In Spain’s fast-evolving mosaic, Galicia has carved out a strong regional identity — with film and TV as standard-bearers.

An impressive range of spectacular locations, enchanting legends and mischievous humor underpin much of Galicia’s dynamic film and TV industry. The region, perched on Spain’s northwest corner, has gained enviable momentum following its path-breaking 1999 Audiovisual Law that ushered in the Galician Audiovisual Consortium and the 52-company Galician Audiovisual Cluster in 2003, and now a new venture-capital firm, SempreCinema.

In a decade, Galicia has built a burgeoning animation sector and hosted hits such as Pedro Almodovar’s “Bad Education” and Alejandro Amenabar’s “The Sea Inside.” Jose Luis Cuerda’s “The Blind Sunflowers,” set in Galicia’s Ourense, bowed Aug. 29 in Spain to healthy 17-day $3 million.

Guillermo del Toro raves about Galicia’s pagan legends — he set “Pan’s Labyrinth” in the region and dug deep into Celtic folklore for “Hellboy II,” including the claim that Ireland’s Celts descended from Galicia.

“I think Galician humor is closer to Irish or British,” says top director Angel de la Cruz. “Whereas most of Spanish humor depends upon people trying to be funny, ours is rooted in situations.”

Galicia now faces a vital crossroads as it enters second-stage growth.

The need to rethink strategies reflects a sea change following the July 2005 election of a Socialist-National coalition that prompted a reshuffle at regional pubcaster TVG and the creation of the Galician Audiovisual Agency that now puts up the bulk of production money and has shifted the funding focus to new talent, DV-lensed pictures and Galician-language production.

Once the film industry’s key driver, TVG, together with established Galician producers — Continental, Filmanova and Voz Audiovisual — have scaled down their pic production. But a younger generation — Vaca Films, Cinematografo, IB Cinema, Perro Verde — have pulled in with ambitious international co-productions. Startups such as Mr. Misto and Matriuska are making low-end features and documentaries in Galician.

Galician animation continues to surprise. Continental’s mesmerizing deep-ocean “De Profundis” sold many major territories last year. But recent mainstream bets, such as Filmax’s “Nocturna” (2007) and “Donkey Xote” (2008), have underperformed; it’s looking to sequel of the hit “The Hairy Tooth Fairy,” set for a Christmas release, to get its toon groove back.

For more than a decade, Galician film and TV recorded impressive 20% annual hikes, with total sales mushrooming from E47 million ($69 million) in 1995 to $291 million in 2005.

But growth in the region has now plateaued, sapped by the same ills as Spain at large: a fragmenting broadcaster market, piracy and a megahit-driven theatrical market.

TVG maintains a healthy regional audience share of 15%-16%, energized by local hits series such as Voz’s recent modern priest tale, “Padre Casares.”

Its enthusiasm for movies seems less certain. In May, TVG and Galician executive government body the Xunta announced a $19.3 million, three-year plan to finance 34 projects through 2010. But Galicia’s top producers association, AGAPI, complained 55% funding is earmarked for TV movies, only 23% for features.

Producers are also vexed by the Galician Audiovisual Agency — offering almost $7.3 million annual aid, but increasingly focusing on Galician-language pics.

Galician producers still need to look for outside funding, making national or international co-productions inevitable for pics with budgets more than $1.5 million. Enter SempreCinema: Unveiled at last year’s San Sebastian fest, the Galician Audiovisual Consortium/Caixa Galicia fund aims to counter the market malaise of Spain at large.

In 2007, only 14 of 136 Spanish film releases grossed $2 million-plus at local wickets. To make an impact, many films need a topnotch cast, high-end post-production and f/x, and whose costs the producers can’t risk on their own.

SempreCinema can invest $882,000 or more per pic as co-production coin equity, says Fernando Salgado, the Xunta’s communications secretary general. That lowers the producers’ risk, but gives SempreCinema wide-ranging leverage.

A first investment, in Sogecine’s “Sunflowers,” was made “to bring Galicia to the market, with commercial and international aims,” Salgado explains. In January, BVI handles a second, Angel de la Cruz’s “Lost in Galicia,” produced by Cinematografo.

Unlike some regional funds, SempreCinema’s cultural criteria are wide-ranging. Galicia contributed 20% of all revenues earned by Spanish films in the national box office in 2006 and hopes to emulate this success over the next 12 months. “Sunflowers” bowed with one of the strongest opening weekends for a Spanish film this year — $971,951 on 191 prints.

After teething troubles, the Galicians may be coming of age.