Panajachel is one of the easiest places on Lake Atitlán to buy textiles, bags, ceramics, and small craft items. Calle Santander is touristy, but that also means choice: compare stalls before buying and bargain politely.
For more rewarding textile shopping, take a lancha to San Juan La Laguna or Santiago Atitlán, where weaving cooperatives sell directly and explain the backstrap-loom work behind the cloth.