Four years ago, there was rioting in the streets of Buenos Aires. But Argentina's capital has bounced back in style. Rory Ross visits the most cosmopolitan and alluring city in South America

According to Catena, cattle culture, and its derivatives of horsemanship, carnivorousness, leather ware and exterior decoration, dominates the history of Argentina, and drives the collective psyche. "Ask any Argentine man, 'How do you want to spend your last days?' and he'll reply, 'On a farm in the pampas.' The estanciero is the ultimate state of being for a Porteño [citizen of Buenos Aires]."

As we leant philosophically out of the window, it struck me how very familiar Buenos Aires looked. One could easily be in the middle of a magnificent throbbing European metropolis. In fact, the city is a harmonic convergence of the combined talents of the British, French, Spanish and Italians, minus the ancestral quarrels. Although Argentina is not technically European, no one told the Argentines. They have always yearned towards Europe. "We don't have this love for what we have," said Graciana, a local tour operator. "The Chileans are the opposite. They love being Chilean."

Although so very familiar, Argentina is a mystery. In 1940, the world's eighth largest country had the seventh richest economy. Today, the acreage is unchanged, but the economy has shrunk. From world power to care in the community, Argentina in some ways looks like an epic tale of underachievement, like watching a man squander an inherited fortune.

Recently things have begun to look up, however. Prices are still low, but the Porteños are on a high. Four years after the financial crisis of 2001, when the peso crashed overnight, the place is throbbing. Creativity in design, art and fashion is back on the agenda. A new generation of proudly self-confessed patriots is emerging. "Before the crisis in 2001, we copied Europe and the States," says Cecilia Nigro, a local public relations executive. "We didn't feel like a country with a culture. After the crisis, we couldn't afford to copy, so we focused on ourselves and our products. Now we export ideas and talent, too."

Each district of Buenos Aires radiates its own distinct character. Palermo is the recently rediscovered oldest part. Its three neighbourhoods are Palermo Viejo, where Jorge Luis Borges lived, which is all cobbled-stone tree-lined streets, turn-of-the-century facades, and great doorways leading to shady patios; Palermo SoHo, which is the fashion district; and Palermo Hollywood, where directors, photographers and television studios operate. These US-inspired nicknames are now a source of squirming embarrassment.

San Telmo, the one-time aristocratic quarter until yellow fever struck in 1865, is now the bohemian area, bustling with antique shops. Fans of vintage clothing should check out Gil Antiguedades. At the Sunday flea market, you can see the tango performed. The tango is also on a roll - ironically, since it expresses the sadness of poverty, homesickness and of the man never getting the woman. It is also fiendishly difficult to master. Today, contemporary artists, like Bajo Fondo Tango Club and Cristóbal Repetto are re-discovering the tango. Repetto evokes the style of Carlos Gardel, the legendary embodiment of the soul of tango who died in a plane crash at 45 in 1935.

Recoleta is the gold-plated district of the city, sporting a magnificent anthology of belle époque architecture as well as the Alvear Palace hotel. The Avenida Alvear, Buenos Aires's biggest catwalk, "is like 5th Avenue but without the stores", according to one fashionista.

La Boca is the rawest, poorest area near the port, and home of the tango and Boca Juniors Football Club, Diego Maradona's club in the early Eighties. The brightly painted houses are a tradition dating from the Italian immigration. With their customary flair for improvisation, the Italians hammered and riveted their dwellings from the tin that the empty cargo ships from Europe carried as ballast, and daubed their exterior walls in rainbow colours.

Puerto Madero is BA's docklands, a grid of salvaged wharfs and warehouses where you find a completely new aspect of Buenos Aires, centred on the figure of Alan Faena, 41, one of the city's most talked-about personalities. After selling his sweatshirts-to-jeans fashion label Via Vai, Faena bought Puerto Madero by the mile - five blocks to be precise - and is now selling it by the inch, having Cinderella-ised it with help from Philippe Starck and Norman Foster & Partners. Loftily re-christened "El Porteño Art District", it comes wrapped up in Messianic rhetoric about creativity, regeneration and new dawns, which sounds like Faena took a few pills and free-associated into a tape recorder for half an hour ("I had an idea some time ago: to offer my country a place that would shelter those who were eager to live an experience of transformation...").

The "Faena Hotel + Universe", the first element of El Porteño Art District, opened last October with its own cabaret theatre, art gal- lery and Starck interior. It occupies a 100-year-old converted grain warehouse originally built from bricks shipped from Manchester. John Galliano was booked in when I was * * there, looking for the elusive fashion zeitgeist.

