Just yards from the city’s quaint cobbled districts, whose artsy residents live amid shingle-walled antiques stores and quirky mansions painted in fanciful shades of indigo and mango, the downtrodden of Valparaíso inhabit a world of urban blight and decay.

Now, as the wrappers come off after a six-year, citywide revamp that looks set to spark an influx of tourists, a battle for the collective heart and mind of Chile’s greatest urban treasure has descended into cacophony.

Long-term residents and newcomers, developers and preservationists, national and local government, rich and poor — all have differing views on the kind of city they want to inhabit. “There are many different factions in the city, all of whom disagree on everything,” sighed a weary European resident.

The factions appear to agree on only one thing: Valparaíso is worth fighting for.

By rights, the city should be one of South America’s must-see destinations. Just 90 minutes from Chile’s capital, Santiago, the UNESCO World Heritage Site and onetime home to the late Nobel Laureate poet Pablo Neruda boasts a rugged, quirky beauty and a compelling history.

In the mid-19th century, the city’s name became synonymous with commercial success. As a stopover for ships sailing from Europe to California via the Magellan Strait , it was home to banks and global businesses, the country’s first public library, and its oldest newspaper, El Mercurio de Valparaíso. It’s a matter of local pride that Chile’s first stock exchange was erected here, not in Santiago.

With prosperity, Valparaíso expanded upward from a narrow coastal plain, scaling a series of cerro hillsides that form a natural amphitheater above the Pacific shoreline. On sinuous cobbled streets, the wealthy erected ornate villas, each jostling with its neighbor for the better ocean view.

Even today, multicolored houses of clapboard and corrugated iron — materials flexible enough to withstand frequent earthquakes — twist with the contours up gulleys and down ravines. In places, the hills are so steep that footpaths resemble staircases; in others, they give way entirely to diminutive funicular railways, or ascensores, whose tiny wooden cabins and clanking machinery were built more than a century ago.

The fall, when it came, was abrupt. In 1906, a powerful earthquake devastated the port, in four tumultuous minutes killing 4,000 and injuring five times as many. Eight years later, when the opening of the Panama Canal effectively closed the Magellan Strait shipping route, the banks closed shop and the businessmen left town.

At first, decline seemed quaint. Artists and bohemians arrived, turning warehouses into ateliers and investing the forlorn port with the kind of whimsical charm that drew Neruda (1904-73) to breezy Cerro Bellavista in 1959. After stuffing his chaotic house with antiques, the romantic poet even penned odes to the scruffiness he found outdoors, delighting in a trash-strewn staircase or a housewife’s clothes hung haphazardly to dry.

Walls of graffiti became part of the city’s aspect, particularly after Catholic University art students painted 20 abstract murals on Cerro Bellavista’s staircases, forming the Museo a Cielo Abierto, or Open-air Museum.

Even during Chile’s 1973-90 military dictatorship, Valparaíso cultivated a reputation as an artsy enclave, its dirty stairways symbolizing a kind of smudged romance.

But decline soon turned to decay. The twisting alleyways became clogged with trash, the abandoned mansions became a haven for addicts and thieves. The middle classes fled, taking their economic activity and tax contributions with them, leaving a financing burden no mayor could fix. “It’s quite simple,” the current mayor, Jorge Castro, told me. “Valparaíso is a city without income.”

Infested by rats, consumed by termites, racked by earthquakes, and burned by one of the highest arson rates in Chile, the city’s destruction was almost biblical in its theatricality. “Valparaíso burns easily,” a theater director said. “Things fall down, things collapse.”