Francis A. Luzzatto's letter {Aug. 26} makes the valid point that the Peace Corps may have become "programmatically cautious, conservative and self-satisfied."

However, the solution is not so simple as improving leadership, for people are only as good as the system in which they work. To revive imagination in the corps, we must decentralize its system of manage-ment.

In reality, there are more than 60 different Peace Corps operating in 60 host countries, each of which has unique political, economic and social systems that Peace Corps Washington cannot understand. If imagination is required to improve the effectiveness of any one of these 60 Peace Corps, it must be generated by the on-site directors, staff and volunteers -- who are in a position to understand the problems and changes occurring in the host country. Those on site must be allowed the flexibility necessary to effect needed programmatic changes.

As a volunteer in Senegal, I witnessed some of the severest droughts in that country's history, yet Peace Corps Senegal continued to operate as if it was business as usual, failing to recognize or redress the inadequacy of its programs in face of the drought; it claimed its hands were tied by Washington. As a result, many volunteers became frustrated and left (one year, eight out of nine volunteers in the health program left because of dissatisfaction with the program).

Twentieth-century totalitarian governments have taught us the faults of inflexible, centralized planning. Let's not make the same mistake with the best program America has.

KENNETH GUTSCH

Alexandria