S Mexico, on the Pacific Ocean and its arm, the Gulf of Tehuantepec. Oaxaca is the capital. Except on the west and the north, the periphery of the state is tropical, the interior generally temperate.
Fertile valleys make agriculture the principal economic activity.
Oaxaca's mineral deposits remain largely unexploited. The state's limited industrial activity centers around oil refining, beverage and paper manufacturing, and sugar and flour milling. Oaxaca is also known for its handicrafts, especially handwoven textiles, pottery, and leather goods. Despite the existence of several highways, inadequate communications remain the chief barrier to the state's industrialization. Indigenous peoples predominate here, as in few other states, with Mixtecs dominating in the highlands and Zapotecs elsewhere.