From the log kept by JM on the Feb/March 2010 Chiripa buying trip.
In the foothills north of Oaxaca is the town of San Augustin de Etla. There you can visit an interesting workshop that produces high quality hand-made paper. They are happy to give demonstrations, and there is also a nice shop where you can buy interesting paper items of all sorts (we did).
Paper drying in the bright Oaxacan sun and hand-made paper kites in the shop.
The natural setting is beautiful, and on the hill above the workshop there is an old mill that has been converted to an art school and display gallery.
The unique architecture makes effective use of the water that flows down the hillside and right through the facility. The lush vegetation and hilltop views evoke the Oaxaca region as it may have looked before an exploding population, industrialization, deforestation and traffic took their toll.
If you are feeling adventurous, you can get to San Augustin for just 10 pesos per person (less than a dollar) by taking a collectivo taxi from a location next to the Abastos Market. From the zocalo in downtown Oaxaca, walk west on Trujano until you get to the market area. Cross busy Periferico at the end of Trujano, and you will see an area where the brown and white collectivos are parked. Be sure to ask for a collectivo to St. Augustin de Etla. If you take one that is just marked Etla, you will be disappointed to find yourself in a very different place.