Next Step : Island Paradise Is Unlocked by Prison’s Demise : Penitentiary’s demolition inspires big plans for tourist development off the coast of Brazil.

In this drowsy fishing hamlet, miles from Brazil’s bustling mainland, villagers sit under broad-leafed amendoeira trees, playing dominoes, drinking beer, lost in conversation and in time. They are resplendent in their sandals, shorts, T-shirts and beaded bijouterie .

There are no cars here, no smokestacks or jackhammers to belch or bellow of civilization. The loudest noises are the tum-tum-tum of deep-bellied African drums and the steady shoosh of waves breaking on the curving beach.

“Look at this,” says Amaury de Souza, a political scientist from Rio de Janeiro, the high-strung metropolis 60 miles to the north.

De Souza has boated to the island to unwind for the weekend with his wife and friends. He lifts a chin to the cobblestone promenade where lovers stroll, with their arms braided and hips swaying with the crowns of palms in the ocean breeze. Hand-painted signs lashed to trees beckon customers to snacks and home-cooked meals.

“This is the old Brazil,” he says, “a Brazil that doesn’t exist anymore.”

Year after year, life on Ilha Grande, the Big Island in Portuguese, lying 10 miles off Brazil’s Green Coast, has been like this. Except during Carnival, when the island brims with tourists, tranquillity reigns here. Generations have savored this peace, content to sit under the stars and sip and sing while history rushes by.

But the days of bliss may be numbered. Late last month, plastic explosives brought down the weathered walls of the Candido Mendes prison, a maximum security penitentiary on a remote beach of the sprawling, mountainous island. For years, the prison had been both the curse and the blessing of Ilha Grande.

Harboring at times up to 1,000 major felons, the prison served to intimidate many tourists and would-be island residents. Prison breaks were routine, and old-timers here delight in telling stories of how fugitives occasionally terrorized islanders. Yet thanks largely to its infamy, Ilha Grande had remained as pristine and peaceful as it was when European navigators first sighted it nearly five centuries ago.

Down with the prison walls came the luxury of isolation. Another sort of luxury appears to be on its way--the kind that travels by jet and yacht, and measures life by calories and karats. The governor of Rio de Janeiro, Nilo Batista, together with a klatch of investors and hoteliers, has big plans. They speak of erecting a five-star hotel on the beach where the prison stood. The hotel will be serviced by sea cruisers and have a heliport.

For many investors, this 78-square-mile island, appointed with mountain peaks rising 3,000 feet and necklaced by 105 pearl-white beaches, is a promising address. “Growth will be tremendous there,” said Nilo Sergio, marketing director of Porto Hotels, which owns three hotels on the mainland facing Ilha Grande as well as property on the island itself.

All over the island, property values are starting to soar. Ten years ago, Gerard Masse, a French engineer, paid $10,000 for an empty beachfront plot in Abraao and built a small, $25-a-room inn, the Pousada Tropicana. “Just the other day someone offered me $300,000 for it,” he said, shaking his head.

“Every day, someone comes by with an offer,” said Janete Dias de Araujo, who was born and raised on Ilha Grande and runs its most traditional seafood restaurant.

But the scent of a rich future is already giving the quiet folk at Abraao indigestion. “We don’t know what is going to happen now,” said Araujo. “Today, I walk around freely day and night. I never lock my door. It’s peaceful. But things are changing.”

In fact, Ilha Grande was never exactly the untouched jewel in the Atlantic its champions like to portray. For centuries, it was inhabited by two rival and often warring Indian tribes, the Tamoios and Guianas. And Europeans proved no less rapacious. Though ignored by the first Portuguese settlers, the island became a pirates’ paradise.

Gradually, though, authorities awoke to the danger on the seas and took control. In time, Ilha Grande became a natural way station for sea trade. Especially slaves. Brazil bought more slaves than any other country in the New World, held them longer and continued to purchase them decades after the slave trade was banned elsewhere. Ilha Grande became an entrepot for the smuggling of this human contraband.

When abolition finally came to Brazil, in 1888, the new but unpopular republican government looked to Ilha Grande much the way many threatened regimes regarded islands the world over: as a dumping ground for bandits and misfits.

In 1893, Army Marshal and Vice President Floriano Peixoto put down a naval revolt and dispatched monarchist rebels to the island. It took another 10 years for authorities to build the first official prison.

A second was constructed in 1932, when the populist leader, and later dictator, Getulio Vargas exiled the leaders of a rebellion sparked by Sao Paulo coffee barons. In the special ways inherited from Lusitanian justice, select prisoners were locked away in underground cells, which sometimes flooded to neck level when the tide rolled in.

Famous inmates were confined in the dungeon. Perhaps the most renowned was Graciliano Ramos, a writer and Communist jailed by Vargas in 1936. Ramos based much of his opus, “Memories of Prison,” on his two years on Ilha Grande.

In the years that followed, democracy came and went like the Atlantic tide in Brazil. When it last ebbed, with a coup in 1964, the military regime made the island a bin for political dissidents.

At the same time, Brazilian authorities also aided unwittingly in giving birth to modern organized crime. During the military years, a law said that all bank heists were crimes against national security. So common bank crooks were sent to Ilha Grande. There, they mingled freely with ideologues and intellectuals, and soon a strange outlaw symbiosis developed.

“Common bandits learned about organization and tactics from the leftist intellectuals,” said Eneas Quintal de Oliveira, a former director of the Candido Mendes Penitentiary. “They got the know-how with none of the ideology.” The leftists, for their part, found inspiration in the bravado and street smarts of the hardened cons.

Now, free at last from the specter of these legendary bad hats, island residents are eyeing their prisonless future uneasily.

What troubles locals most is the cavalier attitude of the state authorities, who did not deign to consult the residents when they ordered the prison razed. The same rash thinking, they fear, may soon touch off an explosion of tourist development.

Part of the problem is that the island became a prisoner of the penitentiary. What few amenities Ilha Grande enjoys --electricity, a working pier, housing and commerce--came with government, which came to tend the jail.

The 100-member police detail has been halved. About 500 public-sector jobs will soon be phased out.

“We were born with the prison. We’re afraid of what’s coming,” said Janete de Araujo.

Yet some on the island are shedding few tears. One is Elias Lins de Melo, who owns the island’s oldest inn, Mar da Tranquilidade. “The prison was a blight on the island,” he said. De Melo wants the island to have an oceanic-research center and dreams of carving out trails and campsites for nature and “adventure” tourism.

Sgt. Ezekiel Menezes, the weekend duty officer, stood out before the powder-blue police depot at Abraao. He wore shorts and a T-shirt. The lone police vehicle was parked nearby, and dusty from underuse.

“Robbery, the occasional domestic dispute--yeah, we have all that,” Menezes said. “But not much else. It’s quiet here.” The town he was in charge of policing lay spread out before him, as tidy and tranquil as a still life.

“Now with the prison gone, things are going to change. It’s like the island is a child that’s lost his father,” he said, digging a sandal in the sand.