After months of pressure from nationalists of right and left, the Mexican government has decided to cancel an agreement allowing American Protestant Bible translators to work among Mexico's Indian population.

This action is expected to have repercussions in several other Latin American countries where controversy is growing over the role of the American missionaries.

These fundamentalist Protestants are variously known as Wycliffe Bible translators or members of the Summer Institute of Linguistics. They operate throughout the continent on the basis of contracts negotiated with each country. They have worked in Mexico since 1935.

Sensitive to the fact that President Carter is a Southern Baptist, the Mexican government had downplayed the announcement for fear of provoking reactions from the White House prior to or during the visit of the Mexican president to Washington this week.

A terse communique issued last week said, referring to the institute, that while any person or association could do scientific linguistic work, the Mexican state, which is secular, could not "grant exceptional treatment to an organization engaged in spreading religion."

As a result, the more than 500 members of the SIL will have their privileges canceled, which include diplomatic type visas, tax exemption, and duty-free imports of equipment and paper. They have been given a year's notice to hand over their installations and equipment to the state. Government officials say this included their headquarters in the south of Mexico City, a sprawling compound where the SIL has offices and homes as well as a printing shop and computer facilities used to service the other Latin American countries where the Institute works.

In the southern jungle, near the Guatemalan border, the SIL runs a training camp where all linguist-missionaries take a four-month course in jungle survival before any Latin American assignment.

It is still unclear whether the Bible translators, who work in about 100 Indian communities, will have to leave Mexico altogether or may get the status given to the many foreign missionaries or anthropologists who live here.

Several months ago, Mexico SIL director John Alsop was reportedly officially warned that "it was better for the institute to leave." Today Alsop declined to give any comment during a telephone conversation.

But the Mexican decision is evidently highly political. At the heart of it lie the same troubles the SIL has been having in Peru, Brazil and Colombia: It is a mix of growing suspicion of American political activities on this continent, of pique by the Catholic Church, which is aware of increasing competition from the more zealous Protestant groups, and of more nationalist, protective policies toward Indian minorities.

In Mexico, a tenacious press campaign demanding expulsion of the SIL began about a year ago. Spearheading the drive was the influential National College of Ethnologists and Anthropologists, which began a "systematic study" of SIL's work four years ago.

In its more than 100-page study, the college denounced the "conservative, capitalist, individualist American work ethic" preached to Indians "whose values are communitarian." The Indians are taught "obedience and passivity, which has an adverse effect on their liberation movement and are discouraged in their claims for land, which are described as sins of greed," the study charged.

The SIL, the study charged, is "a political, ideological instrument of U.S. penetration," receives subsidies from the U.S. Agency for International Development and its members, it claims, have done undercover work for the CIA in Cambodia, vietnam and Guatemala.

This summer the Mexican government itself began to pressure the institute, demanding reports on activities, property, budgets and personnel, and launched an official investigation of its own.

Its findings have not been published. But according to Salomon Nahmad, director of Indigenous Education, under whose jurisdiction the SIL comes, "the institute has broken the terms of the agreement."

For example, said Nahmad, "they proselytize under the auspices of the education ministry, use its credentials to settle in communities, print the ministry's approval on their religious publications and have not prepared the textbook which they were expected to."

The government now wants "the sole responsibility for linguistics and all other aspects of indigenous work and foreign penetration," said Nahmad. "We are training 70 Mexican linguists as part of a new program."

SIL members always have denied that they proselytize, and say they only analyze the Indian language, compile dictionaries and then translate the New Testament. But they do not convert people, they say.

They say that they teach respect to the local authority and for the law, and that the concept of private property and individualism was introduced among Mexico's Indians by the state itself during the 19th century liberal reform.

Both Mexico director John Alsop and SIL founder William Cameron Townsend have insisted the institute has no association with the CIA.

Despite bitter attacks on the SIL, a number of Mexicans have said and written that they will be sorry to see it go. They say the institute has performed tasks that Mexicans were neither equipped for nor interested in doing in the past.

"If they are run out, Mexican linguists will have to leave their comfortable city offices and share the harsh and terrible life of the Indians," wrote Fernando Benitez, Mexico's foremost author on Indian life and lore last week.