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The recent accident was a blow to the city's hopes of revival by tourism. But it strengthened resolve to salvage the remains of the city's colonial past and start capitalizing on its potential as the cultural capital of Chile and one of Latin America's most intriguing and unusual cities.

After being slapped down once in 1998, the city is entertaining new hopes of being recognized by UNESCO as a world heritage site.

"What's special about Valparaiso is not just its rich European heritage," explains Andres Garces, an architect and university teacher at Valparaiso. "It is its unique geography."

The city's financial center is squeezed into a narrow seafront strip which is overlooked by 45 picturesque hills. Some of the buildings, including the landmark tall, wedge-shaped Turri clock tower, are typical of the way the quirky architecture has molded itself to the twists and turns of the topography.

Valparaiso was never formally founded; instead it grew "organically" after Spanish explorers first landed here in 1536. The result is a refreshing break from the grid patterns that box most American cities into shape. Valparaiso is a Mediterranean-style tangle of winding alleys festooned with drying laundry, steep footpaths, and cascading flights of steps.

For those with weary legs, an ancient and rickety collection of Victorian lifts trundle the locals up and down between the commercial center and the breezy, residential hills. There are 15 of the original 34 bone-rattling mineshaft-like contraptions still running, the oldest built in 1883.

These funiculars are listed on the World Monument Watch list of endangered heritage. Some are owned by local authorities, but most are still in the hands of private families who are reluctant to sell them but unable to invest in their restoration.

For Todd Temkin, an American poet and academic who has set up a foundation to restore the city's crumbling buildings, this is potentially the San Francisco of Latin America.

"Urbanistically, this place is even more interesting than San Francisco," he claims. "It's just that San Francisco is more wealthy and has already been cleaned up for the tourists."

Temkin's Fundacion Valparaiso is just one of a handful of enterprising independent organizations, both foreign led and local, that are outpacing the bureaucratic local government in the race to restore the city.

Small, independent organizations like Temkin's have sprung up here in recent years and are busily restoring hillside follies to their former glory, splashing color and life back into the dilapidated "barrios" that were once the chosen home of Chile's best known poet, Pablo Neruda.

Many of the houses are built on stilts and perch precariously on the hillsides. Temkin's foundation is reconstructing the original wooden frames, using Douglas fir, shipped from Oregon, filled with bricks.

The buildings are then shielded from the sea air with corrugated iron or steel sheeting, traditionally painted in bright pastel colors. The sheeting, used for shipping containers, was easily come by in the days when the port thrived.

"All of these houses were built with exquisite European standards of construction. They haven't fallen in the five earthquakes we had last century," says Temkin.

A German architect has renovated a striking wooden building that stands out at the top of one of the most popular hills, "Cerro Concepcion," and has become one of the city's best known hotels. Locals have fitted out their homes to make bed-and-breakfast inns with breathtaking views over the city and the bay.

Small cafes and art galleries displaying work by local artists are popping up here and there. A farsighted handful of wealthy Santiago families have invested in seaside getaways in the cobbled hilltops where some of the most flamboyant, turreted follies can be found.

Valparaiso suffers from some of the country's highest unemployment and AIDS rates, so architectural heritage is not everyone's priority. But the city has been selected by the Socialist government of President Ricardo Lagos to be one of five Chilean cities to be spruced up in time for the 2010 bicentenary celebrations of Chile's independence from Spanish rule.

Ambitious public projects have been drawn up to create a seafront promenade with cafes, restaurants, and hotels, to convert the town's abandoned prison into an arts exhibition center, and to transform the burnt-out shell of one early 19th-century mansion into the new courthouse.

Efforts will be made to preserve the special character of the city, but, as Garces points out. "This city has been steeped in nostalgia for far too long. We have to make sure Valparaiso doesn't get turned into a quaint museum. We have to find ways to give it a new life."

Sophie Arie is a British journalist freelancing in Santiago de Chile. She has worked in the past for international news agencies in London and Paris and edited a feature service for America Online.

Restored houses covered in traditional corrugated iron sheeting. Photo: Mariana Walker Rusty facades on Cerro Bellavista. Photo: Mariana Walker A neoclassical building built in 1901 houses the oldest Spanish-language newspaper in Latin America, the Mercurio. Photo: Mariana Walker Victorian folly in Cerro Allegre. Photo: Mariana Walker Plans are afoot to convert this former mansion into a new courthouse. Photo: Mariana Walker Windows, terraces, and loggias are the dominant features of most residential buildings. Photo: Mariana Walker   Click on thumbnail images to view full-size pictures.