Faena has granted me an audience in his all-white office. Shaven-headed and shod in bespoke anaconda-skin cowboy boots, he wears a white shirt and cords, symbolising fresh-start optimism. "Buenos Aires is the only truly cosmopolitan city in South America," he begins. "Not even Mexico or Sao Paolo can compare. I believe that now is the perfect time for the world to listen to our message... The inspiration for this development was to re-create what is happening to us, not only in the present, but also what was lost in the past."

Faena enticed Starck over to design the "Faena Hotel + Universe". "He came up with six designs, which I rejected," says Faena, gesturing regal dismissal. "I told him, 'I want you to help me with the rebirth of this city, to help me show the world this new Argentina.'" Faena waltzed Starck around BA's Haussman-esque boulevards, and shoved his nose up against the windows of local cantinas. An image of Starck springs to mind, baffled, bemused and intrigued by Faena's big-picture rain-maker gesticulations. "I like how Starck thinks," says Faena. "We have a good interaction."

As Faena sees it, Argentina is a nation of trauma junkies. The immigrant "survivor mentality" has, built into it, an in-built self-justification mechanism. Not only is it geared to withstand crises, but it also does an outstanding job of bringing them on. "For us, it is almost strange when nothing goes wrong," laughs Faena. "The crisis of 2001 was not our first crisis, merely the latest."

I asked him to elaborate on the Porteño mindset. "A Porteño? A survivor. When you are used to losing everything, that makes you a survivor. The lyrics of the tango express this loss. Being a survivor makes you enjoy life."

One thing you notice in Buenos Aires are the numbers of fashionable not-necessarily-Argentine restaurants that have sprung up, like Sucre in Bajo Belgrano, Cruz in Palermo Viejo (where Galliano threw a party for his entourage), Olsen, a Scandinavian restaurant, and Sudestada, a Vietnamese. You can even get sushi - which years ago Nobuyuki Matsuhisa tried unsuccessfully to introduce here.

At Rond Point, a chic new restaurant that typifies Buenos Aires's post-crisis renaissance, I met Dereck Foster, a Porteño of Gloucestershire descent, who is a bilingual walking encyclopaedia of Latino gastronomy and Argentine history, as well as the food and drink editor of the Buenos Aires Herald.

Eight years earlier, we'd discussed Argentina's decline relative to the rise of the United States, despite having similar racial mixes. "Yes, but whereas the Americans have a sense of being American, we're not sure who we are," he had replied. "We have no sense of community feeling. The Spanish have an expression: 'Everyone kicking towards their own goals.' The only symbol of national unity is the Argentine national football team, so long as it's winning. The easiest way to upset an Argentine is to remind him that Argentina has only won the World Cup three times."

Eight years later, we meet again. He feeds me news of the food scene. "The trend over the last two years has been towards ethnic cooking," says Foster, examining a dish of poached Pacific salmon and grilled toothfish (Antarctic hake) as though for flaws. "Buenos Aires is still not San Francisco, but the Asian and North Africa cuisine here is the tops. I ate Moroccan the other day; first time I had a couscous that I wanted more of. We have a Russo-Polish restaurant, Kosako, and a very good North Korean. I thought North Koreans lived off rice and hope, but the food is hot in all senses. We're seeing good Peruvian, too. Peru has the most authentic and original cuisine in South America. Lousy presentation, but the flavours are... wow! Peru has 500 varieties of potato."

There followed a discourse on Argentine wines. "Out of this world," he sketches a toast with a glass of Rutini late harvest 2002. "Argentina offers every type of soil, climate, temperature and altitude, and excellent grape varieties. Viognier, unknown here a few years ago, is now one of our best whites. Patagonia is producing Pinot Noirs which even Burgundy can't match. The wine world here is changing so fast I can't keep up."

You could never accuse the Argentines of being unpatriotic about their wines. Last year, they exported only 21 per cent of their output - and they're the world's fifth-largest producer. I bump into Phil Crozier, sommelier of the Gaucho Grill in Britain, whose Argentine wine list is one of the longest in the world. He recommended Catena, Terrazzas, Norton, Luigi Bosca, Flichman, Weinert, Etchart, La Amalia, and newcomers like Salentein, Dolium and O Fournier. "Argentine wines are all about earthiness and ripe fruit," he tells me. "Argentina has very high altitude vineyards. The combination of strong mountain sun and cool air has an inverted greenhouse effect - ideal for long, slow ripening, which gives mature-fruit flavours. Plums in Europe become prunes in Argentina. You also get cloves, candied peel, liquorice and cinnamon."

Actually, I think the Argentines are just pretending to eat and drink. Most of them are too busy slimming, determined to look good. This brings us to Argentine fashion, which, despite being six months out of step with the rest of the fashion world, is enjoying a purple patch.

Queen of logical-radical chic is Jessica Trosman, 38, an ex-English translator. Trosman's "intellectual", multi-coloured, layered look is discreetly fashionable and doesn't outrage the Argentine needs for classicism and uniformity. Despite showing in Paris and selling at Harvey Nichols, Trosman remains BA-based. Her boutique is in Patio Bullrich mall in Recoleta.

