The Plaza de Armas is close to the foreshore where you can stroll in the mornings or evenings and watch how the local lads catch a trout (1 to 2 lb) with a spoon lure from the end of the muelle (stone jetty). Nearby is the Casino and a small craft market, and a tour agency that will arrange for you a "Southern Lakes Crossing" to Bariloche in the Argentine Lake District.
Many of the hotels and hospedajes are on the flat near the Plaza de Armas and the Avenida Costanera which follows the lake foreshore. It is very pleasant taking the evening stroll and watching the activity and then maybe check out the Casino for a drink.
Artisans display their jewellery on a blanket and hope for a sale. The national gemstone of Chile is lapis lazuli of which there is some production from a site in the Andes north of Santiago. The blue of lapis lazuli blends in well with silver as rings and pendants.
A fun day may be had by taking the minibus to nearby Puerto Montt and perusing the wonderful craft market stalls along the road to Angelmo, the fishing port. It is easy here to spend a lost afternoon by having lunch at one of many dinky seafood restaurants. You will arrive back in Puerto Varas well fed and happy with your day's outing.