The people in the United States are going to hear a lot about the Argentine from old Hollings," Sen. Ernest Hollings (D-S.C.) told a roomful of applauding resident American businessmen here last week.

"They're going to hear about [Argentina's] free government," Hollings said in his deep Southern drawl. The Carter Administration, he said, has done "too much moralizing, and I think they're making a mistake applying it to the Argentine."

The businessmen, members of the American Chamber of Commerce here who are among the last holdouts against a long exodus of foreigners intimidated, by terroists, could not have agreed more.

Like the Argentine military junts, they feel that many of Argentina's current troubles - including an international reputation for institutionalized repression, political imprisonment and torture that has brought both verbal and economic sanctions - are the result of propaganda disreminated by people who either want the government to fall or don't know the reality of the Argentine situation.

In the past month, however, Argentina has begun its own tactical offensive to change that image. The junta has received a series of offical American visitors cordially, encouraging them to see a different kind of reality here and tell about it back home.

Hollings - who came here on an Air Force jet during a four-country trip with Sen. William Scott (R-Va.), their wives and a 10-member staff encourage - was one of a dozen American legislators and other officers to [WORD ILLEGIBLE] to Argentina this month in what one Argentine newspaper column dubbed an "exercise in human-wave diplomacy." The visitors included members of the House subcommittee on inter-American affairs on a tour to guage Latin American support for the new Panama Canal treaty.

From the State Department came Patricia Derian, human-rights coordinator, and Terence Todman, Assistant secretary for Latin America. Their visits came at a time when the Carter Administration appeared eager to men some of the diplomatic fences damaged by its outspoken human-rights policy.

Relations with Argentina deteriorated in February, when Carter recommended that military assistance to the government of Gen. Jorge Rafael Videla, took over as president after a March 1976 coup, be slashed to a minimal $15 million. Argentina, along with five other indignant Latin American countries similarly accused of human-rights violations, subsequently refused all American military aid.

In June, Congress went one step further than Carter, with a vote to cut Argentina from its 1977-78 foreign aid bill.

Argentina, along with most of the rest of Latin America, bridled at U.S. criticism and accused Carter of interference in its internal affairs and refused to recognize that harsh methods are necessary to combat its internal threat from leftists terrorists.

In an attempt to smooth some ruffled Argentine feathers, Carter recently praised the Argentine governments' announcement that it would free 342 political prisoners. Todman, at a Buenos Aires press conference, said that the U.S. government is trying to maintain a "direct contact with [Argentine] reality" and noted that the human-rights situation here seemed improved.

Some of the junta's happiest moments came with the strong statements by congressional visitors about the moral judgments of Carter and some congressmen had been misdirected.

To the unconcealed delight of the government, a majority of the congressional visitors said they not only were satisfied with the way the junta is handling things here, but were surprised at the human-rights agitation in the United States.

"I think that propaganda distributed in many countries against Argentina distorts the country's real image," said Foreign Minister Oscar Montes after meeting with Hollings and Scott.

"That is why they were so surprised when they saw" the situation here.

"I expected to see tanks in the street," exclaimed Rep. Eligio De La Garza (D-Tex.), a subcommittee member, as quoted on the front page of La Razon, a Buenos Aires newspaper. "I expected oppressed people without civil rights, but I have found something completely different."

Echoing Montes, De la Garza attributed the misimpression to the press. "I wish each member of Congress could come here and see the truth," he said.

The Argentine "truth" was presented to the legislators in interviews with President Videla, Montes and the country's economy and defense ministers.

All the visitors were given ample chance, through guided tours, to enjoy the Paris-like delights of Buenos Aires - a sophisticated, beauty-filled city whose daily life has remained remarkably unaffected by the violence that has terrorized many of its residents.

The treatment given the House and Senate delegations was somewhat different from that given other official U.S. visitors - including Rep. Robert Drinan (D-Mass.), whose trip here last fall as a member of an Amnesty International team investigating alleged human-rights violations was marked by frequent official intimidation, including surveillance of Drinan and the arrest and interrogation of some of his Argentine contacts.

While the number of unexplained disappearances increases here daily, and political parties and labor unions continue to be prohibited from organizing, the government has said it is beginning a National Reorganization plan aimed at setting a timetable for return to civilian rule some time after 1980.

Not all American legislators feel that their government should be allowed to comment on that process.

The question of human rights, subcommittee chairman Gus Yatron (D-Pa.) reminded Argentine journalists, "was at the center of debate in the Congress on the prohibition against military assistance and sales to Argentina."

Yatron said: "Many of us here today, as well as others of out colleagues, strongly oppose this measure. I continue in my conviction that this action was ill-considered. Unfortunately, many were swayed by the human-rights argument. If this action is to be reversed in the future, Argentina must make a greater effort to publicize the strides which have been taken toward a more stable and open society."