The five-nation Andean Pact has opened the way for a new flow of badly needed capital by relaxing its strict foreign-investment regulations.

Trade ministers from the five countries -- Venezuela, Ecuador, Bolivia, Colombia and Peru -- agreed during a two-day meeting here last week on the need for more foreign investment to help revive their economies, which are burdened by staggering foreign debts and high unemployment rates.

The group decided that its foreign-investment regulations are outdated. "The countries originally thought they could regulate foreign investment on their own terms, but they found their tight control has discouraged investors," said Farid Antakly, a Caracas lawyer.

"They understand the benefits such Far East countries as Malaysia, Taiwan and Hong Kong have received by opening doors to foreigners."

"Foreign investment is better than foreign debt," said Hector Hurtado, president of the Venezuelan Investment Fund.

The five ministers also called for the elimination of tariffs and quotas that have depressed trade among the countries.

Andean Pact foreign ministers are expected to approve these and other recommendations when they meet in late March on Ecuador's Galapagos islands.

Intergroup trade, which rose to $1.4 billion in 1981 from $90 million in 1969, fell to $400 million in 1983. No later figures are available, but officials said it was only marginally higher in 1985. Analysts attribute part of the drop in trade to the flagging economies, but they also blame barriers that each nation has erected.

Ironically, knocking down trade obstacles is what the Andean Pact was supposed to do when it was founded in 1969 to serve as the South American version of the European Economic Community.

Instead, each country has turned aside the initial goals in an attempt to protect local businesses and jobs, critics have charged. "The Andean Pact is a failure," one observer said at the meeting held here.

The trade ministers rejected this characterization, but admitted they must overcome high hurdles to reinvigorate the group. "We need to revive the Andean Pact, but doing this will take a lot of work," said Fernando Caseres, one of Bolivia's delegates

In the meantime, each country has adopted its own policy regarding foreign investment. Colombia and Ecuador are aggressively wooing foreign capital, Venezeula and Bolivia are loosening rules cautiously, and Peru is treating foreign investors suspiciously.

However, all of the countries are suffering from serious economic problems, leading analysts to question how attractive they'll be to foreign investors.