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Valparaíso blooms again

Take a walk in Cerro Alegre, a neighborhood overlooking the Chilean port of Valparaíso, and you may briefly think you have been transported to a quaint Mediterranean resort.

Narrow cobblestoned streets, stately 19th century houses painted in bright pastels, funky sidewalk cafés and window boxes overflowing with flowers are everywhere—along with sweeping views of the shimmering Pacific Ocean.

Tourists from Brazil, Europe and the United States walk along twisting sidewalks, sample art galleries and jewelry stores, visit the nearby Pablo Neruda museum, and attend musical and theatrical performances. They often pass workers who are painting public murals, installing elegant new lamp-posts or restoring the facades of historic buildings.

Cerro Alegre is one of several historic neighborhoods in Valparaíso that are prompting Chileans and foreigners alike to take a fresh look at one of Latin America's most unique and underappreciated cities.

Not so long ago, Valparaíso had a serious image problem. “When we moved here 20 years ago, everything was grey,” says Verónica Castillo, owner of Hotel Acontraluz, a new boutique hotel housed in two historic residences high up on Cerro Alegre.

Castillo and her husband chose to relocate to Valparaíso because they like its rich and eclectic architectural heritage, a legacy of boom times in the 19th century, when the city was the largest port on the Southern Pacific coast and a vital trading hub. Rich shipping executives built lavish homes with ocean views, and British contractors were hired to install one-of-a-kind funicular elevators that still transport pedestrians up and down the city’s steep hillsides. Immigrants from around the world put down roots and infused Valparaiso with a distinctive and cosmopolitan identity.

But with the construction of the Panama Canal and new seaports in other nations, Valparaíso gradually lost its competitive advantages and slipped into a long decline. Many prosperous families moved to Santiago. Shrinking municipal revenues and a lack of maintenance took a toll on the city’s appearance.

In the 1990s, civic leaders began actively looking for ways to reverse Valparaíso’s fortunes. A turning point came in 2003, when UNESCO declared Valparaiso’s historic downtown a World Heritage Site. The designation convinced community leaders, entrepreneurs and elected officials that Valparaiso had the potential to use its heritage to not only attract tourists, but also to catalyze private and public investment, generate jobs and improve the quality of life of all residents.

First, the city needed a radical face-lift. Aware of the IDB´s experience in financing historic preservation and urban renewal programs throughout the region, Chile approached the Bank with a proposal that would eventually become the Program for the Recovery and Urban Development of Valparaíso (PRDUV). Funded with a $25 million IDB loan approved in 2005 and $48 million in Chilean government funds, this program set out a comprehensive strategy to reclaim areas with historical value and economic potential through investments in roads, public spaces, and both public and private real estate.

A key goal of the program was to ensure Valparaiso’s historic neighborhoods remain affordable to a wide range of incomes. So part of the project financed the rehabilitation of historic residences that have fallen into disrepair but are still home to many low-income families. Program funds are also being used to rebuild and equip parks and public buildings, paint and restore facades, refurbish the ageing funicular elevators, improve garbage collection and even control stray dogs through a free sterilization campaign (see slide show at right for details).

It will take at least a generation for Valparaíso to reach its full potential as a place to live and work, and the city must still resolve poverty and productivity problems that are far worse than in other Chilean cities.

Nevertheless, today there is a palpable sense of excitement about Valparaíso’s future.

“We were very cautious, so we set up this hotel so we would only need 35 percent occupancy to break even,” says Castillo, of the Hotel Contraluz. “Instead, in our second year we’re already at 70 percent!”

Indeed, the number of hotels and hostels in Valparaíso has shot up from 120 to 195 since 2007, thanks in part to government incentives that make it easier for entrepreneurs to obtain credit. Many of these are small, upscale properties like Castillo’s that showcase the city’s architecture and style.

But tourism is perhaps the strongest indicator that perceptions about Valparaíso are changing. The number of visitors to the city rose 37 percent over the past year, and the proportion staying four nights or more rose to 18 percent. Visitors from Argentina, the United States, Brazil, France, Germany and Spain predominated, and they spent, on average, 19 percent more than the year before.