Choirs of roosters and burros salute each sunrise in the pre-Columbian village of Teotitlán del Valle (pop. 6,000), nearly a mile high in the Sierra Juárez foothills a couple of miles off a rutted section of the Pan-American Highway east of OaxacaCity. Tall cactus fences separate oxen-tilled plots of corn and black beans. Short, broad grandmothers speaking only Zapotec, the native language of this region, their wide bronze faces creased like pecans, dutifully grind corn for tortillas and march their pigs to market . . . . . .

Past the stylish Zapotec restaurant that garnered enthusiastic reviews in the New York Times and Saveur magazine, past the new two-story brick houses that harbor shiny $30,000 pickup trucks and satellite dishes—most likely paid for in cash—past the Zapotec families with their own Web sites, and that new bed-and-breakfast yoga retreat up the hill. This display of wealth, while common in larger Latin American cities, is still startlingly rare in its Indian villages. That such prosperity exists in one of Mexico’s poorest states, a mountainous region consumed by profound poverty, is all the more surprising.

Too often prosperity of this kind has come only illicitly, say, with the harvesting of coca in Peru or the rise of narcotraficantes in Colombia. But that is not the case in Teotitlán. Anthropologists and importers alike agree that this tiny Third World jewel boasts one of the highest standards of living of any indigenous village in our hemisphere, perhaps the world—not because of drugs, but, remarkably enough, rugs.

Not only do Teotitlán weavers earn more than many white-collar professionals in Oaxaca City, a vibrant art mecca with more than a half-million people 20 miles away, but they, and the revenue they bring in, have elevated the village in countless ways. In families where the parents never got beyond the sixth grade—and many women were discouraged from attending school at all—children now routinely attend colleges such as the University del Mar and the National Institute of Fine Arts and Literature. The town has built roads, schools, a new city market, a drainage system and a clinic, which has three doctors. (Residents want two more.) Even more impressive, many women have gained economic independence and social confidence—ultimately helping to reduce teenage marriages and domestic violence.

“Teotitlán is a folk art miracle,” says Barbara Mauldin, curator of the Latin American collection at the Museum of International Folk Art in Santa Fe, New Mexico. “They have a great product, but it’s all about the people—their artistic talent, perseverance, marketing savvy, plus the good fortune of being located near a major tourist market in one of the most beautiful valleys in Latin America.”

You’ve probably seen the source of Teotitlán’s success— the Zapotec wool rug—even if you didn’t recognize it as such. Sometimes called Oaxacan rugs, or confused with Navajo varieties, they range in size from about 2-by-3-feet to 8-by-10 and cost anywhere from $25 to $500. (Elegant, naturally dyed pieces from the most famous weavers can cost several thousand dollars.) Over the past two decades, Zapotec rugs have shown up in thousands of living rooms across the world—on walls as well as floors—and in folk art boutiques and galleries from Oslo to Osaka.

Since the early 1970s, when I saw my first Zapotec rug, sold from a rusted Volkswagen van on a San Diego beach, the humble weavings have evolved from unpretentious tourist souvenirs into wildly popular “Santa Fe-style” fashion accessories and, more recently, folk art masterpieces. Some years ago they achieved a pinnacle of rug fame—Pakistani factories began churning out Zapotec knockoffs.

Still, Zapotec rugs would likely have gone the way of Nehru jackets were it not for buyers who sensed that the rugs transcended mere souvenir culture. Thousands of tourists from such creative hotbeds as Seattle, Toronto and Austin connected with the weavers, creating a buzz that eventually would bring a half-million tourists to Oaxaca state each year. Travelers who came to Teotitlán for an hour often found themselves spending entire days in weavers’ homes, taking photographs, exchanging addresses and bargaining into the night.

