I do not think either population or populations is a critical factor here. In any case, 'populations' is a legitimate plural form available in English and has been used conspicuously when a large number of diverse settings are to be described. Similarly, since, the 'cities' in fact refers to a number of diverse cities, populations is quite appropriate IMO.
For reference, pl look at this site, <https://www.wordhippo.com/what-is/sentences-with-the-word/populations.html.>
In any case, if populations were incorrect, then all the choices are incorrect.
Next point. What can 'which' refer to? It can never refer to a clause. It can only precisely refer to a noun. At the most, it may refer to a slightly distant but nevertheless logical antecedent.
In context, 'which' cannot refer to anything other than cities. Because Conquistadors referring to the Spanish generals, who conquered Latin America, could not be ascribed to ornate decorations, natural beauties( not referring to humans, but to natural landscape) or large populations in the South American cities.
On that count, of course dropping 'which were' may be grammatically precise and good enough, but still isn't a decisive GMAT factor.