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Dispatch From OaxacaWhat happens when a tourist destination becomes a war zone?

By Jan Jarboe RussellPosted Thursday, Dec. 21, 2006, at 12:03 AM ET

Will Scanlan stands in front of a burned-out Volkswagen outside his storeOAXACA CITY, Mexico—In the fall of 2005, when William Scanlan—then an MBA student at St. Edward's University in Austin, Texas—wrote a business plan for opening a Mail Boxes Etc. store in this state capital, the 33-year-old entrepreneur never imagined that he would need a contingency plan for staying open during a civil rebellion that lasted more than six months and resulted in at least 17 deaths and the occupation of the city by the federal police.

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One afternoon in mid-December, Scanlan stood in his store, which is located in a cheerful red-and-white building directly across a wide street from the city's university. "It's been very stressful and scary. This street was barricaded for weeks," said Scanlan.

On Nov. 2, several thousand protesters who had been encamped at the university squared off against 4,000 police who were trying to remove barricades the demonstrators had erected. Scanlan absent-mindedly picked up a rock that was hurled into his business by a protester. "One of my souvenirs from the revolution," he said, stoically.

Civil unrest reaches Scanlan's businessOn this particular afternoon, the famed cobblestone streets of Oaxaca, a city of 750,000, were jarringly quiet. The day before, Flavio Sosa, the corpulent, bearded leader of the protesters, had been arrested and jailed in Mexico City on charges of sedition and incitement of violence. Block after block of lovely old colonial buildings, blackened with graffiti and soot from fire bombs, were finally getting fresh coats of paint.

The main square is a confusing mixture of hope and dread. Several hundred federal police officers, armed with machine guns and riot gear, are still camped there in dark tents. Yet ordinary Oaxacans have planted hundreds of rows of poinsettias in the flower beds, many with handwritten messages: "We want to live in peace"; "No more violence"; "Tourists, please come back."

To Americans, what Scanlan euphemistically refers to as "the situation" in Oaxaca highlights the political and economic divisions and the unsteady rule of law within Mexico. From U.S. press reports, it's difficult to know which side to cheer for—the protesters who convened under the umbrella of an organization known as APPO on July 17 and declared itself the governing body of Oaxaca, or the state's governor, Ulises Ruiz, who many accuse of corruption and repression.

The view from Mail Boxes Etc. provides a window into how the rebellion went wrong. What started as the 25^th annual teacher's strike for wage increases erupted into violence that has left the city's economy in ruins. "The movement may have started with good intentions," said Scanlan. "But it ended with a bunch of thugs kidnapping the city."

Scanlan grew up in an old South Texas family with ties on both sides of the border. As an infant, his first sentences were in Spanish. During a 1994 trip to Oaxaca, he met a variety of folk artists. He bought their work, and in time acquired so much folk art that he decided to open a gallery.

During his final semester in business school, he wrote a business plan for an art gallery, and he soon realized his biggest problem: There was no reliable or economical way to ship the art from Oaxaca to the United States. He changed directions and decided to open a shipping business in Oaxaca. In December 2005, he purchased a franchise for a Mail Boxes Etc. store in Oaxaca. His store was the 32^nd MBE in Mexico and the only one owned by an American.

After months of untangling Mexican red tape, he rented a building and had a successful grand opening on Aug. 17. Local TV crews enthusiastically covered the event. That night, Oaxaca seemed eager to embrace a business whose sole reason for being was to connect the ancient city to the outside world.

During his first month, Scanlan did about $13,000 in business, the best month in the company's 13-year history in Latin America. A few of Oaxaca's 2,000 or so expatriates rented mailboxes; Scanlan signed up for Netflix. "Life was sweet," he says.