"Going to Brazil? Buy stones." That's the advice offered by everyone from your great-aunt to your taxi driver, and they're right: experts say more than half the world's fine-colored gems come from Brazilian mines. But until the 1950s those resources were underexploited. Miners were focused on industrial exports, like iron ore and mica, and didn't even bother to pocket the gemstones they dug up. Establishment jewelers in New York City, London and Paris snubbed anything that wasn't a diamond, an emerald or a ruby.

Hans Stern helped change all that in 1945 when he founded H. Stern, a Rio de Janeiro—based gem and jewelry company. Ever since, he has been teaching the world to think aquamarines, amethysts, citrines and tourmalines whenever Brazil is mentioned.

A German émigré who arrived in Brazil as a teenager with his parents in 1939, Stern began buying stones on consignment, financing his first purchases by hocking his accordion. Today H. Stern is among the 10 largest international fine-jewelry brands, with a retail network of 160 stores in 12 countries and estimated annual sales of $500 million. (The company is privately held and does not publish financial data.)

At 83, Hans Stern may be frail in appearance, but he still clocks in every morning at 8:30 and has no intention of retiring. Many of the day-to-day operations, however, have been turned over to his sons and nonfamily managers. And they have positioned H. Stern as an international luxury brand, with expansions into watches and a licensing arrangement with Diane von Furstenberg.

The most thundering change was ordered by Stern's oldest son Roberto in 1995, when he shifted the product focus away from individual pieces designed around specific stones to jewelry collections based on themes. Three of the company's six designers immediately quit. "For my father it was very tough to understand that a consumer could desire an imperfect stone," says Roberto, 45, motioning to a $2,565 Sunrise bracelet in which citrines and other pastel stones, chosen for color rather than quality, are joined by strands of 18-karat-gold wire.

In the store's modern wood-and-glass showcases are collections based on feathers, drops and tiny leaves executed in a variety of materials. Some lines use only gold or diamonds and no colored stones. A simple Golden Stone ring in yellow gold, in the shape of a river pebble, costs $1,100; the same ring in a larger size, loaded with diamonds, costs $12,000. Overall, collection prices are focused on the $1,000 to $5,000 range, lower than Bulgari's or Cartier's.

In the gem business it's widely believed that stones bring good luck, and H. Stern has seen its fair share of late. At the World Watch and Jewelry Salon in Basel, Switzerland, earlier this year, colored stones were a key trend across price categories, appealing to women who buy jewelry for themselves (a growing segment) and reflecting a playful consumer attitude. Von Furstenberg has proved an especially enthusiastic cheerleader. She pursued Hans Stern for more than 25 years before managing to persuade Roberto to partner for a jewelry collection; her bold pieces were launched last year. "At Stern, even before they modernized their lines, their workmanship was exquisite," von Furstenberg tells French fashion editors gathered at her Left Bank apartment in Paris. She has invited them for lunch to see her collection, casually displayed between two Warhol portraits of herself. "I visited the workrooms. No one has these workrooms, not at this level of craftsmanship. They have 600 people there," she says. "I wanted to scream. I was so happy."

Von Furstenberg is just back from Brazil. Nearly all the French editors are going—Brazil is white hot. Rio and São Paulo designers, including Carlos Miele and Isabela Capeto, are attracting editorial attention abroad; a slew of models led by Gisele Bündchen have broken out of the fashion pages; and Brazilian soccer stars like Ronaldo are idolized by the Harry Potter set.

São Paulo (pop. 18 million), roars with sophisticated hotels and boutiques. Clube Chocolate in the Jardins district has live palm trees and a sand beach. The new Daslu, Brazil's most exclusive designer emporium, is the grandest of them all. Modeled on a neoclassical temple and measuring some 200,000 sq. ft., it has three restaurants and a rooftop helipad. Brazil is said to have the world's second largest fleet of private helicopters, and choppers keep coming up. At Carlota, a power bistro in town, diners tease tastemaker Costanza Pascolato. In a recent interview, she scolded nouveau riche helicopter owners for arriving late at country weddings and blowing away bride and guests. "It's outrageous," Pascolato says, rolling her eyes and leaning across the table toward Gloria Kalil, the Lebanese-Brazilian author of a new etiquette book, Chiquerrimo. "Gloria, you should do a chapter on helicopters."

