(Updates with another death in Mexico)

By Tomas Bravo

POZA RICA, Mexico, Aug 22 (Reuters) - Hurricane Dean ripped into Mexico's Gulf coast on Wednesday with screaming winds and torrential rain that killed two people, flooded towns and forced thousands into shelters, but then weakened rapidly.

Large trees felled by wind were blocking main roads in the oil town of Poza Rica as Dean, packing winds of up to 100 mph (160 kph), made landfall in Mexico for the second time.

"It's spectacular, it's very powerful," said hotel manager Felipe Torres near where the center of the storm hit land.

One man was killed during Dean's two-day rampage in Mexico when howling winds -- at one stage the hurricane was at the fiercest Category 5 level -- blew down a wall on top of him in his house in Puebla state, authorities said.

Another died in Veracruz state when he touched a power cable as he was on the roof of his house trying to carry out repairs during the storm.

Haiti on Wednesday also increased its death toll to nine, taking the total number of killed in Haiti, Jamaica, Mexico and other parts of the Caribbean region to 19.

It finally weakened to a tropical depression on Wednesday afternoon and was not expected to threaten the U.S. coastline.

Dean lost strength soon after landing near Poza Rica but its rains fell in Mexico City more than 125 miles (200 km) away. The U.S. National Hurricane Center said it would fizzle out overnight.

"Dean is expected to dissipate over the mountains of central Mexico tonight or early Thursday," it said.

But the state government of Veracruz warned of heavy rains, which often cause mudslides in poor mountain villages after hurricanes pass.

"It's raining and it's going to keep raining intensely in the coming days," said Gov. Fidel Herrera.

Dean pounded Mayan villages and beach resorts in a run across the Yucatan Peninsula on Tuesday and then passed through the Campeche Sound where the vast majority of Mexico's crude for export to the United States is produced.

OIL PRODUCTION

Mexico's state oil monopoly, Pemex, said oil production, 80 percent of which was cut due to the storm, would begin to return to normal on Friday.

Dean was the first hurricane in the Atlantic basin to strike land as a Category 5 since Hurricane Andrew in 1992.

The storm surge left large parts of the Ciudad del Carmen oil port underwater. There was flooding throughout Veracruz state, including Poza Rica, which is home to oil storage facilities and energy pipelines, although it is not a major producing area.

Rains also battered the old city of Veracruz, a major Gulf port with a tropical feel and often compared to Cuba's Havana.

"There has been panic buying of food in supermarkets," said Gabriela Navarrete, 35, who runs a bar in the city, near where Spanish conquistador Hernan Cortes landed in Mexico in 1519 on his way to conquer the Aztec empire.

Dean hammered Mexico's Caribbean resort of Tulum and swallowed sand from the famous beach at Cancun on Tuesday. A cruise pier in the up-start resort of Majahual was badly damaged and could be out of use for months.

But the majestic coral reefs on Mexico's Caribbean island of Cozumel, considered one of the world's top diving spots, appeared to have been unscathed by the storm.

Mexico is one of the top three suppliers of U.S. crude imports and Pemex evacuated more than 18,000 oil workers, shut down 2.65 million barrels a day of production -- slightly more than Venezuela's total output -- and closed ports as Dean approached.

Insured losses from the hurricane were likely to reach up to $400 million in Mexico, said AIR Worldwide Corp, risk modeling consultants.

The government did not expect Dean to cause substantial damage or hurt production of coffee and sugar crops in Veracruz state, an Agriculture Ministry spokesman said. (Additional reporting by Tomas Sarmiento in Veracruz, Adriana Barrera, Chris Aspin, Anahi Rama and Noel Randewich in Mexico City)

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