Combine flour, baking powder, 1-1/2 teaspoons sugar and salt in a large bowl; set aside.
Beat egg in a medium mixing bowl. Add 2 Tablespoons oil slowly, then milk, blending well to combine. Gradually stir egg mixture into flour mixture. Dough will be dry. Knead on a lightly floured surface until dough is smooth and elastic, about 3 to 5 minutes. Cover; let dough rest 10 to 15 minutes.
Divide the dough in small portions, about 1-inch in diameter. Shape into balls; then flatten on a floured surface. Using a rolling pin, extend each portion and then stretch by hand to form a thin, almost transparent disc.
Pour oil to a 2-inch depth in a large fry pan. Heat oil to 360 to 370°F. Fry flattened discs a few at a time until puffed and golden brown, about 20 seconds per side. Drain on paper towels. Combine 1/2 cup sugar and cinnamon; sprinkle over bunuelos while still hot.
Bunuelos can be frozen in an airtight container. Reheat in 250°F oven for 5 minutes and sprinkle with more cinnamon and sugar, if desired.