John Zimmerman of NYU explains that the term “Hispanic” is:

..a recent invention, dating to the 1970s and ’80s. Before then, when Sotomayor was growing up with her Puerto Rican family in New York City, she was not Hispanic….
How did Mexicans, Cubans, Puerto Ricans, Dominicans, Salvadorans, Panamanians, Nicaraguans and Guatemalans all become Hispanic?
Amid the African American civil rights struggle of the 1960s, many of these groups joined hands to demand voting rights, bilingual education and social services. Here they received a big assist from an unlikely source: Richard Nixon. Eager to bring Mexicans and other Latino immigrants into the Republican fold, Nixon also saw them as a potential bulwark against black political aspirations.
“All Spanish-speaking Americans share certain characteristics — a strong family structure, deep ties to the church, which makes them open to an appeal from us,” wrote one GOP campaign strategist on the eve of Nixon’s 1972 presidential reelection bid. “The Democratic Party is under suspicion for favoring politically potent blacks at the expense of the needs of Spanish-speaking people.”
So Nixon threw his weight behind bilingual education, which has since become a bête noire for the GOP. He also ordered the Census Bureau to add a query on its 1970 form asking whether respondents were “Hispanic,” hoping to further solidify this new voting bloc.