A rabble of fops and flakes stares out at the audience, mouths agape. The vision that stands before them is evidently spectacular. The only catch is that what the “wonders” they are enjoying are the stuff of imagination, magicked up by the pair of charlatans Chirinos and Chanfalla. Henze's Das Wundertheater may be great fun, but it is much more than banal buffoonery. The exemplary Ópera de Cámara del Teatro Colón presented the work alongside other others by the Weill/Brecht and Kaija Saariaho – an evening of biting social critique fit for the dourest of cynics.

That such astringent satire has its roots in Miguel Cervantes, "El príncipe de los ingenios", is surprising. Any hints of sardonicism in Don Quixote, by far his most universally popular work, are subtle and delivered with winning charm. But when it came to the entremeses – one act plays that served as an interlude to longer pieces of entertainment – the gloves were well and truly off. Cervantes' El retablo de las maravillas, one of eight entremeses he wrote, has the travelling duo convince an audience that its show of wonders will be visible only to Christians and those born within wedlock. When a soldier passes by and points out that the spectators have been duped, blinded by their desire to appear respectable to one another, he is deemed a sinner and beaten black and blue.

It is in university performances of the entremeses from the 1950s onwards that the Festival Cervantino has its roots. The works still play a part in this large inter-disciplinary arts festival today, with Madrid's theatre group Teatro de La Abadía performing three of them, including El retablo de las maravillas, in period costume and with 17th-century sound effects at this theatre earlier in the week. Here, the decision to translate Henze's German-language version back into Spanish made more of a direct link between this audience and its heritage. But stage director Marcelo Lombardero provided a modern update: not to the 1940s of the work's creation but the "Roaring Twenties", an appropriate context for this gang of skittish impressionables bent on fun.

Lombardero had his cast prance in time with the music and strike garish tableau vivant poses, their hysterical visages aglow to shadowy under-lighting. The moment soldier Furrier receives a beating (the spoken part delivered by Lombardero himself) carries a half-comical absurdity. Such a balance between the grim and the comic belies directorial skill. But that everything works so smoothly is also testament to the fine performances of the Ópera de Cámara, a travelling troupe, based at the Teatro Colón, from which standout performances came from the razor-voiced, amply-bearded Sebastian Angulegui as Benito Repollo and the rakish Mariano Fernandez Bustinza as dandy Juan Castrado.

The score, written before Henze found a warmer strain of lyricism on moving to Italy, is cast in the austere modernist style of Berg. Here, it was given concise delivery by the Mexican modern ensemble the Camerata de Coahuila under young director Martin Sotelo. Yet it was in the performance of the Mahagonny-Songspiel that the orchestra came into its own, proving a tight, vibrant unit equally at home in the blistering goose-step marches as in slushy splashes of jazz. Thematically, this proved adroit programming. Weill and Brecht's "scenic cantata" formed the basis of the later opera Aufstieg und Fall der Stadt Mahagonny: a critique not only of capitalism but also of operatic form.

Lombardero employed a number of Brechtian "dialectical theatre" techniques in this performance, which was delivered in German, with Maria Victoria Gaeta's Jenny emerging from the audience to deliver a smoky rendition of the "Alabama Song", and disenchanted residents of Mahagonny City at one point brandishing an hilarious array of ludicrous protests on placards. A projected backdrop of a modern American metropolis made the work's message closer to home than the usual desolate setting might have done, whilst pugnacious displays from a card-playing, whisky-sloshing cast clad in leathers evoked man his basest.

The concert opened with Kaija Saariaho's 2004 song cycle The Tempest Songbook, which felt more like a convenient insertion than a work that fit the programmatic theme. But it allowed the group to acknowledge the 400th anniversary of Shakespeare's death in addition to that of Cervantes, and saw Sebastian Angulegui and Graciela Oddone in ethereal from, who appeared and vanished from behind a sheer drape onto which lightening and choppy waters were projected. But it was with caustic social critique that the evening ended, with a selection of songs from Weill and Brecht's Happy and End and Der Dreigroschenoper. In the finale to the latter, the sinister incantation of "Denn wovon lebt der Mensch?" (For what does man live?) ran delightfully close to the bone in these plush surroundings.