The correct answer is that they granted economic freedoms but not political freedoms. This means that they opened up a bit and became a bit more capitalist, but political freedoms were still forbidden and people would not be able to protest certain things or say certain things out loud or speak against the government and its choices.
I think its the first one since the british believed that the loyalist would hold their territory
The dispute was settled when they split the line in present-day Brazil, in which Portugal was given the eastern part of Brazil, while Spain got the Western part of South America in ~38 degree parallel (1493) to the 46 degree parallel (1494)
hope this helps
