ARCO, Madrid’s biggest and oldest art fair, opened surprisingly quietly last Wednesday, considering the controversy it generated in recent months. Only in December, the selection committee, which includes 70 Spanish dealers, threatened a boycott if four galleries chosen by the fair’s organizer, IFEMA, were allowed to participate. Historically, only the ARCO committee of galleries determines participants.

At stake was the very foundation on which 29-year-old art fair was built. IFEMA quickly backtracked and withdrew its selections, but not before generating a lot of ill will and criticism in the press. Especially troubling to some dealers was IFEMA’s choice of Barcelona Galerie Manuel Barbie, which has been under scrutiny for selling forgeries. Once the original policy was back in place, most galleries put the incident behind them. “We signed a document last month that insures that control is only in the hands of the galleries,” said ARCO director Lourdes Fernandez.

Strolling the spacious aisles in the immense exhibition space just outside the city, where more than 200 galleries had set up booths to display work by some 3,000 artists (only slightly smaller numbers than 2009), the general tone of the fair was marked by good art and an optimistic spirit. This required a leap of faith for the Spanish galleries, as over the last year they experienced a 60 percent drop in the institutional buying that largely supports  contemporary-art collecting in the country.

More than a little sunshine fell on ARCO this year, thanks to its surprising choice of Los Angeles as its featured guest city—the first time the honor, which entails a focus on the geographic center's art, was bestowed on a city rather than a country. (India, Brazil and Korea were the most recent honorees). “We selected Los Angeles because it’s become a major center of contemporary art,” said Fernandez. “It also has a rich mix of cultures, especially Hispanic and Asian, and a vibrant academic, film, and literary tradition. Plus, the world has changed, and often cities and regions may be more representative of trends than countries. We’ll now be wide open to what area we select.”

The Los Angeles art world was thrilled by the recognition. “It underscores the importance of Los Angeles as an art capital," said Olga Garay, executive director of the city's department of cultural affairs. “Sometimes you have to be recognized away from home before you gain recognition at home.” Independent curator Kris Kuramitsu and critic, curator and artist Christopher Miles made the selection of galleries, basing their choices not so much on the galleries as the artists they represent. They seemed interested in presenting a variety of work in terms of media, genre, and inclination, produced by artists who ranged widely in background, age, and notoriety. The galleries themselves also ranged from established to new. Given the considerable time and money commitments involved in participating, the curators only expected 13 dealers to accept the invitation. A full 17, however, rose to the occasion.

“It’s a wonderful opportunity for L.A. galleries to concentrate on Europe,” Miles said. “Some already attend European fairs, but certainly not as a group and not with so much fanfare. L.A. is not consistently represented in Europe. It’s great for us to be in touch with an older and more established marketplace. And when you’re here, you become as much a part of the cultural and civic life of Madrid as the artistic, which is a very nice extra.”

Like most other dealers and artists who come to ARCO, Miles waxed on about the special qualities of the fair: its organization, its attention to collectors, the broad audience it attracts, and finally, the artistic and social pleasures Madrid affords, such at the Prado, Thyssen-Bornemisza, and Reina Sofia museums, the galleries and its restaurants and nightspots.

ARCO doesn’t confine itself to traditional exhibitions. It holds forums, presents performances and solo exhibits, and hosts film series. This year, there were discussions on collecting video art—a relatively new medium in art fairs—and alternative approaches to presenting art in Los Angeles. There were also performances, like “The Straight Edge” by FabienGiraud and RaphaelSiboni, which was offered by Berlin’s DNA Gallery, and "Post-Living Ante-Action Theater (poLAAT)" by the art collective My Barbarian, courtesy of Steve Turner Gallery. Then there were off-campus events, like a Julius Shulman exhibition that displayed an outstanding collection of the photographer's iconic images of Los Angeles.

“We’re glad to be here,” said Lexi Brown, director of Los Angeles gallery The Happy Lion, who brought artists Allison Cortson, Joe Sola, Monique van Genderen, and Brian Willis to Madrid. “It’s a great way to meet Spanish collectors.” Sitting at her booth, near an  explosive, tropical painting in bright reds and pinks by LariPittman, Regen Projects president Shaun Caley Regen, agreed. “It’s the best way to find European collectors.”

European galleries long accustomed to ARCO still sing its praises. “The level of collector who comes here is very high,” says Efrain Bernal, director of La Fabrica, Spain’s most prestigious photography gallery, which represents Marina Abramovic, Antoni Muntadas, and Paul Graham, among others. ARCO director Fernandez works hard to attract them, offering them special consideration. This year has also seen a considerable influx of collectors from Portugal and Latin America. "What they like about ARCO, as opposed to other European fairs, is that they can circulate anonymously, without people knocking on their doors,” Fernandez said.

That’s not the only thing they like. ARCO flies them to Madrid, pays for their stay at the five-star Palace Hotel, and arranges for nine contemporary art historians to escort them to all the city’s best museums and collections. And thanks to the generosity of other Spanish regions and cities, they can spend two days in Murcia, Barcelona, Bilbao, or Valencia after ARCO closes, getting to know Spain better.

Steven Sacks, director of New York’s Bitforms Gallery, returned to ARCO after a three year hiatus because he wanted to reconnect with Spanish collectors. As a representative of new media, he finds that the Spanish respond well to his artists, particularly those included on this trip: Daniel Rozin, Michael Joaquin Grey, and Rafael Lozano-Hemmer. “In Europe, it’s about building relationships,” he said. “Americans tend to have a quick sale mentality, which doesn’t work here. Europeans will stay loyal over time, maybe because they have a more historical connection to art.” Nonetheless, he had just sold two pieces to an American collector. But sales aren’t his chief reason for coming to Madrid. “My goal is to network and break even,” he said. “Everything else is a luxury.”

Raquel Ponce, whose Madrid gallery does well with artists like Jorge Pineda, Xavi Munoz, and Gehard Demetz, would agree. She says collectors are drawn by the excellence of their technique. “If there’s any trend today it’s away from technique,” she said. “It’s really too bad because, like me, collectors appreciate it.” Newcomers like the Korean galleries, Simyo and Gana Art, simply expressed delight in being in such august company. “I know this is just the first step,” said Simyo director, Sunny Sung. “It’s not so easy. But I want to introduce Korean artists to the world.”

Top-selling Chinese artist Zhou Chunya needs no introduction. However, Bruno Simpelaere, co-director of Belgian gallery ChinaToday, still wanted to exhibit four of his pieces at the fair, among them a sculpture of a bright green dog with an even brighter pink tongue. He isn’t that well-known in Spain, and that’s what Simpelaere wants to correct. “I must say, I like the friendliness here,” he enthused. “You don’t usually find it at fair, and it makes all the difference.”

Certainly Fernandez would be happy to hear the compliments, but she still knows that she has to gear up for rising competition. Only this year, Just Madrid, an excellent fair devoted to emerging artists, took place at almost the same time as ARCO and caught the attention of art lovers and collectors. Directed by independent curator Virginia Torrente, it also kept fees for booths low—no small attraction in difficult economic times—and prices were also well below those asked at ARCO.

“We’re going to have to develop a bigger personality and focus on building stronger ties with Latin America,” Fernandez said. “We know we have a lot of work to do to stay competitive.”