D.C. Mayor Marion Barry, apparently backing away from an embroiled dispute among Hispanic community leaders over who will run this summer's Hispanic Festival, has issued a warning: solve the dispute or risk losing city support for the popular summer festival.

The warning, issued late Wednesday through press aide John C. White, represents an about-face for the mayor, who issued a statement last Friday that was generally seen as one of support for one of two factions in the Hispanic community who say they are the rightfully elected organizers of this year's festival.

"It was never my intent to choose sides in a community dispute," Barry said in his statement Wednesday. "However, I believe that an orderly democratic process is the best way to choose community leaders as well as public officials.

" . . . Unless we can get that kind of unity and agreement within the Hispanic community it might be necessary for the District government to withhold support from future Hispanic-American festivals."

White said Barry could decide to withdraw city support of the festival as early as this summer if the dispute is not settled. The city provides services, such as police protection and trash pickup, to the festival.

At issue is an election that was held among three local businessmen Dec. 17 to decide who would be president of this summer's festival, which has drawn as many as 125,000 people in past years. Jose Sueiro, the publisher of El Latino community newspaper, defeated building contractor Arturo Griffits and radio station owner Israel Lopez.

Lopez and Griffits immediately protested the results of the election, saying Sueiro had broken an election rule prohibiting the busing of voters to the polls.

The past president of the festival, Eduardo Perdomo, and his executive committee upheld the protest and set a new election date. Griffits was elected in the second vote, which was held Saturday.

Sueiro, supported by a majority of other past presidents, said there was no provision in the festival bylaws that allows the committee to nullify the election. He has continued to make plans for the festival.

On Friday, the night before the second election was held, Barry issued a news release recognizing the Dec. 17 election and vowing that "the District government will proceed to work with the duly elected president."

Perdomo said he sent Barry a letter on Tuesday informing him of the winner of the second election and telling him that he and other election organizers could not "believe he was taking sides" in the dispute.

But White said Barry's second statement Wednesday night was not in response to Perdomo's letter.

Griffits reacted favorably to Barry's new position. "Our slate has always been for unity," he said.

Sueiro could not be reached for comment.

If Barry does make good on his threat to cut off financing to the festival, Perdomo said Griffits and his supporters would then probably ask community members to donate money to pay for the festival.