Niko Kyriakou is a freelance journalist. He has written from the United Nations bureau of Inter Press Service and in United Press International's headquarters in Washington D.C. He spent two years writing for the Yahoo! News syndicate, OneWorld.net.

Hugo Chavez's reelection to Venezuela's presidency early this December is a bad sign for already declining U.S. economic influence in South America.

Chavez won a third term easily, capturing 63 percent of the votes in the December 3 election, which was declared democratic, free and fair by some 700 international election monitors. The charismatic but controversial leader rallied the support Venezuela's poor majority-60 percent voted for Chavez-with anti-capitalist and anti-George Bush rhetoric, praise of Cuba and above all, commitments to continue spending billions of dollars on domestic social programs like free health care, free education and low-price food markets.

But Chavez's most urgent aim appears to be the economic independence of Latin America, which has traditionally relied heavily on trade with the U.S. This independence could be supported by an alternate trade model-one of regional integration-whereby countries south of the border would develop their economies primarily by trading with each other.

"What Chavez wants is a social democracyŠregional integration, going back to the 1950s idea that any country in Latin America, even Brazil, is too small to fuel itself," said Fred Rosen, a columnist for The Miami Herald based in Mexico City who is working on a book about Venezuela's politics.

Chavez showed his eagerness for regional integration when, just a day after his victory, he zipped off on a continental tour of leftist governments in Brazil, Argentina, Uruguay and Bolivia. At his first stop in Brazil, he announced that work would begin immediately on a $200 billion "oil pipeline of the south" that would run 4,800 miles from Venezuela to Argentina, providing oil access to countries all along the way.

Chavez also said the time had come to thicken bonds between members in the South American economic union, Mercosur, which has been critiqued for giving lopsided power to the group's largest economies, Brazil and Argentina.

"Because of the philosophies and background of the presidents of Argentina, Paraguay, Brazil and Venezuela, Mercosur will take a new direction that will now encompass social and political issues," said Venezuela's Foreign Minister Nicolas Maduro, who accompanied Chavez.

It seems that Chavez is hurrying to press regional deals forward as a means of diversifying Venezuela's booming economy, which is almost entirely dependent on volatile oil price remaining high.

"Traditionally, oil is a cyclical commodity; that's why he is anxious to push forward integration," said the Herald's Rosen. "If oil [price] goes down, this may be Chavez's soft underbelly."

Mercosur, which includes Venezuela, Argentina, Brazil, Uruguay and Paraguay, has a combined output of $1 trillion in goods and services annually. Increasing the exchange of those goods would not only serve to diversify Venezuela's oil dependent economy, but could lead the region further away from U.S. economic models which Chavez says, "have enslaved the region in debt to the International Monetary Fund."

In a move that may reveal the northern superpower's weakening hand, U.S. Embassy spokesman in Venezuela, Brian Penn, said last week that the U.S. would be willing to negotiate trade deals with Mercosur.

"We are firm believers of free trade. We believe regional integration is best served with the implementation of the Free Trade Area of the Americas," Penn said.

"However, we do not discourage regional integration through Mercosur and we are willing to negotiate with them as a regional bloc. But remember, it's in their interest to negotiate with the U.S. because we are their biggest market."

Yet despite the size of the U.S. market, Latin American rejections of U.S. trade models have stiffened in recent years, largely because they have brought the region no significant decrease in poverty levels. Throughout the 1980s and 1990s, the so-called Washington Consensus dominated the region's economic activities but failed to uplift the poor and left governments crippled by debt. The consensus espouses a system of neo-liberal economic policies whereby countries applying for loans through U.S.-dominated international lending institutions like the International Monetary Fund (IMF), World Bank, and U.S. Treasury must submit to fiscal austerities, privatizations and the removal of barriers to foreign investment.

Per capita gross domestic product in Latin America declined by 0.7 percent during the 1980s and grew by just 1.5 percent annually in the 1990s, according to the World Bank. Today, one in four Latin Americans lives on less than $2 a day. This grinding poverty and Washington's failed promises have led Latin America's poor to elect leftist leaders like Hugo Chavez and Evo Morales in Bolivia, who have, for the first time, delivered genuine reforms.

