While the 5,000 athletes gathered here for the 13th Pan American Games have a lot riding on the contests, none has as much at stake as the once proud city serving as their host.

Never mind that the Brazilian soccer team was a no-show or that the sprinters are in Europe or that U.S. television networks will largely ignore the event. For Winnipeggers who have watched their city stagnate for much of the last 75 years, putting on these games has been an exorcism, of sorts, of the civic demons of defeatism and self-doubt.

"What we hope people will discover is that Winnipeg is not as down on its heels as they think," said Sanford Riley, chairman of the local organizing committee and chief executive of the Investors Group, Canada's largest mutual fund company. "The tide has turned for Winnipeg -- and the Pan Am Games will be the event that marks it."

Riley, a former Olympic sailor, ticks off the community's commitment to the event: $100 million in government support, $16 million in corporate sponsorships, 20,000 volunteers from a city of 600,000. Even Guess Who, the Winnipeg rock band that topped the charts in the 1960s and '70s, has agreed to get back together for the closing ceremony.

There was a time, at the turn of this century, when Winnipeg was growing so fast and so rich that few doubted it would become Canada's second city, its Chicago. But history soon dealt Winnipeg a series of cruel blows -- a bitter general strike in 1919 that still echoes through the political and business culture; the building of the Panama Canal, which diverted freight traffic; a government takeover of the grain business on which the city's great fortunes were built. A prolonged agricultural depression in the 1930s sapped the city of its entrepreneurial juices, while the dismal failure of the federal government's Indian policies would eventually turn Winnipeg's historic downtown into a U.S-style racial ghetto from which white residents fled.

"Nothing of significance happened here since 1967," the last year the Pan Am Games were held in Winnipeg, said Sam Katz, owner of the local minor league baseball team, the Gold Eyes.

It was the loss of the Jets, the city's National Hockey League franchise, to Phoenix in 1996 that confirmed the city's minor-league status. But from it, 'Peggers discovered that their city could not only survive but thrive in new ways.

As traditional industries built on wheat and transportation continued to decline, new ones -- aerospace, financial services and the production of furniture and clothing -- have sprung up to take their place. One result is the lowest unemployment rate in Canada.

At the same time, the traditional WASP business establishment that used to gather for lunch at the exclusive Manitoba Club, has given way to new entrepreneurs from the city's large Jewish, Ukrainian, Mennonite, Chinese and Philippine communities. This new business elite is more willing to take risks and stands that are less aloof, socially and politically, from the rest of the community.

Winnipeg's handicaps have become a source of strength. Its isolation, 1,000 miles from any other major city, forced it to develop its own cultural community, which now includes a world class ballet, a respectable symphony orchestra, a repertory theater and a lively summer folk festival. The sporting scene is looking up: The Gold Eyes, who recently clinched a playoff spot in the Northern League, now play to sellout crowds at a splendid new stadium at the fork of the Red and Assiniboine rivers.

"The whole mood has changed," said Arthur Mauro, chancellor of the University of Manitoba. "We've stopped looking at what we once were and focused on what we can be."

Even the most diehard boosters acknowledge that Winnipeg's reinvention will remain incomplete until it finds a decent and proper place for the native Indians who have migrated from nearby reservations to the North Main Street neighborhoods and now account for 15 percent of the population. Aboriginal poverty rates run to 80 percent, adult joblessness to 45 percent, and fewer than half the youngsters who start high school graduate. Alcohol and drug abuse are rampant, and street gang violence has spilled over from the streets to the local penitentiaries.

The physical manifestation of this social dysfunction begins just a block away from the heart of the modern financial district. There, landmark bank buildings in the Chicago style sit vacant as they have for the last 30 years, their stoops often occupied by Indians guzzling beer and engaged in aggressive panhandling.

There is plenty of blame to spread around -- among white leaders who threw millions of dollars at the Indian problem and Indian leaders who squandered it. Now, with both groups facing a backlash from their constituencies, they are moving to discard the old concepts of guilt and entitlement in favor of more grass-roots efforts to build democracy and self-reliance within the Winnipeg urban reservation. Ground has been broken at a vacant lot on North Main for an Indian spiritual center that is meant to be the focal point of that effort.