On Aug. 7 in Guatemala City, Daniel Ortega signed a peace treaty in which he pledged, among other things, pluralism and democracy in Nicaragua. Eight days later in Managua, Ortega's police broke up a human rights demonstration held to test that pledge. The nation was protected from pluralism by cattle prods, batons and attack dogs. And just to be sure, Lino Hernandez, leader of Nicaragua's Permanent Human Rights Commission, and Alberto Saborio, head of the Nicaraguan Bar Association, were thrown in jail.

The Permanent Human Rights Commission was established in Somoza's day, at which time Hernandez defended Sandinistas and other government opponents. Inconveniently for the Sandinistas, Hernandez carried on his work after the new dictators took over. He has been representing the wives and families of Nicaragua's 6,000 to 8,000 political prisoners.

To arrest such a man is a significant signal that whatever they sign in Guatemala City and whatever they say on "Nightline," the Sandinistas rule in Managua. The signal did not transmit well here. The story made page 15 of The Washington Post and page 4 of The New York Times.

On the whole, the arrest served the Sandinistas well. It raised no protest from Sandinista sympathizers in the United States. It intimidated the local opposition. It gave the Sandinistas the occasion for performing that communist ritual of making a gift of human beings: on Sept. 8, Ortega turned Hernandez and Saborio over to a visiting American senator (Tom Harkin), who declared his "deep appreciation" to his hosts for their generosity.

Best of all, breaking up the opposition demonstration lowered the standard of what constitutes good democratic behavior on the part of the Sandinistas. If they merely refrain from breaking up the next political rally in Managua, that will be hailed as a significant sign of moderation.

Hailed by whom? Not just by anticontra Democrats, but, amazingly, by the Reagan administration, now utterly adrift on Nicaragua policy. "Are they going to continue breaking up demonstrations with clubs and cattle prods, or are they going to allow freedom of assembly? Will La Prensa be allowed to resume publishing? Will political prisoners be released?" That litmus test of Sandinista behavior came from a White House official.

Well, say that the White House gets satisfactory answers (no, yes, yes, yes) to these questions. The administration is setting itself up for a policy disaster by letting contra aid hinge on such Sandinista gestures. If the Sandinistas do open a newspaper, if they do allow a Catholic radio station to return to the air, if they do release some political prisoners -- so what? That in no way proves that they are prepared to carry through with the promises to democratize that they signed in Guatemala. It doesn't even prove that they are prepared to retain this narrow and temporary restoration of rights beyond the day when the contras finally wither away from lack of support. It proves only that Ortega is tactically attuned enough to know that, in the weeks before the U.S. Congress decides contra aid, it pays to play nice.

After all, the conflict in Nicaragua is not about rights. It is about power. It is not about whether a political rally or a nongovernment newspaper will be permitted. It is about whether a Leninist regime will monopolize power and dispense these rights. Because so long as it dispenses the rights, they will not be safe (and neither will Nicaragua's neighbors). The Sandinistas promised similar rights to the Organization of American States in 1979, and granted just enough of them -- a moderately free press and a formally open political system -- for just long enough to keep American aid flowing, to strip their democratic allies of all power and to consolidate their own. Then they systematically abolished these rights.

If Ortega is smart -- and he is -- he will allow La Prensa to reopen. He will allow a few opposition parties to hold rallies. He will offer a freed prisoner or two as a party favor to a passing political pilgrim from the United States. With support from congressional liberals, he will then demand in return for these eminently revocable moves (but not for any concessions having to do with political power) that the United States reciprocate by cutting off the contras. Democrats will oblige. And the administration has so maneuvered itself that it too may have to say yes, no longer knowing how to explain why the United States must say no.

President Reagan now says that his goal is "genuine democracy" in Nicaragua, but it may be too late. The depth of the administration debacle will be apparent when Ortega is confirmed in power for good and the Democrats, having finally won the Nicaragua debate, escape the consequences of their victory. Ten years from now, when Oscar Arias takes his vanity and his Nobel Peace Prize into Miami exile, Americans will ask who lost Central America. The answer will be that the Democrats thought up the idea, but they never could have swung it without Ronald Reagan.