A friend mentioned this in a Facebook post, and it turns out to be true:
A Caganer (Catalan pronunciation: [kəɣəˈne], Western Catalan: [kaɣaˈne]) is a figurine depicted in the act of defecation appearing in nativity scenes in Catalonia and neighbouring areas with Catalan culture such as Andorra, Valencia, Northern Catalonia (in southern France) and the Balearic Islands. It is most popular and widespread in these areas, but can also be found in other areas of Spain (Murcia), Portugal and southern Italy (Naples).
The exact origin of the Caganer is lost, but the tradition has existed since at least the 18th century. According to the Friends of Caganer group (Amics del Caganer), it is believed to have entered the nativity scene by the late 17th- or early 18th-century, during the Baroque period. An Iberian votive deposit was found near Tornabous in the Urgell depicting a holy Iberian warrior defecating on his falcata. This began a short-lived series of polemics between the Institut d’Estudis Catalans and the Departament d’Arqueologia in the Conselleria de Cultura of the Generalitat de Catalunya as to whether the find can be regarded as a proto-caganer (which would place the origin of this tradition far earlier than previously thought) or just a pre-combat ritual…
…The caganer is a particular and highly popular feature of modern Catalan nativity scenes. It is believed to have entered the nativity scene by the late 17th-early 18th century, during the Baroque period. Eminent folklorist Joan Amades called it an essential piece and the most popular figure of the nativity scene. It can also be found in other parts of southwestern Europe, including Murcia, the region just south of the Valencia in Spain (where they are called cagones), Naples (cacone or pastore che caca) and Portugal (cagões). There is a sculpture of a person defecating hidden inside the cathedral of Ciudad Rodrigo, Province of Salamanca, though this is not part of a nativity scene. Accompanying Mary, Joseph, Jesus, the shepherds and company, the caganer is often tucked away in a corner of the model, typically nowhere near the manger scene. A tradition in the Catalan Countries is to have children find the hidden figure.
The practice is tolerated by the local Catholic church. Though the tradition is highly popular and beloved, there are, however, divided opinions among the local population as to whether it is really appropriate, which means that not all nativity scenes in Catalonia include caganers.
You can read more, and see this character in action, at the Wikipedia link.