Puerto Varas looks across Lake Llanquihue at two almost perfect volcanic cones, Osorno and Calbuco, and was settled by Germans in the 1850s, which is still visible in the architecture and the cake.
It is the calmer half of the lake district: kayaking on the Petrohué, walking in the Vicente Pérez Rosales park, and the crossing to Bariloche in Argentina by a chain of lakes and buses.