With the initial lease set to expire, the US-based Solomon R. Guggenheim Foundation on December 9th announced it was signing on to run its museum in the northern port city for another 20 years.

That was double the period previously envisaged for the new contract, and for those involved it was another sign that the museum satellite is a winning
formula.

The northern Basque port was a run-down mess in the early 1990s before the contemporary art museum ensconced itself there in its scaly titanium building, local leaders say.

"It is a real miracle that the Guggenheim is in Bilbao. This was a junk yard before," said the city's mayor Ibon Areso.

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The Rothkos and Warhols hung from the museum's walls have helped give the city new life — and others across the world are following its example.

"This strategy was driven by globalization. It was very new at the time, but now it is being replicated," said Lluis Bonet, a specialist in cultural management at Barcelona University.

Apart from their New York base, the Guggenheims had already opened a collection in Venice and are now planning a new museum in Abu Dhabi.

Numerous other big museums are planning their own satellites as well, including several in Spain, a country slowly recovering from recession.

The Louvre has branched out from Paris to Abu Dhabi and to the northern French town of Lens. Paris's Pompidou Centre is planning to open a venue in Malaga, southern Spain.

In Russia, Saint Petersburg's Hermitage museum has announced plans for a branch in Barcelona.

Bilbao effect

The banks of Bilbao's Nervion river were grotty and dirty, dotted with abandoned factories before the project was launched that led to the Guggenheim opening in 1997.

"We were in a terrible state. There was high unemployment, industries had shut down, there were lots of drugs and the city hadn't been cleaned up for many years," said Iñaki Esteban, author of a book, "The Guggenheim Effect".

The more than €130 million ($170 million) museum was part of a plan to transform the city and diversify its economy, but it was controversial at the time.

"People didn't see how a museum could be an economic motor," Esteban said.

Now the area is brightly lit with parks and bicycle lanes woven around the ship-shaped metallic museum building designed by Canadian-born US architect Frank Gehry.

Seventeen million visitors have come through its doors and hotel stays in Bilbao have soared as foreigners have flocked to the city.

The Guggenheim directly or indirectly employs 5,000 people, and has brought in €3.5 in revenues to the region, officials say.

Bilbao had historically been one of Spain's most prosperous cities, but it had declined along with its heavy industries and shipyards.

Within a year of the museum opening, it had generated €144 million for the Basque region, and its unemployment rate has decreased to one of the lowest in Spain.

"The Guggenheim was a great success but it was not an isolated initiative. It was part of wider urban regeneration. They improved the port and built an underground train system," said Guillermo Dorronsoro, head of the business school at Bilbao's Deusto University.

Other cities have since imitated the "Bilbao effect" though not all have succeeded, mayor Areso said.

"There is much more to it than just putting a museum there. Bilbao's transformation would have been possible even without the Guggenheim. But we wouldn't have become so well-known internationally."