Watch the Breakdown: Variation 1 online guitar lesson by Tierra Negra from Magic Gypsy Chords & Rhythms
Place the capo at the 3rd position.
If you were playing without the capo, this would be an Ab-minor, but actually it sounds like a B-minor because we have the capo at the 3rd fret.
The first three chords of variation 1 sound familiar and the progression is clear, but the last chord leads into a typical flamenco-sounding Eb-Phrygian chord. It´s an Eb-Phrygian with the G in the bass to give you a fuller sound. Mute the A-string with your 2nd finger.
When you play our favorite thumb arpeggio for this progression, rest your thumb into each string.