
Founded in 1680 by Portuguese settlers from Brazil, Colonial del Sacremento was an important base for smugglers through most of its existence. The historic centre is built ona peninsula that juts into the Rio de la Palata.
Colonia is charming and lively, there are some nice old colonial buildings and there are some good beaches nearby. Although you shouldn't expect nighlife like in Punta del Este there is enough to be done at night as well. There are many nice restaurants in the old city.
From Colonia you can take the ferry to Buenos Aires in Argentina. There are about 10 crossibngs daily.