What was a mom and pop cottage industry 30 years ago—based on a centuries-old, pre-Spanish weaving tradition— has turned into a multimillion-dollar phenomenon involving a couple of hundred families and multinational importers. Today the enterprise is fueled by gallery exhibitions, coffee-table art books, TV documentaries, countless travel articles and, of course, the Internet. Farming families who once produced a few 5-by-7-foot rugs each month on the side now employ 10 to 15 weavers to meet the demands of American importers who order several thousand rugs each year.

Scott Roth, an importer from California who travels to the village so often he has his own room in one family’s home, made his first trip to Teotitlán in 1974. In those days, he says, “about 90 percent of the homes were adobe and 10 percent were brick. Now that’s reversed. They’ve had electricity since 1965, but there were very few TVs. No paved roads. There was only one car in town, a ’58 Ford Edsel. Now maybe 90 percent have TV; about half have refrigerators.” A commercial Teotit-lán weaver might make $15 a day, compared with the $10 a day a OaxacaCity police officer earns or the $8 a day paid to a teacher. (The minimum daily wage is $4.) “The wealthiest families have maybe $10,000 to $20,000 in cash savings, most often used to make improvements to their homes,” says Roth. “I’ve yet to see anyone who hasn’t made a sound economic investment.”

All this in a state where the per capita annual income is just over $1,000, and even lower among the state’s 18 indigenous groups, including Huaves, Zoques, Popolacas and Zapotecs. Twenty-seven percent of Oaxacans cannot read or write, but among the state’s Indians the rate climbs to 42 percent for those over 14 years of age. While Teotitlán is hardly free of poverty, the village shimmers like a Vegas casino compared with nearby settlements that barely have electricity, plumbing, roads, schools or clinics.

Picture a high sierra village, set against a backdrop of cornfields and marigold plots and framed by serrated Aztec mountains, where the air is thin and clean and warm, and weaving families still welcome strangers with smiling faces and homemade soup. In a typical weaving home, a nondescript, corrugated metal front door—one learns not to judge books by their covers here—leads to a sunny inner courtyard, perhaps shaded by a lime tree, climbing jasmine or pink bougainvillea, and a room with a Virgin of Guadalupe shrine at one end and stacks of folded rugs at the other. Amid the seductive fragrance of lanolin in pre-washed fresh wool, a child may greet you at the door, but an older sister or aunt stands ready to talk if you’re a serious buyer. The man of the house smiles and continues clacking away on a heavy loom (with notable exceptions, men still do most of the weaving and design work; women usually perform all domestic chores, cook and help prepare the wool).

Handshakes are gentle. In conversation, Teotitecos wait for you to finish; interruptions and aggressive behavior are considered rude. Over many visits I’ve yet to witness an adult scream at or hit a child. “The kids have great role models in their parents,” observes Roth. “I’m convinced their healthy upbringing is one reason why they’re so artistic.” When kids aren’t playing or in school, they’re likely carding or cleaning wool, preparing to move up to dyeing, spinning or, ultimately, weaving.

Elena Gonzalez, the 36-year-old daughter of Januario Gonzalez, a respected weaver, says that her “very traditional” mother, who was never taught how to weave, is aghast that Elena cooks with an electric stove and uses a blender to make the cornmeal paste for tortillas, rather than grinding it in a basaltic metate, as women have for centuries. Even so, the two of them happily coexist in the kitchen.

In 2,000 years, the village has survived natural disasters, the industrial age—and that unpleasantness in the 1500s. Five hundred years ago, when Spaniards enslaved the Zapotecs, confiscated vast valleys and mountain ranges, and exposed millions of Indians to smallpox and other diseases, the resourceful Teotitecos were allowed to keep their land. That privilege may have been granted because they demonstrated a willingness to adapt to European culture.

The Spanish recognized the Teotitecos’ splendid weaving skills, and in an irony, considering the misery they otherwise brought to the Zapotecs, introduced churra sheep and the upright European-style loom, which have helped sustain Teotitlán ever since. By the 1600s disease claimed as many as three or four Teotitecos a day—reducing the region’s Zapotec population from 350,000 to 45,000. Yet somehow Teotitlán survived.

