First settled by Portuguese of Azorean descent in 1777, Porto Alegre, the capital of Rio Grande do Sul was at a disadvantage for many years because of its location some distance away from the sea. From the nineteenth century, with German colonization and the building of the first railways, the city began to expand rapidly until becoming the most important city in southern Brazil.

Situated on the left bank of the River Guaíba near the port of Porto Alegre, important for transporting local produce, the Gaucho capital has a broad-based economy that lays particular emphasis on agriculture and industry. Agricultural production includes produce such as plums, peaches, rice and cassava grown on rural smallholdings. The shoe and leather industries are also important, especially in Novo Hamburgo in the metropolitan area of Porto Alegre.

If the capital was disadvantaged in the beginning by its geographical position, it is now deriving great benefit from it. With the creation of Mercosul comprising four countries of which two, namely Argentina and Uruguay, border Rio Grande do Sul, Porto Alegre has almost taken on the role of capital of the Southern Cone.

Porto Alegre is the centre of Brazil's third largest communications network, the Brazil South Network (Grupo RBS) and one of the foremost education establishments, the Federal University of Rio Grande do Sul. One of the city's main tourist-cultural attractions is the Mário Quintana Cultural Centre based in the former Hotel Majestic where the poet, whose name the Centre bears, lived until 1980, before his death in 1994. The Cultural Centre comprises auditoria for both theatre and cinema, libraries and an art gallery as well as housing a vast collection of material relating to Mário Quintana.

In the Matriz Square in Porto Alegre is an architectural complex in the Portuguese baroque style, a legacy of its founders. The most important buildings are the São Pedro Theatre, which is more than one hundred and thirty years old, the Metropolitan Cathedral built in 1929 in the renaissance style, the Public Library, the Town Hall and Riachuelo Street where the city's bookshops, both new and second hand, are situated. Not far away is the Gasometer Factory which used to operate as a thermoelectric plant but is nowadays an important cultural focus in the city.

It is in the mountain range of Rio Grande do Sul that the influence of the German and Italian immigrants predominates. Largely concerned with tourism, Gramado and Canela are the best known towns and here in winter, below freezing temperatures cover the roofs in snow. Gramado is closely associated with hydrangeas, Bavarian architecture and the Gramado Film Festival, one the best known in Brazil. Canela is a small town with an abundance of natural beauty, including the Cascata do Caracol, a waterfall with a drop of one hundred and thirty one metres.