With all the buzz, Brazil would seem to be an obvious selling point for H. Stern, but it's complicated. "We think of ourselves as a Brazilian company, but we don't think it's necessary or even useful to scream that. Nokia is not 'Finnish,'" Roberto Stern argues. "In luxury, to be French or Italian, this is useful. But what does it say to be Brazilian?" It's a constant tightrope: bikinis and overt carnival references are frowned upon, but Havaianas flip-flops trimmed in gold feathers were a hit with the media. Artists' collaborations have been successful, like the 2001 pieces based on the work of Brazilian furniture designers the Campana brothers, famous for their favela chair.

Despite Stern's attempts to modernize the company's image—in 1998 the company ditched its Gothic-lettered logo for a sleeker one in which the S is slightly submerged—the brand struggles with a split personality. The name means one thing to consumers who encounter H. Stern in magazines or stores and another to Brazilians and the tourists who visit H. Stern in Rio. There they have a unique experience: a dispatcher in H. Stern's offices takes calls from 40 Rio hotels and sends free limousines to bring anywhere from 300 to 1,000 guests a day to H. Stern's modern glass headquarters in the fashionable Ipanema district. The tourists disappear downstairs for the guided tour, a mainstay of H. Stern's marketing strategy since 1952.

Wearing audio headsets with a choice of 17 languages, they are given some background on Brazilian gems and watch experts cut, polish and set stones. They learn that the value of a colored gemstone depends on subjective factors, including color, rarity and clarity, and that even the best-trained eye is incapable of accurately remembering color. They are shown how specialists spot a fake.

Visitors are ushered into a special sales room with small tables on which trays of $300 rings are gradually traded up for more expensive pieces, depending on the visitor's wallet and interest. After coffee come the five-figure pieces, like an $89,000 emerald choker with diamonds. "There is nowhere else in the world where you will find such a selection of rare colored stones," says Roberto Stern, escorting a visitor into the walk-in vault.

About 25% of visitors make a jewelry purchase during the guided tour. The rest leave with a photo and an ice cream (a hostess in a glass vault scoops on the way out), the Stern philosophy being that everyone should have fun.

The guided tour is just one of many zany marketing ploys. Over the years, Hans Stern dispatched representatives to meet holiday cruise ships at the dock. The company handed out charms in key South American ports of call and advised vacationers to stop by its store in Rio to pick up free bracelets. As air travel replaced cruise ships, H. Stern adapted by posting girls in shorts near the baggage carousels to distribute city maps splashed with the Rio stores' addresses and H. Stern advertising. Meanwhile, Hans Stern successfully lobbied the powerful Gemological Institute of America to ban the term semiprecious in reference to gemstones.

In today's more scripted marketing environment, the company depends on magazine advertising and celebrity endorsements. Catherine Zeta-Jones wore an H. Stern $160,000 vintage aquamarine necklace to the 2001 Academy Awards, and Angelina Jolie flashed $10 million of flawless diamonds at the 2004 Oscars. Still, Roberto Stern cultivates a kooky side. He once installed a dentist's chair in the Ipanema store window and had clients drop by to have stones glued onto their teeth. He encourages individual touches in different locales. The downtown Rio store has one of the area's most popular lunch spots and a coconut-juice bar in the rear for beach-starved moguls. A spa concept is planned for another store.

Standing out has never been so important for H. Stern. High-end jewelry is one of the luxury world's hottest sectors, with all sorts of well- financed new competitors piling in. Chanel and Dior now make bijoux, diamond producer De Beers has launched its own brand with the LVMH luxury conglomerate, and other groups continue to expand their jewelry holdings. Hans Stern says the company has lost money for three years, as it tried to keep up with the pack and store investments outpaced sales growth. The Sterns say they are convinced that the combination of creative modern products and in-house technical savoir faire will permit H. Stern to flourish as an independent company. Plus, there's that inside track with the locals.

It's a two-hour drive past eucalyptus-studded ridges and giant iron-mining operations in Minas Gerais—Brazil's mineral-rich inland state—to reach the world's only imperial-topaz mine. There are other sources of the tawny topaz stone, but the Topazio Imperial company, located near the 17th century Portuguese gold-rush center of Ouro Preto, is the only place that produces a variety of topaz that turns a lovely pastel pink when properly cut. High above a muddy pit, three cranes toss down giant buckets, each bringing up a ton of mud and rock. The mixture is sprayed with water cannons and then examined by hand on a conveyor belt. Topazio Imperial offers lots with a mix of valuable and less valuable stones to 10 clients in the world: H. Stern and nine select lapidaries.

And if anyone else calls needing imperial topaz? Mine owner Wagner Colombarolli glances at his two partners and scratches his chin. "Well, we'd tell them we don't have any stones to sell."