It’s an unusual approach to take when an industrial city hits rock bottom – but Bilbao’s leaders decided the best way out of the malaise was to build a museum.

The $89m Guggenheim Museum, opened in 1997 and built on a former shipyard, has sparked a cultural renaissance in Bilbao, capital of Spain’s Biscaya region.

“This project was important because Bilbao and its citizens recovered their pride after the earlier social and economic crisis," says Josu Bergara, Biscaya’s prime minister, who tirelessly promotes the region to overseas investors. “We began to have faith in ourselves again.”

Mr Bergara stresses the many different ways in which a project like the Guggenheim Museum can have an economic impact. “Many foreign visitors come to Bilbao to see the museum and then spread the message about the city. That encourages investors to take a look at what we have to offer.”

In the end though, Bilbao’s recovery has been on a wider basis than purely cultural and touristic. There has been growth in machine tooling, the automotive industry, the steel industry has been modernised, the harbour has been moved outside the town and transport infrastructure has been improved.

But in his role as regional flag waver, Mr Bergara has had to answer the difficult questions as well as the easy ones – such as how business is affected by the terrorist activities of the Basque separatist movement ETA.

“Terrorism is not a threat to investors,” he says. “If people have concerns we put them in touch with the chamber of commerce, which has information about the economic realities. Generally, Bilbao is a safer city than Madrid or Barcelona.”