The drowned man represents any number of mythological or epic historical figures, and we'll go through them one by one. First off is the name the villagers assign him: Esteban. Who is this Esteban? As it turns out, Esteban is another name for Estevanico, a slave from the early 1500s who was supposedly the first man born in Africa to set foot in the Americas. Estevanico (or Esteban) became a legendary figure in Latin America, and was later given a set of incredible skills – he mastered dozens of languages, knew everything about medicine, was even considered by some to be a deity, or so the story goes.
When the women of the village call the drowned man Esteban, they might very well be referring to this Estevanico. (At the end of the story, the women imagine a captain speaking of Esteban's village "in fourteen languages" (12). This may be a reference to the myth that Estevanico spoke so many languages fluently.)
When the oldest women calls the drowned man Esteban, Márquez writes that some of the younger women hoped it might be Lautaro. In the mid 1500s a war occurred in what today is Chile between the colonizing Spaniards and the native Mapuche people. In this conflict, Lautaro was a military leader of the natives. The drowned man's handsomeness and sheer masculinity inspires the young women to fantasize that he is this famed leader. There are some interesting questions to consider here: why is it that the older women's thoughts turn to the Esteban, while the younger women think of Lautaro? And why is it that, once they get a better look at the drowned man, everyone agrees that it is Esteban, rather than Lautaro?
Many scholars have also pointed out that the drowned man is a shade of Quetzalcoatl, an Aztec god. The drowned man in many ways takes on the role of a deity for the villagers. He arrives from some other world (the sea), is essentially worshipped by the villagers, and permanently changes their lives.
Mythology in this story isn't limited just to the drowned man. The entire tale is rooted in mythological history; even the villagers take on mythological roles themselves by the end of the narrative. When the women weep for the drowned man at his funeral, Márquez writes, "Some sailors who heard weeping from a distance went off course and people heard of one who had himself tied to the mainmast, remembering ancient fables about sirens" (12). This comment is an allusion to Greek mythology.
Some background on the sirens. The sirens were half-women, half-bird creatures who lived on an island. They used to sing in beautiful voices to lure sailors off their course. The sailors would head towards the voices and then crash their ships on the jagged rocks, which pretty much meant death. When Odysseus was sailing by the siren's island, he made the rest of his men plug up their ears and tie him to the mainmast. This way, he got to hear the beautiful sound of their voices without being driven to suicide. Here in "The Handsomest Drowned Man," the women weeping over Lautaro are compared to the sirens, and some sailor going by ties himself to the main mast in an attempt to mimic Odysseus. The point is that through the drowned man, the villagers enter the realm of the mythological themselves.
The allusions to Esteban, Lautaro, Quetzalcoatl, and Odysseus's sirens illustrates the magical realism we've been mentioning. (If you haven't read "Genre" yet, go ahead and take a look.) "The Handsomest Drowned Man in the World" is exploring this mingling of the real (a little fishing village) with the mythological (a magnificent dead man).