We stayed here over Xmas. It's a really homey hostel, the Argentine owners are sweethearts. Even dished out amazing roast for xmas dinner. There's also a roomy camp site in the backyard. Juan makes mean drinks at the bar.
Costa do Dentro is a small village about 5 km from Pantano do Sul. It's a 10 min walk to the beach. Trails and waterfalls abounds in the mountains surrounding the bay.
Only downside was that the rooms were a bit musty, but then again you are in a tropical climate. The kitchen could be better equipped. Recommended for a chilled out hostel experience away from the madness of mainstream tourism!
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