Is it possible that Nicaragua's Marxist military junta is willing to dismantle its dictatorship and submit itself to criticism, organized opposition and periodic free elections? If defeated in those elections, would it relinquish power? No Marxist government of any country has ever done so. Yet Nicaragua's rulers say they are ready to meet the terms of the peace plan adopted at Esquipulas, Guatemala, by the presidents of the five Central American nations.

Do they mean it or are they following Lenin's recommended tactic of ''two steps forward, one step back,'' seeking to eliminate the contras with concessions that can be repealed later?

The peace plan calls for a cease-fire in internal wars of the region, full freedom of expression, and full political freedom -- including free elections to be held in 1990.

The government of Nicaragua accepted the plan and has announced several steps to comply with its terms. It is said that Nicaragua's opposition newspaper, La Prensa, which the Sandinistas first submitted to heavy prior censorship then shut down, will be permitted to operate freely. Radio Catolica and other independent radio stations also shut down by the government will be permitted to function, it is said.

These could be significant steps. And the government of Nicaragua has indicated additional liberalization should be expected between now and Nov. 7, the deadline for compliance with the plan.

Do these steps mark the first democratic transition of a Marxist government? It is difficult to be certain. While announcing that the Nicaraguan government will no longer censor any media, Interior Minister Tomas Borge noted that the state of emergency remains in effect and that it will be the editor's responsibility not to publish anything that threatens the prospects for peace or tends to destabilize the Nicaraguan economy.

If Nicaragua's rulers this time keep their promises for democracy, then there will be democracy, peace and development in Central America. It is as simple as that. A democratic Nicaragua would not continue to militarize Central America, nor arm guerrillas in El Salvador and Colombia, nor invite thousands of troops and advisers from Libya, the PLO and elsewhere in the Soviet bloc, nor spend its resources building a 10,000-foot runway to accommodate heavy bombers. Costa Rica, El Salvador, Honduras, Colombia, the United States would not need to fear the policies of a democratic Nicaragua. There would be no stream of refugees to burden the economies and disrupt the societies of neighbors.

It would be marvelous if the area's plans were to bring democracy to Nicaragua. But many in Central America and Washington fear it will have very different consequences.

They worry that the junta will liberalize its practices just enough to ensure the end of support for the contras, then reinstitute repression once the resistance forces have been dismantled. There is also widespread concern that Costa Rican and congressional liberals will lower the standards for democracy to permit the Sandinistas a ''passing grade.''

Sen. Tom Harkin (D-Iowa) shocked his colleagues by urging Violetta Chamorro -- owner of La Prensa -- to agree to ''moderate censorship'' as a condition for reopening the newspaper. Sen. Christopher Dodd (D-Conn.) has already begun to advocate ''flexible'' standards for judging Sandinista compliance, and U.S. friends of the Sandinistas have recently suggested that it is excessive for the Reagan administration to insist on ''complete democratization'' of Nicaragua. Fears that standards of democracy will be stretched to cover Sandinista conduct were heightened when Costa Rica's President Oscar Arias, in his speech on Capitol Hill, advocated flexibility in judging compliance.

In Costa Rica, the man whom Arias narrowly defeated in the last presidential election charged that ''more and more, the peace plan seems designed to disarm and dismantle the Nicaraguan resistance forces.'' Reports circulating in Washington suggest this may be the case, at least in part. It is known that the ''right'' plan was leaked to the Sandinistas five days before other governments in the region received it, and that revisions were made to take account of Sandinista criticism. Reports also have it that Dodd and Democratic adviser Col. Edward King made significant contributions to the Arias plan.

Arias' clear opposition to U.S. funding for the contras mired the plan -- and Costa Rica -- still more deeply in U.S. partisan politics on the side of congressional liberals, and aroused real resentment within the administration and among those in Congress who for seven years have led the fight to secure some $5 billion in U.S. assistance for Central America.

The peace plan has involved both Arias and El Salvador's Napoleon Duarte in a dangerous game with Republicans as well as the Sandinistas. Rep. Jack Kemp (R-N.Y.) made this clear when he noted after Arias' speech that ''it will be very difficult to get assistance to governments in Central America -- particularly Costa Rica -- if there is a lobbying effort by President Arias against U.S. assistance to the freedom fighters in Nicaragua.''

Two things are very badly needed at this stage: Some relatively clear criteria and bipartisan agreement on what constitutes democratization, and some bipartisan agreement about what will happen if the commanders of Nicaragua's revolution once again renege on their promises of democracy.