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We drove here from Mexico City the day after Christmas. San Miguel is as lovely a town as you`ll find anywhere in the world, and we thought it would be fun to see in the New Year there.

We rolled down the windows to the warm afternoon sun and the rich, sweet scents of the high desert. It was the winter dry season, and the land was all shades of beige and brown except for the odd emerald plot of clover or winter wheat.

San Miguel is built on a steep hillside in the Sierra Nevadas. Many of its buildings date to the 18th Century or earlier (the settlement was founded in 1540), and the character of the place is carefully preserved by local custom and federal law.

The town`s central plaza with its sculpted trees and old iron benches was appropriately bedecked for the season. Japanese lanterns were strung among the trees, and the buildings all around were crowned with strings of lights.

San Miguel is all arched colonnades, narrow cobblestone streets, hidden courtyards full of flowers, birds and palm trees and thick, pink walls draped with bougainvillea.

Half a dozen colorful pinatas decorated the normally austere police station, where carbine-bearing guards stand in the entranceway, and the town bandstand was occupied by a life-size creche scene.

The little park`s one tall pine came alive at night with strands of colored lights and a big white star.

Indeed, lights are everywhere in my memory. Innkeepers, restaurateurs and home owners strung them around palm trees, tropical plants and flowering shrubs in their private patios. After dark the two bell towers of the great pink stone church La Parroquia, said to have been designed by a local Indian after picture postcards of European cathedrals, were illuminated by spotlights that spread a soft, rosy aura over the town. And later still, walking the dark, narrow streets, you could look through the windows of dozens of houses to discover spindly, sparkling Mexican Christmas trees.

And the flowers. The nochebuena (poinsettia) is native to Mexico and takes its name from the fact that it blooms at Christmastime. It takes its name in English from Joel Poinsett, ambassador to Mexico during the 1820s, who brought the plant home with him.

In San Miguel during the holidays poinsettias are clustered everywhere, making hearths and fountains and courtyards all over town look like church chancels on Christmas morning.

But it was the people and the music and the mood that made our holiday in San Miguel special. The week after Christmas is a traditional vacation time for Mexicans, and thousands had poured into town. There were cosmopolitan families in stylish clothes and cars from the capital and local farmers driving pick-ups or leading burros.

There were many Americans and Canadians, some of whom had come for the winter, some to study art at the Instituto Allende or music at Belles Artes or Spanish at one of several language schools in town, and some like us who had just come for a few sunny winter days.

And there were dozens of the area`s poor and very poor who came out into the crowds hoping that the holiday spirit would be kind to them, too. They begged in the shadows at all hours of the night and day, often with tiny, sleeping children wrapped in their blankets.

On Saturday there was a bullfight in the town`s picturesque little bull ring, a mano a mano between two young matadors. On Sunday the weekly market spilled over from the municipal building and filled the streets and plazas all around with wagon loads of colorful flowers, vegetables and fruits (the strawberry harvest was just beginning), tethered goats, squealing pigs, cages full of white hens, burros tied to telephone poles, and the smells of tortillas frying and the Mexican corn called elote boiling in huge pots. On Tuesday another market repeated the whole spectacle down at the end of Canal Street.

Four times during the week the Chamber Soloists of San Francisco put on concerts (Beethoven to Britten) to SRO crowds in the acoustically perfect chapel of La Parroquia. Meanwhile, over in the bar of the Hotel Central a tall, tuxedoed Texan named Jay Meadows played elegant piano while a fire burned and everyone sat on big white sofas.

At La Princesa there were flamenco dancers, at the Frugua Bar a rock and roll band, at Mama Mia`s a fine classical guitarist and a Mexican trio playing plaintive songs highlighted by a wooden flute, and in half a dozen restaurants and courtyards and almost spontaneously at any moment in the plaza, mariachi bands of varying size and quality. And late in the cool night as you pulled the covers up to your neck you could hear the distant beat of one of San Miguel`s several discos.

With all of this, New Year`s Eve was still special. Of course, it didn`t start off that way. We just weren`t in the mood. We actually forced ourselves to go out just because we didn`t want to sit around.

At 9 o`clock the plaza was festive enough: A brass band played for the several hundred people there. The town had on display all 10 of its firetrucks and ambulances. People milled a bit nervously. A group of teenagers passed a bottle of cheap brandy and kids threw vicious little sparkling poppers against the paving stones and then looked innocent when the cops hurried over to investigate and sometimes to confiscate their firecrackers.

Then things quieted down. We wandered around looking into a number of restaurant parties where people in silly hats were sitting beneath streamers and balloons. We had one drink here, another there. Then we stopped in a nearly empty nightclub to watch a fat, green lipped American blond wearing gold lame and doing a quite unintentional send-up of a Las Vegas lounge act. As she snapped her fingers, winked at the front tables and sang ”God Bless the Child,” Judy leaned over and whispered, ”That woman`s got a 12-year-old somewhere.”

We were back in the plaza at midnight. At 12 sharp, fireworks began to explode over the town. A party of drinkers lifted their champagne glasses high and then let them fall to the pavingstones.

But the real focus of attention was the big, pink church. In its bell towers we saw the shadows of young boys pushing at and swinging on the four big bells and one after another they began to ring until all four were going at once, until they so filled the plaza and the night with music that it was difficult to talk.

When the bells finally stopped 10 minutes later, there was quieter, sweeter music from inside, a chorus of tenor voices singing ”In Excelsis Deo.” We pushed up as close as we could get to the door; the crowd overflowed into the stone courtyard.

The great sanctuary was brighter than I had ever seen it, ablaze with the light of 10 glass chandeliers. Two priests in blue and white vestments said mass and an altar boy swung a censer that clouded the chancel and seemed to cast a spell in the room.

Children`s voices rose in song again and again, and when the priest asked us to shake hands with the people around us, even those of us on the stoop shyly turned to our neighbors. The only deserter I saw was an old dog who came out through the door licking his chops like an irreverent usher going for a smoke.

On our way home we looked in on Mama Mia`s open air courtyard attracted by the pink, green, blue and yellow Japanese lanterns.

They were still serving food and drink, although the service was a little slow-all the waiters and waitresses seemed to be hugging one another. No one minded. The tables were toasting one another, lifting their glasses of wine high in the air.

Then on the street again we looked up high at open French windows where handsome young couples in tuxedos and evening gowns were singing, too, against a 20-foot high wall of books. We stood on the sidewalk smiling.

But across the street we nearly stumbled over a tiny, ragged woman still begging at 1 o`clock and a block away two men were quietly collecting empty beer bottles from the night`s celebration. We were reminded of just how desperately this country we have come to love so much needs a good 1988. And a bit more sincerely than we had really intended, we wished it one.