On Thursday, the United States expelled the ambassador from Ecuador, in retaliation for Wednesday's expulsion of the US ambassador from Ecuador. This now leaves the United States without ambassadorial relations in three South American countries – Bolivia and Venezuela being the other two – thus surpassing the Bush administration in its diplomatic problems in the region.

US Ambassador Heather Hodges was declared "persona non grata" and asked to leave Ecuador "as soon as possible", after a diplomatic cable released by WikiLeaks showed her saying some disparaging things about Ecuador's president, Rafael Correa. In the cable, she alleges that President Correa had knowledge of corruption by a former head of the national police.

Although the Bush administration intervened in the internal affairs of countries such as Bolivia and even Brazil, it was somewhat better at keeping its "eyes on the prize" and avoiding fights that would distract from its main goal. The prize, of course, is Venezuela – home to the largest oil reserves in the world, estimated by the US Geological Survey at 500bn barrels. Washington's goal there for the last decade has been regime change. The Bush team understood that the more they fought with other countries in the region, the less credible would be their public relations story that Venezuela was the problem.

It's nothing personal, really – Venezuelan President Hugo Chávez could have chosen to be the perfect diplomat and he would still be treated in much the same manner by the US government. And it's not the oil itself, since Venezuela still sells the US more than 1m barrels a day and there is a world market for oil, in any case. It's just that any country with that much oil is going to have regional influence; and Washington just doesn't want to deal with someone who has regional influence and doesn't line up with its own goals for the region – not if it can get rid of them. And they have come close to getting rid of Chávez, in the 2002 coup – so they are not giving up.

But Washington is losing ground there, too. A big blow was the change in Colombia's foreign policy last summer, when President Juan Manuel Santos took office. An important part of Washington's strategy in Venezuela is to maintain tension between Colombia and Venezuela. They have a head start on this project since the 2,000km border between the two countries has been plagued by paramilitary and guerrilla violence for decades. Conflict between Venezuela and Colombia is also important to Washington's electoral strategy in Venezuela. When there is trouble between the two countries, as in 2009, when Venezuela cut off bilateral trade in response to the US effort to expand its military presence in Colombia, it has a negative impact on a lot of Venezuelans in border states. This helps garner some anti-Chávez votes in border states, as in last year's congressional election in Venezuela. And accusations of Venezuelan support for the Farc guerrillas in Colombia – despite Washington's failure to offer any evidence – are a key element of bringing its anti-Venezuela efforts under the "war on terror" umbrella.

Although Colombia's previous president, Álvaro Uribe, was – in recent years – very much allied with the United States' strategy toward Venezuela, Santos immediately rejected it and decided to make peace with Chávez. This turned out to be quite easy to do, despite their past fights when Santos was Uribe's defence minister. As anyone who follows Venezuela knows, Chávez is friendly to any head of state or government that is friendly to Venezuela.

Santos's U-turn towards Venezuela is very interesting for several reasons. First, it shows how important regional economic integration is as a force for peace and stability in the area. The attempt by Washington and Santos's predecessor to expand the US military presence in Colombia led to a cutoff of $2.3bn of Colombia's exports to what had recently become their second most important trading partner, Venezuela. This was more than 11% of Colombia's exports, and the bulk of it was in livestock and textile products for which replacement markets were not so readily available. Venezuela also has very close relations with Brazil and most of the rest of South America, and they all felt the same way about Colombia's foreign policy. They were especially concerned about the US military expansion in Colombia – and even more opposed after US Air Force documents made it clear that this expansion was for "mobility operations … on the South American continent" and against the "constant threat" from "anti-US governments".

Santos was basically faced with a choice of continuing to do Washington's bidding or being part of South America. He chose South America. The key role of commerce here, as South America continues to integrate economically, illustrates some of the most important "gains from trade". These are far greater than the neoclassical "efficiency gains", often exaggerated by advocates of "free trade" agreements.

Also, Santos's choice to rejoin South America shows how geopolitical changes led by the left governments of the region have now encompassed even rightwing governments. This is a result of changes in institutions (foreign ministries, multilateral organisations such as Unasur, the Rio Group), ideas, and norms that have taken place over the last decade.

Now comes Washington, demanding that Colombia extradite one Walid Makled, an accused Venezuelan narco-trafficker arrested in Colombia, to the United States. No, thank you, says President Santos – this guy goes to Venezuela. Santos cites Colombian law, stating that, first, Colombia has an extradition treaty with Venezuela, not with the United States; second, Venezuela got their extradition request in first; and third, Makled is wanted for more serious crimes (including murder) in Venezuela than in the US (drug-trafficking). All of these are facts that legally require extradition of Makled to Venezuela.

This is most infuriating to Washington. To understand why this is so important to the state department, one has to look behind official pronouncements about Makled getting "a fair trial" in Venezuela and other nonsense repeated with charming innocence by the major media. Venezuela has a presidential election next year. For every important election or referendum in Venezuela – and there are many, but none more important to Washington than this one – there is an international media campaign, with the participation of the US government. (A recent WikiLeaks cable shows the Colombian government sharing with US officials its coordinated media campaign to link both Chávez and Correa to the Colombian Farc guerrillas.) Makled has already offered to sing about alleged corruption of Venezuelan officials, but only if he is extradited to the US. So, if they could only get him to Miami, they could have a splendid show trial that would be better than any international media campaign that the state department could organise.

If all that seems like it's not worth the trouble, it's exactly what happened in 2008. US authorities used a sketchy show trial of a Venezuelan slapped with dubious "failing to register as a foreign agent" charges – but not with actual espionage – in order to broadcast allegations of corruption at the "highest levels" of the Venezuelan government. The allegations made headlines throughout the hemisphere and, of course, were a mainstay of the Venezuelan opposition-dominated media. Just think what the Makled trial could do: no one would ask what the witnesses were offered for their testimony, or whether there was any corroborating evidence for their allegations. It would be one big free-for-all smear-fest, with reporters gobbling it all up.

But Santos is not co-operating, despite enormous pressure and, of course, the currently pending "free trade" agreement between the US and Colombia. Perhaps Washington wants this agreement more than he does.

In any case, the Obama administration – like its predecessor – is fighting a losing battle. President Obama's recent trip to Latin America was hardly more successful than those of Bush. He gets better press – no riots in the streets or Mayan leaders cleansing the site after his visit. But every president and foreign minister there can see that US policies haven't changed one bit.