Heat oil in large pot (enough to cover/deep fry churros) over medium heat.
To prepare churro batter, combine water, butter, sugar and salt in a large saucepan. Bring to a boil over medium-high heat. Add flour and reduce heat. Cook and stir until full mixed and batter is smooth.
Transfer batter to a large mixing bowl. Allow to cool for 5 minutes before adding final ingredients. Add vanilla and egg to batter and blend until batter thickens. Keep mixing until full incorporated. Batter will be sticky.
Transfer batter to a 16-inch piping bag fitted with a rounded star. Pipe mixture into heated oil and cut into fry lengths with scissors. Fry until golden brown. Transfer to paper towels to absorb excess oil then quickly coat in cinnamon-sugar mixture. Repeat process with remaining batter. Do not overcrowd pan.
Serve warm with dipping sauces.