object was to oblige the deposed viceroy to return to Spain, pursuant to the orders of the royal audience, as his continuance in the country occasioned perpetual discord in Peru. But, as the viceroy was not there, Hinojosa intended to make only a short stay in the place, having orders from Gonzalo to offer no injury to any one unless attacked, in which case he must defend himself as he best could. The opposite party alleged that the presence of Hinojosa in warlike guise was sufficient to excite suspicion; since, even allowing the government of Gonzalo in Peru to be legitimate as they pretended, he had no jurisdiction in Panama, and had no right to direct the proceedings of any one at that place. That Bachicao had formerly come among them under pretence of peace, yet had committed all those violences and injuries, which Hinojosa now pretended he was come to repair. After a long conference, it was at length agreed that Hinojosa should be permitted to take up his residence in Panama for thirty days, accompanied by fifty soldiers to serve as a guard for his personal safety; but that the fleet and all the other soldiers of his party should repair to the Pearl Islands, where workmen and all necessaries for the reparation of the ships could be procured; and that at the expiry of these thirty days, Hinojosa and his armament were to return to Peru.
On the conclusion of this convention, which was confirmed by mutual oaths and the interchange of hostages, Hinojosa took up his residence in Panama with a guard of fifty picked men, and hired a house in which he kept open table for every one who pleased to visit him, all of whom he allowed to divert themselves in play or otherwise as they pleased. By this procedure, he gained over most of the soldiers of Yllanez in a few days, and many other idle fellows joined themselves secretly to his party. It was even said that all these men had previously engaged by letter to have gone over to him if he and the governor had come to a battle on the former occasion. Indeed the governor and other principal persons of Panama had been chiefly induced to agree to the present accommodation by distrust of their soldiers, who were all eager for an opportunity of getting to Peru. By the above-mentioned means, Hinojosa soon saw himself at the head of a considerable body of troops, while the captains Yllanez and Guzman were almost deserted by all their men. As they saw likewise that the convention was in other respects ill observed, they secretly withdrew with fifteen men who yet remained, and endeavoured to get to Carthagena. Yllanez was taken soon afterwards by one of Hinojosas officers; on which he entered into the service of Gonzalo Pizarro, and was afterwards engaged on that side in the engagement at Nombre de Dios against Verdugo, to be afterwards related. Hinojosa continued to reside in Panama, where no one dared to oppose him. He increased the number of his troops from day to day, and kept them under excellent discipline, without allowing them to do injury to any of the inhabitants; neither did he intermeddle in any thing whatever except what concerned his troops. At this time Don Pedro de Cabrera and his son-in-law Hernan Mexia de Guzman, who had been banished from Peru by the viceroy, resided in Panama; and these two gentlemen were sent by Hinojosa, with a party of soldiers, to keep possession of the port of Nombre de Dios, which was of great importance to his security, and whence he might receive early intelligence from Spain and other places.