The patients start to queue at Chacaltaya hospital at 3.30am. By the time the doctors arrive, at 8am, the line stretches all the way round Plaza German Busch. This grubby square is in Alto Lima, the poorest area of El Alto, a city of 850,000 that sits above La Paz, Bolivia.

Chacaltaya is the first medical facility in South America’s poorest country to treat patients for free. Its staff are part of a contingent of 1,200 doctors from Cuba who have treated more than 2.2m Bolivians so far this year, or 25 per cent of the population.

The hospital, which is widely believed to be funded by Venezuela, highlights the relationship that Evo Morales, Bolivia’s president, has built with allies in Caracas and Havana.

Yet in recent months La Paz appears to have been seeking greater independence from Venezuela and this radical Latin American axis.

Mr Morales, flush with energy revenues and a sense of importance from his position in the region, has shown signs of moving closer to more moderate regimes in the region, such as Brazil and Argentina, and of reaching out to long-time foes including Chile and the US.

Nowhere is the shift clearer than in Bolivia’s crucial energy industry. At the beginning of May Mr Morales announced the nationalisation of the gas industry. That was shortly after he had signed a trade pact with Hugo Chávez, Venezuela’s president, and Cuba’s Fidel Castro.

But after months of negotiations, Bolivia opted for a more pragmatic deal with 10 foreign companies, including Petrobras of Brazil, BG of the UK, Total of France and Spain’s Repsol.

Officially, YPFB, Bolivia’s state-owned company, has taken ownership of the gas fields and will also oversee processing and shipment of the gas. The foreign companies will stay on but, under new contracts signed last week, will pay up to 82 per cent of their revenues to the government in the form of royalties and taxes.

In practice, however, the deal allows the foreign partners to take steps such as offsetting capital depreciation against these amounts. Given a rise in gas prices and production, the companies are doing better than they were.

“The nature of the business has changed dramatically over the last four years,” says Jorge Quiroga, a former president and leader of the Podemos opposition party.

“Companies will do better with the new contracts because the size of the cake has got bigger.”

“The rhetoric is nationalisation but in reality they have just changed the tax rates,” says Carlos Toranzo, a political analyst with the Friedrich Ebert Foundation in La Paz.

Some Bolivians had hoped for more far-reaching reform, in which YPFB would have played a prominent role and the state-owned company of Venezuela, PDVSA, would have taken over the assets of foreign companies in marginal fields.

However, that plan foundered two months ago when Mr Morales sacked his hard-line and pro-Venezuelan hydrocarbons minister, Andrés Soliz Rada, after he had moved to nationalise two oil refineries that Petrobras managed.

According to analysts in La Paz, pressure from the company and from President Luiz Inácio Lula da Silva of Brazil helped pave the way for an accommodation with foreign companies.

There have been signs that Venezuelan influence has been waning in other areas too. Mr Morales has maintained Bolivia’s membership of the Andean Community, a trade pact that Venezuela abandoned earlier this year.

Expectations that Venezuelan interests would acquire rights to work the El Mutún iron deposit concession in the south-east were quashed in June when an agreement was struck with Jindal, an Indian steelmaker.

And earlier this week a military agreement between Bolivia and Venezuela, which involved the construction of military posts along Bolivia’s borders, was postponed.

At the same time, Mr Morales has deepened ties with Argentina, recently signing a long-term deal to supply gas to Bolivia’s southern neighbour. Talks are even under way with Chile, a historic enemy, over potential electricity sales.

Bolivia has also warmed to the US by offering to co-operate on the eradication of coca, the raw material for cocaine. In response, the Bush administration has included Bolivia in its request to Congress to renew the ATPDEA low-tariff regime for imports from the Andean countries.

One of the reasons for the shift is that the strength of the Bolivian economy gives Mr Morales much greater room for manoeuvre than his predecessors enjoyed.

Revenues from higher gas prices and gas tax increases imposed last year mean that the government is no longer strapped for cash. Debt payments have been reduced as the result of a debt forgiveness deal agreed by the World Bank and the International Monetary Fund.

The fiscal deficit, which peaked at 8.8 per cent of gross domestic product in 2002, fell to 1.6 per cent of GDP last year and this year is on course to run a fiscal surplus for the first time in three decades.

Patients at Chacaltaya hospital might have cause to thank Mr Morales’s radicalism but he is proving to be more pragmatic than looked likely six months ago.

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