A monument stands in the old Aztec marketplace of Tlatelolco, near the centre of modern-day Mexico City. It commemorates the 1521 battle where the Spanish overcame the army of the last Aztec emperor, Cuauhtémoc. But it was “neither a triumph nor a defeat”, the engraving on the monument reads. “It was the painful birth of the Mestizo people which is Mexico today.” This origin story is where Mexican author Álvaro Enrigue’s new novel, You Dreamed of Empires, levels its gaze.

The Spanish killed Cuauhtémoc’s father-in-law, Moctezuma, in 1520, just under a year after Hernán Cortés and his small band of conquistadors entered the city of Tenochtitlan, nerve centre of the Aztec civilisation. That first contact between Cortés and Moctezuma, the impregnation that would result in Mexico’s painful birth, commands Enrigue’s interest. He takes events familiar from the conquistador Bernal Díaz’s eyewitness account, The Conquest of New Spain, and compresses them into one day. He also throws in a heap of magic mushrooms, magic tomatoes, and two “very fine slices of cactus, glazed with honey”, that have Moctezuma and Cortés tripping so hard they don’t even need translators.

Enrigue, whose previous book, Sudden Death, was one of the best historical novels of recent years, happily lets theme and thesis fend for themselves: he wants to give us a sensory experience. This is why he opens the book not with exposition but with Jazmín Caldera, one of Cortés’s captains, struggling to eat because of the stench of dried blood coming off the Aztec priests on either side of him.

Enrigue’s novel shows how alien both cultures appear to the other. On the one hand, the Spaniards’ thrill at drinking cacao – “a tickle at the base of the neck, a shudder of the spine, the tremendous urge to do something, anything” – and the levitation-like comfort of sandals; on the other, the Aztecs’ fascination with the “hornless deer” the conquistadors ride, and their more polite interest in the newcomers’ “naked god … sad and hanging on a stick”.

The novel is mestizo by construction, shifting between characters, including Tlalpotonqui, the mayor of Tenochtitlan. This man, a wonderful depiction of a harried civil servant, spends the novel slowly realising that his term of office is coming to an end, which in Aztec terms really does mean the end. As the book builds to its climax Enrigue cuts more rapidly between his cast, each on their own mission around the city.

Caldera, the only central character to be invented by Enrigue, stands out by not simply seeing Tenochtitlan and the valley of Mexico as a cow to be slaughtered, its gold and silver blood drained, but as a land with which to fall in love: “That entrance, that first sight, kept coming back to Caldera like the best page in the best book. Now that he had lived to see it, nothing that came after would matter. The lakes, the rivers, the pine forests, the valleys scorched by the first autumn frosts, the unimaginable cities splashed everywhere.”

When he later puts on Aztec robes and disappears into the Tenochtitlan marketplace, abandoning Cortés and “the shit ship of Europe”, he can be seen to represent an alternative path to mestizo Mexico, one based not on greed and violence but attraction and assimilation.

Throughout the book, Enrigue (and in English his excellent translator, Natasha Wimmer) boldly uses modern language to recreate the past: Moctezuma’s advisers think of the conquistadors as a “pack of clowns”; Tlalpotonqui “had Moctezuma’s back”, and can stay outwardly calm “even if inside he was about to lose his shit”. Parts of the novel play like an Aztec West Wing, taking us deep into the political manoeuvrings of the royal court but blending its particularities with 21st-century psychology. It’s a rich approach that achieves a hallucinatory vividness.

In his 1977 short story Cortes and Montezuma, Donald Barthelme describes the Aztec royalty of Tenochtitlan being driven around in limousines – not as a postmodern flourish, but “a way of making you see the chariots or palanquins”. But what is Enrigue trying to achieve in You Dreamed of Empires when Moctezuma, massively high on mushrooms, hears the distant strains of T-Rex’s Monolith? Unlike Barthelme, Enrigue isn’t translating the sounds of a distant culture for our modern ears: the emperor really is hearing glam rock.

Their methods differ, but both writers are doing versions of the same thing: forging a link between the moment in which we read and the moment their work describes. In Enrigue’s case that link is of fundamental importance: he is portraying the encounter in which Cortés fathered his country and, in a brilliant twist, presenting an Oedipal counterfactual. But before that, still hearing T-Rex, Moctezuma gazes into a bowl filled with the blood of sacrificed doves and is presented with an image that takes a long time to form “because it came from very far away. When it was finally sharp and clear, it made no sense to him.” What he sees is Enrigue, at a house on Long Island, writing the novel in which the emperor appears.

• You Dreamed of Empires by Álvaro Enrigue, translated by Natasha Wimmer, is published by Harvill Secker (£18.99). To support the Guardian and Observer buy your copy at guardianbookshop.com. Delivery charges may apply. From Friday 8 December 2023 to Wednesday 10 January 2024, 20p from every Guardian Bookshop order will support the Guardian and Observer’s charity appeal 2023.