Espanola, New Mexico The Jewel of Northern New Mexico. Espanola was founded in 1598 by Spain as the first capital of New Mexico. It sits in the northern Rio Grande Valley between the Jemez Mountains and Truchas Peaks, and is a very convenient base for exploring northern New Mexico.  Espanola has many lodging options and the best selection of restaurants. Don't miss the world-class local artists.  Let us be your tour guide through the Beautiful Espanola Valley.