Unlike many colonial cities in Mexico, Puerto Escondido was not a major centre during the pre-Hispanic period. This territory was inhabited by indigenous peoples, but for a long time, no permanent settlement existed here, primarily due to the lack of reliable sources of fresh water. The city's name, which translates as "Hidden Port", is steeped in a famous 16th-century legend. It is believed to be connected to the pirate Andrew Drake and a young woman from a local tribe whom he kidnapped; she managed to escape and take refuge in the bay's dense forests. The pirates, who searched unsuccessfully for the fugitive, began referring to this place as "La Escondida" (The Hidden One), which over time transformed into the modern name.
The development of Puerto Escondido from a wild bay into a populated settlement was dictated by specific geography and trade:
- Coffee Exports: In the early 20th century, the city began to play an important role as a port for exporting coffee. Rich harvests from plantations in the mountains of Oaxaca were brought down to the coast for shipment by sea, as there were practically no land roads.
- Natural Harbour: The deep and protected bay allowed merchant ships to approach the shore safely, making this place a key logistical hub for the region.
- Administrative Division: Historically and politically, the city's territory is divided between two municipalities — San Pedro Mixtepec and Santa María Colotepec, which influenced governance and development patterns.
Before the tourism boom, the economy of Puerto Escondido was based exclusively on fishing and servicing cargo ships. It was a quiet village where life flowed steadily, governed by coffee harvest seasons and sea tides. The local culture formed in isolation from major centres, preserving the authenticity of the fishing lifestyle. Radical changes began only in the second half of the 20th century with the arrival of water supply infrastructure and the construction of the highway. Soon after, the unique waves of Zicatela beach attracted the first surfers, forever changing the city's economic vector.