Teotitlán’s rug trade remained fairly modest until the mid- 1980s, when American consumers developed a fascination with all things Southwestern. Joe Carr, author with Karen Witynski of six books on Mexican design, claims that Ralph Lauren and his Santa Fe-style Polo ads spurred the craze. “When I lived in Santa Fe,” says Carr, now a resident of Austin, Texas, “I sold Ralph Lauren some of his very first Navajo blankets, around 1978 or ’79—four or five really expensive, classic blankets like you’d see in his ads. He grabbed hold of this [Southwest] design thing.” Then collectors from New York and Chicago began showing up in Santa Fe and Aspen looking for Navajo antiques. Eventually, Carr says, several buyers realized that a vintage Navajo rug, which might cost $25,000, could be reproduced in Teotitlán for less than $500. “From across the room,” Carr adds, “most consumers couldn’t tell them apart. The Teotitlán rugs were perfect as decorative pieces.”

Before long, living rooms in Minneapolis and Kansas City were looking like tepees. Teotitlán weavers rode the wave, whipping out thousands of Navajo designs, often altering their own traditional (and naturally dyed) browns, grays and indigos to appease America’s Southwestern design police, who decreed pink, teal and sky blue the acceptable colors of the day.

But some weavers rejected pastels, Navajo knockoffs and the easy geometric clichés they could weave with their eyes closed, and began creating designs inspired by the works of modern artists like Picasso, Miró and M.C. Escher. One innovator, Sergio Martínez, introduced bold russet, black and gold rugs, inspired by fabrics from Ghana and Nigeria. “It shocked some of the other weavers,” Martínez said one afternoon, as his son cruised past on Rollerblades. “Change does not always come easy here.”

Another artisan, Arnulfo Mendoza, who studied weaving in France and Japan, pioneered elaborate silk, cotton and wool designs that sell in his OaxacaCity gallery for more than $5,000. “Now I have people knocking-off my designs all over the state,” says Mendoza, whose rugs have been exhibited in Berlin, Madrid and New York. “I guess that’s better than them copying Picasso—because my work is rooted in the tradition of Mexican textiles.”

Understandably, wealth and worldliness have brought tensions. The long-standing divisions between rich and poor have grown more striking. The wealthier weavers’ large houses line a newly paved asphalt road leading to the Pan-American Highway (all the easier for tourists to find); the poor live on the fringes. “It has become a more segregated town,” says anthropologist Lynn Stephen.

While the Zapotec language remains strong, many adults lament the growing trend for children to speak Spanish. “Kids are watching too much TV,” says Reynaldo Sosa, the town’s vice president, sounding a familiar refrain. Even the very rhythm of work has changed in some homes. When everyone farmed, sunset signaled the end of work. After electricity arrived in 1965, the ubiquitous bare light bulb, hanging from a single electrical cord, allowed weaving late into the night, increasing profits as it reduced leisure time. With the encroachment of modernity, even AIDS has reached the OaxacaValley.

Still, Teotitecos seem to approach the future, whether it brings earthquakes or peso devaluations, with the collective knowledge that they will adapt and survive. Ask a weaver what would happen if the world quietly decided Zapotec rugs had outlived their hipness? “We would find other things to do,” says Sergio Martínez. Then he adds: “I don’t think people will stop buying rugs—maybe just a certain style.”

Beneath portraits of 21 uniformly unsmiling town presidents, dating back to 1919, Reynaldo Sosa allowed that a rug recession would not be good. “That’s why we are trying to prepare our children to be professionals,” he said, citing the need for more doctors and a high school. “After September 11, rug sales went really down, and we worried. But now things are better.”

That’s about as close as anyone here gets to panic. Much of this inner calm about unseen economic forces may result from the fact that Teotitecos for the most part try to avoid debt. “Our homes are paid for and we can grow our food,” one elder told me. “Can you say that in the States?”

