JOSE Diego Martins greets me with a lingering handshake. "I don't understand tourism," he says. Over the past 20 years, this 80-year-old fisherman has watched as his sleepy Brazilian village has morphed first into backpacker paradise, then a bustling tourist destination that is attracting charter packages from Europe.

This is the story of how Jericoacoara, virtually isolated from the outside world, became an international destination - in 2004 it was voted best beach in the world by Lonely Planet - and where it goes from here. As Alberto Magalhaes, a Brazilian tourist who's been visiting "Jeri" for nearly 20 years, puts it: "If there's a corner on this earth where heaven and hell meet, it must be here."

If one man can be said to be responsible for the rise of Jericoacoara, it is surely Cal Fussman, an American freelance writer who was travelling around South America in 1987 when an editor from The Washington Post asked him if he knew of a great beach in Brazil. He replied that a Swiss backpacker had tipped him off about an incredible place in the north-east, but that it was difficult to get to and few outsiders had ever visited. Fussman was immediately dispatched to investigate.

His subsequent story included this passage: "Tourists started coming to Jericoacoara only six years ago. One of the first to arrive told me that the village existed in a former time, that in Jericoacoara paper money had little value and, if you wanted to stay, you bartered with clothes or a bag of rice. With tourists now more than willing to ride eight hours in a bus over paved roads and another 45 minutes in the back of pick-up trucks over sand dunes just to get there, money has taken on a new importance. For a dollar or two a day, a fisherman will hang a hammock for you in his living room."

Did Fussman expect his story to have such a dramatic impact? "Not really. I figured the place was an ecological preserve without much room to grow; it had no hotels or restaurants, and it was an awfully long plane ride from the US to Rio or Sao Paulo, then up to Fortaleza, then eight hours on a bus. And to go through all that just to sleep in a fisherman's hammock."

He was right. Americans weren't inspired to visit, but an editor at Brazil's Vision magazine read the article and wondered how such a paradise had eluded Brazilians. Soon Jeri was splashed across the Brazilian media; The Washington Post had - predating Lonely Planet by some 17 years - declared it the world's most beautiful beach.

Except it hadn't. The Post had run a photograph of Jeri on the cover of its magazine with the headline "The world's best beaches beckon". Inside was Fussman's tale, plus two others: one from Sanibel Island in Florida and one on Mombasa in Kenya. There was no ranking of beaches, just this rather random grouping.

As the Brazilian media revved its engine, Jeri became the place for hip, adventurous Brazilians. Fast forward 20 years and there's electricity now, plus two ice-cream shops and seven jewellery stores, but unchaperoned cows, donkeys and horses still wander the sandy roads, locals still play football on the beach at sunset, and anyone with a couple of bottles of rum, an esky full of ice and a card table has set up a bar to sell caipirinhas.

The image that drew me to Jeri, though, was one I found on the web of a dune buggy being transported across a river on a rickety wooden raft barely bigger than the buggy itself. Buggy and raft were each hugely appealing, but the combination was like a double scoop of adventure with chocolate sauce. So it was that my wife and I decided to do something different.

The reality didn't disappoint. At least, not for the first few weeks. I spent at least two hours a day pursuing my dream of becoming a windsurf/kitesurf bum in the 28-degree waters and legendary wind. (It blows six months of the year, from July through to December, at between 18 and 35 knots. Every. Single. Day.) I taught my five-year-old daughter to surf on the gentle wave break in the late afternoons.

In the mornings, after gorging on fresh fruit, we sandsurfed down dunes.

When we could muster the energy, we pushed the buggy through the heavy sand and took the whole family to the beach for sunset. We sipped caipirinhas, listened to bossa nova, and bought banana cakes from the banana cake lady and cheese kebabs from the cheese kebab lady. As the sunlight faded, the local capoeira club (no-contact dance-fighting) would begin their daily training, a show with more entertaining acrobatic moves than anything you'll see at the Olympics.

With the help of a babysitter, my wife and I dined out twice a week. The lack of tourist families made us feel we had stumbled upon something special.

With 135 pousadas (rooms, guest houses, hostels and small hotels) to choose from, no one is camping out in fishermen's homes anymore, but one endearing link with Jeri's past is the line of credit that gets extended to anyone who sets foot in town - mostly because no one seems to have change. Try to buy an ice-cream or fruit juice with the equivalent of a $20 note and they'll hand you your food and just tell you to come back and pay later when you have small change.

A funny thing happens when you live in paradise for three months: after a while it starts to feel like life. And the downside to picking a remote, not very child-friendly destination for our sabbatical was that it wasn't great for the children. Just three degrees south of the equator, our children could only last an hour or two in the sun. And there aren't many interesting things to do in the shade. We started to feel like prisoners in our tiny room.

We were also in Jeri long enough to become mildly disillusioned. Towards the end of our stay, I watched 40 Finns waddle up the beach behind a tour leader holding a Finnish flag. Patricia Tholen, a 40-year-old from the Netherlands who had been working in Jeri for a year, said: "I was in shock. If this is the future of Jeri, it's not for me."

Jeri managed to maintain its charm for more than a decade because few people had heard of it, it was difficult to get to, Brazil was notorious for violence and there were few comfortable places to stay. Now the word is out, and there is an 82-room boutique hotel and an even pricier rustic-chic resort with stilted bungalows. Nevertheless, access - an indirect flight to Fortaleza followed by a six-hour drive - is still an issue. A proposed airport just 32 kilometres from Jeri may change that.

Brazil's parliament is debating a bill that would allow expansion of the town. Local entrepreneurs are fighting for control of their future; they are trying to raise funds to have Jeri declared a city so they can get their own mayor. The question is: will Jeri go the way of mass-market Cancun or of protected Fernando de Noronha (a nearby island with expensive visiting permits and maximum of 420 tourists at any one time)?

"It's almost axiomatic," Paul Theroux once wrote, "as soon as a place gets a reputation for being paradise it goes to hell." Jeri hardly felt like hell, but I had never witnessed a place making such a fast transition. Only five years earlier, backpackers had sat where wealthy Italians were now resting their cocktails. And the money that once went to local fishermen is now going to Italian, British and American hotel owners.

At least Jeri won't have to worry about losing one of its residents. "I will never sell," says Jose Diego Martins. "This is a special paradise."

TRIP NOTES

· Qantas/Lan Chile and Aerolineas Argentinas fly Sydney-Rio de Janeiro, with connections to Fortaleza. Phone Un-Limited Travel, (02) 9938 8000, see http://www.un-limitedtravel.com.au. Most hotels can arrange pick-up from Fortaleza for the six-hour drive to Jericoacoara.

· Accommodation: Vila Kalango, doubles from $US120 ($155). Pousada Nova Era, doubles from $US45.