If possible, I would \usepackage{fontspec} rather than the legacy 8-bit fonts from the ’90s that you get with \usepackage[T1]{fontenc}, much less the 7-bit fonts from the 1980s that you get by default. This allows you to use any of your system fonts, or any OpenType or TrueType font, in Unicode.
For your input encoding, I would save any new files as UTF-8. This has been the default encoding of LaTeX since 2018.
Compile with either XeLaTeX or LuaLateX. (I personally like to use \usepackage{microtype} with LuaLateX.)
So:
\documentclass[11pt, spanish]{report}
\usepackage{fontspec}
\usepackage[spanish]{babel}
\defaultfontfeatures{ Scale = MatchUppercase, Ligatures = TeX }
% Set your fonts of choice here with either `\setmainfont`,
% `\babelfont`, or an OTF font package.
\begin{document}
¡Hola! ¿Cómo estás?
\end{document}
.logfile and may be will find some clue there. By the way, if you includespanishas option fordocumentclass, you don't need to include in babel. And if you just use one language, don't need\selectlanguagecommand. – Ignasi Nov 04 '11 at 08:34\usepackage[utf8]{inputenc}solved it for me, which TexShop's "Encoding" preference didn't. – Sridhar Sarnobat Nov 18 '16 at 05:44