Will Teotitlán’s young people stay committed to weaving or do they feel chained to the loom and yearn to abandon small-town life? Some smile at such questions and admit that having everyone in town knowing who you’re dating, or who you want to date, is a bit suffocating. But most of those I talked to assured me that they see weaving not just as a family duty or a traditional obligation, but as a cherished part of their identity. Like water to dolphins.

“There are kids in Teotitlán now who want to be lawyers, doctors and engineers,” said Pantaleón Ruiz, 29, a weaver who has his own Web site and organizes exhibitions in the United States. “I think that’s great. I took broadcast classes and worked at a radio station in San Francisco, but one day I realized art was my life. I went back home to Teotitlán.”

A LOOM OF ONE’S OWN

I still remember my first day in Teotitlán nearly 20 years ago, when a young struggling couple with three small kids accepted my $250 personal check for a rust-colored 6-by-9-foot rug—then, when I missed the last bus back to OaxacaCity, invited me to stay with them overnight. It was on that first visit with Alberto and Ana Gutiérrez that I met Alberto’s then teenage sister María Isabel.

Now in her mid-30s, María Isabel packs about a hundred rugs, place mats, bedspreads and shawls into giant plastic laundry sacks each morning, loads them into the back of a pickup truck and drives less than a mile to Teotitlán’s small plaza, or zócalo, where she joins about two dozen other women (and the occasional older man) in open-air stalls next to city hall. It takes her about 90 minutes each morning and evening to unpack her pieces, stack them on tables and hang them on poles.

Seven years ago, María Isabel’s father died suddenly at age 55 from a heart attack, leaving her devastated and unprepared to take over the family business. But she taught herself how to package and ship the rugs, how to drive a car and, eventually, how to process computerized credit card transactions. She has only six years of formal education but a PhD in street smarts. “I can tell from 50 yards away,” she says, “if someone is from France, Germany, Italy. A European will want a smaller rug, something that represents the town, with scenes of cactus or churches. They’re more hesitant to spend than Americans.”

With responsibility came an epiphany: perhaps her life wasn’t a disaster just because she wasn’t married. “I’m not sure there are any men intelligent enough for me,” she teases, trying to keep a straight face. “I look around . . . but it’s not a high priority right now. I know how to survive.”

University of Oregon anthropologist Lynn Stephen, who is famous in town for having learned Zapotec—it’s a difficult tonal language—and for writing the groundbreaking book Zapotec Women, says prosperity has given women more choices. “Many more women simply aren’t getting married,” she says. “They’re now thinking, ‘Why should I just marry any guy? If I can weave, I can make my own money.’ ”

Elena Gonzalez would likely agree. “I’m happy being by myself,” she says. Gonzalez, who spends six months a year in a Colorado ski town, living with a family who runs a craft store, says she’s not about to trade independence for marriage just to be married. “I think some girls here, when they hear about my life in Colorado, want to be like me. In Teotitlán, when you marry, you’re expected to do the cleaning, fix the meals, care for the children. Maybe I’ll find the right person in Colorado.”

As Elena spoke, sitting at the foot of her family’s century-old loom, a slight, gray-haired woman in her 60s joined her. Amelia Vásquez, who runs a ten-year-old weaving cooperative for single mothers and widows, listened to what would have been radical ideas when she was Elena’s age. “It was very hard for us at first,” Vásquez says. “A lot of us weren’t taught to weave, but we thought we could do everything that men were doing.” She says men initially opposed women traveling into OaxacaCity to sell rugs, but relented when they realized women consistently outsold men.

“Men are always out front on everything in this town!” Vásquez goes on. “But things are changing. Before, we had all these designs only in our minds and hearts, but we couldn’t let them out because our husbands and fathers always did the designs. Now we are gaining our independence.” —B.S.