Later, at El Diamanté, a cheap, chic Latino bar/restaurant in Palermo, Trosman introduces me to Eugenia Rebolini, Argentina's top fashion stylist, who organised the first Buenos Aires Fashion Week in 2001 and deals in vintage clothing, selling to Donna Karan, Marc Jacobs and Zac Posen. Rebolini tells me where to assemble an inclusive cutting-edge capsule Argentine wardrobe. "Besides Jessica Trosman, go to Tramando by Martin Churba for experimental knitting and original textile pieces; to Fahoma by Julio Toledo for strong haute couture jewellery; and to Pablo Ramirez, who manages to synthesis our history and culture."

Laura Orcoyen is Argentina's most celebrated and exportable decorator and homewares designer. When we met, she was operating out of a barn-sized store in Uriarte in Palermo. I entered to find a prospect of creamy, wholesome, morally uplifting, natural fibre, oatmealy pieces of the sort that might grace a smart furniture shop in Knightsbridge. Orcoyen often teams up with her husband Pablo Sánchez Eliá, the architect, to purvey a luxuriously understated aesthetic to creating chic shops, restaurants and homes in Argentina and Uruguay. Among Pablo's most famous pieces is the ziggurat-shaped Catena winery in Mendoza, an icon of Argentina's wine industry.

"People cannot believe this is all Argentine," she says, waving at a vista of tables, white-on-white beds, chairs and icebuckets. According to Orcoyen, there has been a great explosion since the crisis. "Until three or four years ago, 'Made in Argentina' meant 'take care'. Now, there is a new pride. It was like waking up one morning and finding everything was different. Before we didn't know how to trust our own garden. We were always looking over the fence."

Of course, it might not last. You cannot change an ingrained mindset overnight. Four years ago, people were rioting. Now, in Buenos Aires, dog-walking is a growth industry. It's a bubble that's so big you hardly notice it when you're inside it. Hopefully it'll stay that way.

TRAVELLER'S GUIDE

GETTING THERE

Reaching Buenos Aires is neither quick nor easy since British Airways (0870 850 9850; www.ba.com) abandoned its non-stop flights from Heathrow; it now stops en route at Sao Paulo, Brazil. Aerolineas Argentinas (020-7290 7887; www.aerolineas.com.ar) flies from Gatwick, though with a change of plane in Madrid. Many other airlines offer connecting services. Fares through specialist operators such as South American Experience (020-7976 5511; www.southamericanexperience.co.uk) cost around £597. A cheaper alternative is to get a cheap flight to the Spanish capital and connect there for Air Madrid (00 34 91 201 6046; www.airmadrid.com), a low cost airline operating services between Madrid and Buenos Aires.

STAYING THERE

Alvear Palace Hotel, Av. Alvear 1891 (00 54 11 4804 7777; www.alvearpalace.com). B&B from $400 (£222).

Faena Hotel + Universe, Martha Salotti 445, Puerto Madero (00 54 11 4010 9000; www.faenahotelanduniverse.com). Doubles from $295 (£164), room only.

EATING & DRINKING THERE

Sucre, Sucre 676, Bajo Belgrano (00 54 11 4782 9082).

Casa Cruz, 1658 Uriarte (00 54 11 4833 1112; www.casa-cruz.com).

Olsen, Gorriti 5870, Palermo Viejo (00 54 11 4776 7677).

Sudestada, Guatemala 5602, Buenos Aires (00 54 11 4776 3777).

Rond Point, Av. Figueroa Alcorta y Tagle (00 54 11 4802 4379; www.rondpoint-cafe.com).

El Kosako, Junín 1460, Recoleta (00 54 11 4804 3527).

El Diamanté, Malabia 1688, Palermo (00 54 11 4831 5735).

TANGO

Bajo Fondo Tango Club (www.bajofondotangoclub.com).

Cristóbal Repetto (www.cristobalrepetto.com.ar).

SHOPPING

Gil Antiguedades, Humberto 1° 412 San Telmo (00 54 11 4361 5019; www.gilantiguedades.com.ar).

Fahoma, Libertad 1169 (00 54 11 4813 5103).

Jessica Trosman, Patio Bullrich, 750 Avenida del Libertador (00 54 11 4814 7411; www.trosman.com).

Tramando, Rodruigez Peña 1973 (00 51 1 14 481 694 22).

Pablo Ramirez (www.pabloramirez.com.ar).

Laura Orcoyen, Uriarte 1554 (00 54 11 4832 8778; www.laurao.com).

FURTHER INFORMATION

Argentina Tourism (020-7318 1340; www.turismo.gov.ar).

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