That Tuesday lunchtime I was a few pews back, assessing Jesus as Charles II, a David Niven version.

Christ was wearing a blue coat, flared from the waist, with white ribbon. Effete, I thought, uninterested, and sat opposite a pyramidal Virgin: bland, prim, pert.

I was in the Basilica de Nuestra Señora de la Soledad in Oaxaca, a church that could be described as a unique example of Mexican baroque, were the vicinity not covered with unique examples of Mexican baroque.

These are churches where sometimes the job still hasn’t been completed after 448 years; where the building was looted from the adjacent millennium-old Zapotec site; where multitudes of Indian-painted cherubs hover for ever amidst Indian-painted flowers, and the Saviour wears a miniskirt.

I watched a peasant lady go to the altar rail with a small boy and a young woman in a pink frock, cotton anorak and no shoes. The kid played in and out of the rails while the peasant lady took out a candle in a glass and ran it urgently, Geiger counter-style, over the younger woman, transferring spirits, getting it right.

My low-art Jesus effigy was ignored; she opted for a red-robed Christ ascendant. They moved on to a chapel off the altar, with the woman in the pink murmuring, moving, praying, in that divine laboratory. They were dealing with a tragedy, I think, and attempting to avert a catastrophe.

Outside, in the little plaza of ice-cream sellers, it was raining.

I made for the main market through a street where I retched on petroleum fumes, into a vast, dark warren of disturbing scents and odours, ochres and reds and greens, people sharing confidences. Across the derelict periférico, I headed past the transvestite hookers and back towards the Zócalo, the main square.

“The creations of the ancient cultures of Mexico,” wrote Octavio Paz, “invariably elicit an impression of strangeness.” Indeed, they do: 1,200-year-old murals of Lord Jaguar Serpent and Lady Rabbit, decapitated heads, skulls, blood spurting from fingernails, God smoking a joint. But for me, credulous outsider in search of symbols, there is the aftermath, the collision between ancient, Hispanic and industrial civilisations, fragments floating in the atmosphere.

Oaxaca, capital of Oaxaca State, is a World Heritage Site and tourist destination.

It has its stunning churches, inexplicable ritual, challenging mescal – and spectacular graffiti. Down the streets and alleys, there was Emiliano Zapata from the Mexican Revolution, the cliché that is Che, postmodern variants on surrealism. And there was also Ulises Ruiz Ortíz, state governor from the Institutional Revolutionary Party (PRI), metamorphosing into Hitler on the walls of the colonial city.

In May 2006 Oaxaca’s teachers went on strike and within months their battle was a mass movement confronting Ruiz, even taking over local radio stations. The PRI had ruled Mexico for more than 70 years until it lost the presidential election to Vicente Fox in 2000 and again to Felipe Calderón in July 2006.

In late October 2006, two Mexicans and one American were murdered in Oaxaca, probably by plain-clothes cops. Even the PRI was embarrassed by Ruiz, but the still-incumbent Fox sent in 4,000 federal police to bail him out, bloodily. The historic centre was damaged, tourists melted away. It ended. Ruiz survived and the tourists returned.

But the week I was there, so had the dissident teachers, who had occupied part of the Zócalo. “Those teachers stop for anything,” said an (anti-Ruiz) taxi driver. “Private schools stay open, schools for the poor, they shut.” “I apologise for the teachers,” a doctor told me. “They are a disgrace.”

That Tuesday, near the Zócalo, I encountered a handful of teachers queuing for food at a stall festooned with posters denouncing local hoods, junkies, provocateurs and moves to privatise the state oil company, Pemex. Music echoed across their corner of the square. “Bosses are like reptiles,” sang the PA, “and I apologise to the animals for the comparison.”

By Friday I was at the Centro Fotográfico Álvarez Bravo and its exhibition of the battles of 2006. “The more they erase us, the more we paint,” proclaimed a poster. A wall in the centre’s courtyard was given over to four Banksy-style images of a demonstrator hurling a Molotov cocktail into the shields of four cops, red and orange fire against white.

On Saturday the occupation concluded with a big march, red banners and fiery speeches delivered from the Zócalo’s multi-domed, art nouveau bandstand. A nostalgic fantasist faction had even strung portraits of Marx, Engels, Lenin and Stalin between the trees.

“There are many streams in our movement,” said Amada Leticia, director of a barrio school for infants. “We try not to have a political line.” Firecrackers hurled by local youth punctuated the speeches. “They always do that in Oaxaca,” said Amada. “It’s tradition.”

Oaxaca has been a hotbed of rank-and-file opposition to the corporatist National Educational Workers Union, fiefdom of a lapsed Trotskyist, Elba Esther Gordillo, “La Maestra”, a fixer who brokers even governments. Amada, serious, humorous, is one of the opposition’s faces.

“Today,” said a platform speaker, “celebrates two years of the demonstrations and strength of the dignified people of Oaxaca, face to face with this regime.”

A teacher’s wife followed on the bandstand. Her husband had been beaten by cops in July 2007 after he rashly gatecrashed one of La Maestra’s parties, and was still getting treatment. After the 2006 battles teachers were charged with sedition, arson – one charge was shouting at the governor, said Amada – and detained at the other end of the country. Post-PRI, viva el PRI.

Unless you fight, you never get anywhere,” said Amada’s friend Silvia. “You have to keep at it. Many kids arrive at school with no shoes and having had no breakfast. It is not about our money. That is what we are fighting about. The kids fall asleep.”

“Where my school is,” said Amada, “is a popular barrio. That means all the fathers have work. And that, do you understand, is rare.”

Another speaker, having taken the microphone, was greeted with catcalls and airborne fruit and veg. “Our local union leader,” said Amada, “and he has sold us out.” She thought about it. “He isn’t all that bad. But the thing is . . . not leaders – but the base.”

Between the rally and Oaxaca Cathedral, artists were holding an exposición colectiva. How Much More Blood? was speckled red, a spreadeagled-swastika corpse. Enough! was of domes, trees, clouds, dark swirling colour and skulls.

There were no cops around, but there was a clutch of kids in Palestinian scarves. They looked like trouble. I asked about them. “The boys in the handkerchieves?” asked Amada. “They are the ones doing the graphic art.”