Combine milk, butter, and water in a saucepan.

Heat on low until butter melts, then bring to a boil.

Add flour all at once and beat vigorously until the mixture comes away from the sides of the pan.

Remove from heat and cool slightly.

Add egg, beating until well combined.

Beat in chocolate.

Heat oil in a deep fryer or large saucepan on high.

Test the oil by adding a little batter; it should sizzle immediately.

Spoon batter into a piping bag fitted with a star nozzle.

Carefully pipe the batter in 2-inch strips into the oil in small batches.

Lower heat and deep-fry for 2-3 minutes, turning, until golden brown and cooked through.

Drain on paper towels.

Combine sugar and cinnamon in a bowl.

Toss hot churros in the sugar mixture.

Serve with coffee.