But prior to Chavez, the region's leftist leaders had difficulties doing much for the poor, largely because of debt burdens to Bretton Woods institutions like the IMF. These lending agencies forced leaders to implement austerity budgets which hurt the poor, such as value-added tax, salary reductions and social spending cuts. Any measures that would scare off foreign investment, like taxing the rich or private property, were prohibited.

But the poor in Venezuela, Ecuador, Bolivia and elsewhere grew tired of being scapegoats, and began to eject their impotent leftist presidents. For example, in 2005, after the former Ecuadorian President Lucio Gutierrez failed to follow through with a campaign platform based on reforming wealth inequalities, farmers and indigenous people took to the streets, crippling the economy until Gutierrez was forced to step down.

"The message is that: 'if you revoke your campaign platform we will do the same: revoke your leadership on the street.' Impunity may be a thing of the past," said Larry Birns, director of the Council on Hemispheric Affairs, an independent non-profit research organization based in Washington D.C.

But Chavez was able to break the crippling effects of debt. When Chavez stepped back into the presidency in 2003, after having survived a coup against him, world oil prices were beginning to go through the roof. This provided him with billions of dollars to pay off debts and appease the poor who had elected him.

In 1998, the first year of Chavez's presidency, oil price was $11 a barrel. It now stands at $56 a barrel, and has reached as high as $78 this year. Such drastic increases drove Venezuela's GDP up 10.2 percent in the last quarter alone.

"That's why it's a big deal that Chavez is in. Because of high oil prices he has been able to free himself of debt, although not 100 percent," said Fred Rosen. Chavez has not just paid off most of his own country's debt, but even bought more than $1 billion of Argentine debt last year, enabling that country to pay off its IMF loan entirely.

"All of this is unprecedented-that a Latin America leader strained away from the rhetoric and transferred consequential sums of money," said COHA's Larry Birns.

Chavez has also been able to put massive amounts of this money into social programs, thereby ensuring his popularity at home. According to the government, the number of Venezuelans living in poverty has dropped from 44 percent in 1998, to 34 percent this quarter.

The astute Venezuelan president is now set to rule until 2012-and if the country approves his proposal to do away with term limits-perhaps beyond. Chavez has already turned to China, India, Spain, Iran and elsewhere for trade deals, and conditions are ripe for regional integration.

Besides years of debt through the Washington consensus, many Latin American countries are fed up with more recent U.S. refusals to drop subsidies from their great hemispheric-wide commerce deal, the Free Trade Agreement of the Americas. Mercosur countries unanimously rejected the FTAA at the presidential summit of the Americas held in Mar del Plata, Argentina in November 2005.

In what appeared to be a punitive measure, the U.S. responded by threatening to revoke long-standing trade preferences to Brazil, Argentina, and Venezuela, and looks unlikely to renew preferences to other Latin American recipients before they expire at the year's end. While this threat successfully led Peru and Colombia to negotiate bilateral deals with the U.S., it may have the opposite effect among left-wing governments.

Perhaps those driving the Washington Consensus in South America should puzzle over the advice of Nobel prize-winning economist and former chief economist for the World Bank, Joseph Stiglitz.

"The mistake, from my point of view, is trying to figure out Chavez. What you've got to figure out is why the market economic model has not worked to include the majority from Mexico down to Tierra del Fuego," he said.

The reality is that economic officials in the IMF and U.S. Treasury know very well why the Washington Consensus is being challenged; they've just been unwilling to change. And in the past, they didn't have to. But now that left-wing governments in Cuba, Brazil, Argentina, Uruguay, Bolivia, Chile, Nicaragua and Ecuador are being tempted toward regional integration by Chavez's promises of cheap oil for all, they may have to consider improving their offers.

The closer Latin America draws together, the more visible the benefits of its economic union will become, and the less often it will look northward.