Cruise control: passenger ships are on the rise at Chile's Valparaiso as the port races to handle the traffic.

After the Panama Canal opened in 1914, it took business away from the Port of Valparaiso, thousands of kilometers away in central Chile. Soon afterwards, the city fell into decline. First the business elite moved to Santiago, and then the middle class fled, leaving the working class behind. Today, nearly a century later, things are picking up.

As cruise lines across the world look for new destinations, Valparaiso--a hopping-off point for Chilean fjords, Cape Horn and Antarctica--is back on the international radar screen. Just eight years ago, only 17 cruise ships annually called on the port. Now, 46 are showing up each year, a 170.5% increase, bringing 54,000 passengers and 18,000 crewmembers eager to spend money, according to the Valparaiso Passenger Terminal (VTP), the passenger subsidiary of Chilean shipping company Agunsa.

The first cruise liner to sail into the port did so during the 1995-1996 sailing season, and pretty much showed up on a whim, says Claudio Nast, managing director of Destination Management Chile, a tourism agency. "We have about 1.5% of the entire cruise-line market, and this will remain for the next few years," Nast says. "So we have to aspire for a 3% share of the market."

Smaller cruise fines aren't the only ones stopping in Chile. The Queen Mary II, the world's longest, tallest, widest and most expensive passenger liner ever built, showed up in 2005. The Queen Mary II docked again in Chile on March 22, the exact same day the Regal Princess, a high-end cruise ship run by Princess Cruise Lines, was there. The two ships alone brought 8,000 passengers to the city, says Nast.

Valparaiso has been undergoing a US$689.7 million makeover during the past few years. The government, the private sector and multilateral lending institutions are financing expansions and improvements at port facilities, such as a new passenger terminal, as well as in sub urban train service, tunnels and walkways. Valparaiso also was named a U.N. World Heritage site in 2003, which qualified it for funding to preserve historical landmarks. The distinction allowed government tourism officials to re-orient what had been a dilapidated colonial port town into an attraction. "Now we are building a destination for tourists in Valparaiso" says Katrina Sanguinetti, regional director of Chile's tourism board Sernatur in Valparaiso.

Cruise tourism is good business, in no small part because visitors' spending isn't limited to restaurants and stops at souvenir stands. Cruise ships stock up on fresh produce, water and other perishable goods in ports like Valparaiso, pumping $100,000 into the economy each time they come to port, says Fernando Villagran, port manager for Inchcape Shipping Services. On top of that, cruise ships increasingly allow tourists to spend more time at ports of call, where they spend money exploring and shopping, Villagran says. "The trend is for ships to spend more time on land," he says. "We plan to add two more ports with day events for the next season."

To handle the growing number of cruise ships, a temporary terminal was put in place under a large tent amid cranes, forklifts and containers. To make life better for the tourists, the government awarded a passenger-terminal concession to VTP in 2003, which will build and operate a permanent terminal. Construction is due to begin later this year.

The problem is that the temporary terminal now in use is a five-minute bus ride away from where the ship docks. The new terminal won't be any different, however. While cruise-ship traffic is on the rise, it won't rise enough to build new docking facilities for cruise ships. "All ports with heavy cruise-liner traffic have their terminal beside the ship," says Andres Widow, VTP operations manager. "So passengers embark and disembark into the terminal just like at the airport, but Valparaiso does not have the traffic to warrant a special infrastructure."

Costly. That's because a new dock just for cruise ships is not financially feasible. While the cost of the actual pier is not expensive, sea walls are costly. It would cost $20 million for a two-ship mooting pier and another $50 million for a wall to hold the shoreline against the water as cruise ships dock. "We need more than 100 cruise-ship dockings per year before we can think of an investment of that magnitude" says Jose Luis Palacios, general manager of the Valparaiso Port Authority. "The possibility for growth is there as long as the Valparaiso community and tour operators promote Valparaiso as an attractive destination, so that we can have more ships docking."

Port officials say they can work around that. New access roads for trucks will open later this year that will divert cargo-related activities away from tourists. The port also will set aside land available for hotels, office and apartment buildings and recreational facilities.

JORGE FERNANDO GARRETON * VALPARAISO, CHILE