Canela

Gramado's "smaller sister" is quieter and more low-profile. Brazilians immediately associate this city of 35,000 with the Caracol Waterfall, but it also has great shopping, for cotton and wool-knit apparel, handmade embroidered items, and handicrafts. The impressive views of the forest-clad valleys with meandering rivers also bring many tourists.

Most visitors stay in Gramado, which has many more accommodations, and visit the attractions in Canela as a day trip.