Don Julian turns out to be cruel and half-mad, but literally worshipped by his followers who address him as El Supremo. Hornblower humours him and, as instructed, offers his assistance in the rebellion. A large 50-gun Spanish warship, the Natividad, much more powerful than the Lydia, arrives on the scene, but Hornblower captures it by a ruse. El Supremo demands that it be given to him, and Hornblower has to acquiesce.
Later, Hornblower learns that Britain and Spain are no longer at war but are in alliance against the French, so he now has to recapture or destroy the Natividad. He finds and fights it in the midst of a storm; both vessels are badly damaged and the action is broken off. But next day Hornblower finds the Natividad again and after a huge battle, in which the Lydia sustains further damage and loses many men, the Natividad is sunk. Hornblower has to make extensive repairs to his ship before it becomes fit to round the Horn on its return to England
There is another important dimension to the story, because this novel introduces the character of Lady Barbara Wellesley, the (fictional) daughter of an Earl and the brother of Arthur Wellesley, later to become the Duke of Wellington. She asks Hornblower give her passage back to England, and he can hardly refuse although he find it quite unsuitable to take a woman aboard a man o'war. At first relations between them are strained, at least on his side, but by the end of the long voyage back to England they have fallen in love. Readers of later novels in the series will know that Lady Barbara eventually becomes Hornblower's second wife, but at this stage he is still married to his first wife, Maria, and the affair ends unsatisfactorily for the moment to the chagrin of both.
Forester's naval fiction is renowned for its quality, and rightly so. His writing is comparable with that of Patrick O'Brian. Like O'Brian, he doesn't hesitate to use plenty of technical descriptions. As a result most readers will probably find themselves literally at sea from time to time, not always fully able to picture what is happening, especially when it comes to ship repairs. A glossary would be useful although I didn't find the lack of one reduced my enjoyment. (Forester also includes a technical description of a game of whist, which I understood even less than the nautical material and therefore skipped.)
See also Hornblower in the West Indies