Meanwhile, In El Salvador . . .

By Jill Smolowe

Jose Napoleon Duarte has enjoyed his share of lucky breaks over the years, but even he must appreciate the propitious timing of the latest Central American peace proposal. Often cited as the showcase of U.S. efforts to bolster democracy in Central America, El Salvador is in deepening trouble. The civil war that has claimed 70,000 lives in eight years shows no sign of winding down. A much heralded campaign to revive the economy has foundered. Even the President's most striking accomplishment, the sharp reduction in killings by right-wing Salvadoran death squads, has been compromised by a recent spate of murders of peasants who were linked to the guerrillas. As a result, Salvadorans are displaying growing impatience with the U.S.-supported Duarte, 61.

Duarte's best hope now is that the Guatemala peace initiative will force the Salvadoran rebels to lay down their arms. Under the accord, outside aid to all guerrilla groups must cease, which means that clandestine arms shipments to the guerrillas from Cuba and Nicaragua would stop. Says a State Department official: "It's a definite plus for the Salvadoran government."

Perhaps. The Farabundo Marti National Liberation Front showed little interest in the peace plan when it was first discussed in February, but the rebels were forced to pay closer attention when Nicaraguan President Daniel Ortega joined Duarte in affixing his signature to the accord two weeks ago. Last week Duarte proposed that the rebels sit down with his government on Sept. 15 to discuss a cease-fire and amnesty. The rebels agreed to talk but not under the aegis of the Guatemala Plan.

If the accord is ultimately implemented without rebel participation, U.S. officials warn that the F.M.L.N. will be able to threaten Duarte's government even if outside military aid is cut off. Operating in small bands and able to retreat to rural hideaways, the rebels could continue to inflict damage in the countryside. Indeed, on the very day that Duarte signed the accord, guerrillas attacked a Salvadoran town called El Triunfo and burned down three public buildings, including the mayor's office. Only days earlier, the insurgents blew up a bridge in Usulutan province, the ninth major span hit in the past seven weeks.

Shortly after his election in 1984, Duarte strode into the small town of La Palma for a dramatic, highly publicized meeting with guerrilla representatives. Subsequent attempts at talks fizzled, however. For a while, it did not seem to matter. Strengthened by dozens of U.S.-supplied helicopter gunships, the 52,000-strong Salvadoran army seemed to be slowly gaining the initiative. F.M.L.N. forces dwindled from an estimated 11,000 to around 7,000, and they alienated supporters by torching buses and planting land mines, maiming innocent civilians.

But in the past year the Duarte government has suffered a number of setbacks. With an average per capita income of $535, El Salvador faces as much as 50% unemployment, up to 40% inflation and a flight of capital as wary businessmen invest overseas. The economy has declined in the past year, as the price of coffee, El Salvador's principal commercial crop, plummeted on world markets by about 50%. Then, last October, an earthquake devastated San Salvador, killing some 1,500 people and causing about $1 billion in damages. Though hundreds of millions of dollars in aid poured in, including $250 million from the U.S., the Duarte government was blamed for squandering the funds. Today large swatches of San Salvador are still in rubble.

Duarte's difficulties have been compounded by accusations of widespread government corruption. Recently it was discovered that a state agency that distributed low-cost food to the poor had held back supplies of powdered milk in order to raise prices. Selected middlemen, most of them supporters of Duarte's Christian Democratic Party, allegedly reaped enormous profits when the milk was finally delivered to customers.

Against this backdrop, the guerrillas have been able to regain their momentum. Emphasizing mobility and surprise, they have damaged the government's war effort by hitting at well-guarded military targets. The most spectacular example occurred last March, when they attacked El Paraiso army * garrison, less than 40 miles from the capital, killing 69 Salvadoran soldiers and a U.S. military adviser.

A Reagan Administration official describes Duarte as a "very bitter disappointment." Those are strong words from Washington, which has sent some $2.5 billion in military and economic aid to El Salvador since 1980 and is still giving the country $1.5 million a day. The funds have kept the country afloat, but they have also tarred Duarte with accusations of being a U.S. pawn. Last month some 7,000 students marched in the capital chanting "Yanquis, go to hell!" and burned an effigy of Duarte wearing an Uncle Sam hat.

What Duarte needs to repair his country -- and his reputation -- is the kind of lasting peace promised by the Guatemala Plan. Will the rebels cooperate? Guillermo Ungo, head of the Democratic Revolutionary Front, the F.M.L.N.'s political arm, last week said the plan was a "positive step for the region." But that does not mean the rebels will be willing to give up the battlefield for the negotiating table. One thing is clear: Jose Napoleon Duarte has little to lose by pursuing talks with the guerrillas.

With reporting by Ricardo Chavira/Washington and John Moody/San Salvador