By the fourteenth century there was already a territorial entity called San Julián de Musques, referred to by Lope de Salazar when discussing the ownership of the hills in the Somorrostro valley. This valley encompasses two of the ten "republics" that formed the Encartaciones - or liberties - of Bizkaia, with the seat of government in the La Avellanada assembly. These two republics were the "Three Councils (concejos)" (Santurtzi, Sestao and San Salvador del Valle) and the "Four Councils" - Muskiz, Ziérbena, San Pedro and Santa Juliana de Abanto. Together with the town of Portugalete, they formed the valley of Somorrostro. The jurisdictions of the two republics were delimited. The seven councils jointly exploited and administered a territory rich in iron, pastureland and forests, known as the Triano Highlands.

The sixteenth century saw the transformation of the iron industry, with the introduction of the water wheel and the pile hammer. The iron ore used in Biscayan foundries came from the Somorrostro valley, from whence it was transported by sea or land. The sea and river played a pivotal role in the life of the concejo, and were also used to transport food. During this period, many people from Muskiz worked in shipbuilding and other maritime activities; fishermen, pilots, seamen. The confraternity of San Nicolás constituted the seamen’s guild.
In the seventeenth century, some families grew wealthy from the iron trade. Don Simon de la Quadra, who owned two forges (El Pobal and Bilotxi), bought land and reforested the woods. His businesses strength made him one of the most powerful men on the council, and the focus of power shifted from San Martín de Muñatones to his home “La Puente”, next to the old shipyard of San Juan. The council was divided into 5 groups or "regiments"; La Rigada, El Valle, Memerea, Musques and Pobeña, governed by "regidores" who met in assembly at El Crucero.

The eighteenth century might well be seen as the council's golden age. With the coming to power of the Bourbons, a new bureaucratic class emerged, which in time rose to the rank of nobility. One of the representatives of this bureaucracy was Don Sebastián de la Quadra y Llarena, who under the reign of Philip V, held the position of “Secretary of the Office Universal Office of State” (1736-1746). In recognition of his services the king made him the first Marquis of Villarías. La Quadra used his privileged position to advance his own family interests. The result was that the Encartaciones came into conflict with the lordship of Biscay over control of the transport and sale of iron.

The council had a population of between 900 and 1,000. The primary economic occupations were related to iron ore. (ironworkers, charcoal gatherers, blacksmiths, carters) revolving around the forges (Bilotxi, El Pobal…) and shipping, centring on Pobeña, where the leading families in the trade settled and grew rich. They accumulated enough capital from this trade to build the palatial houses that are such a feature of the town. The two most characteristic are Pobeña and El Valle. The favourable economic situation was also reflected in the urban infrastructure: a new bridge was erected and two new churches built (San Juan (twice) and Pobeña.