Chiloé [1]’s crafts offerings include ceramics, wood carvings, and woolens. Outlets include the Museo Chilote and the Mercado Municipal (Dieciocho between Libertad and Blanco Encalada). A permanent Feria Artesanal (Arturo Prat and Pedro Montt) occupies the site of the old rural bus terminal, but it focuses on fruits, vegetables, and seafood.
Links:
[1] http://www.moon.com/destinations/chile/sur-chico/insular-chiloe