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In a medium saucepan, combine condensed milk, desiccated coconut, and butter. Cook over medium heat, stirring continuously for 10 minutes, until the mixture thickens and begins to pull away from the sides of the pan.
Transfer the mixture to a bowl and refrigerate for 30 minutes. Once chilled, use a ½ tablespoon measure to form uniform balls. Lightly oil your hands to prevent sticking while rolling.
Prepare the caramel by combining sugar, water, and vinegar in a small saucepan. Heat over medium heat until the mixture begins to simmer and turns a golden amber color.
Reduce heat to low to prevent burning. Test the caramel’s readiness by dropping a small amount into cold water – it should form delicate, glass-like threads.
Carefully dip each coconut ball into the caramel, allowing excess to drip off. Let the candies set for 2-3 minutes on parchment paper. Once cooled, the Bala Baiana are ready to serve and enjoy!