The political situation here has changed dramatically in recent months after almost five years of harsh authoritarian military rule.

President Augusto Pinochet, whose name has become associated abroad with total suppression of political liberties and brutal repression of human rights, is clearly on the defensive as a result of internal and external pressures - not the least of which is the U.S. investigation into the 1978 assassination of exiled Chilean diplomat Orlando Letelier.

These pressures have already forced Pinochet to relax his grip on the country and to consider an end to the military dictatorship that he had headed since 1973, when he led the overthrow of leftist president Salvador Allende.

The question is no longer whether the military will leave power but when and under what circumstances. Last January, Gen. Pinochet said he could see no reason to hold another election in Chile for 10 years and added that the military had no intention of leaving power until 1980 or 1991.

By March, Pinochet had cut nine years off his timetable for when the next election would be held and six of seven years off his schedule for returning Chile to civilian rule. Pinochet announced that he would have a proposed new constitution written by the government ready by the end of this year, that there will be a plebiscite to approve or disapprove the document next year and a return to an elected government here by 1984 or 1985.

Most observers here believe that the deaths of Pinochet's timetable for phasing our military rule and his ideas for the kind of civilian government he would like afterwards are less important than the fact that he felt it necessary to discuss the subject in the coutext of other liberalization measures and concessions to foreign critics that have perceptibly changed the atmosphere here.

"The fundamental shift that has occurred is that it is now worthwhile to talk about what the future might look like," said one diplomatic observer. "It's possible that this change in ambiance will be ephemeral. But, at the moment, the Christian Democrats and the other opposition parties are riding high."

A Chilean lawyer who is a leader of a centrist political party - all parties are still officially outlawed - was both more cautious and more optimistic during a recent interview.

"At this time, there isn't much repression because of international pressure. But we believe that Pinochet doesn't really want to return to democracy and that the repression could return. The Letelier case is very serious for the government and will have an important effect on what happens," he said.

Since the United States has not yet charged any Chilean former secret police officers with a role in the political murder and the evidence against them has not yet been made public, the lawyer said, "it is impossible to say exactly what is going to happen.

But I have the most profound belief that we will return to democracy because, really, this ia a democratic country. In 1973, after the coup, I was optimistic in the long term. Now, I am optimistic in the shorter term."

Most observers here seem to believe that the 1973 coup was welcomed by the vast majority of people here after the last year of economic and political chaos under the Allende regime. But most Chileans have never considered a military solution permanent.

It has been viewed as an interlude - less agreeable to some than to other - that would eventually end. The beginning of the end started last January, according to most observers, and the question that could be answered within the next several months is whether civilian government will be restored in six or seven years, as Pinochet has said, or sooner, as many people here now think.

At the same time, the government has enough support and power to clamp a temporary lid on the liberalization that has already occured if Chile's unions, political parties and leftists reassert themselves too quickly or try to provoke a direct confrontation.

The government, for example, broke up the first May Day labor demonstrations since the coup last month. But, significantly, there was little police violence and all of those arrested were allowed to go home within hours.

The hunger strike that ended last week did not achieve its primary objective of getting the government to admit that more than 600 leftists have disappeared, probably at the hands of the secret police, since 1973, but for the first time the issue was given prominent coverage in newspapers - which are closely watched by the government.

This weekend, the government announced that it will allow the U.N. Commission on Human Rights to visit Chile later this year.

"I don't think that Chile is going to take as long to return to democracy as Pinochet and some of those around him wish," said another diplomat. "But the situation is delicate. Things are vastly improved but the bottom line is that there's nothing to prevent the government from going back. There hasn't been an institutional leap. Most of the generals haven't seen the light."

What they have seen, apparently, is that Chile's worldwide reputation as a gross violator of human rights has severely weakened the country diplomatically and militarily. Chile no longer receives arms aid from the United States and has obtained little diplomatic support for its border disputes with neighboring Argentina and Bolivia.

The generals also though they saw an attempt by Pinochet last January to turn the results of a plebiscite on his rule - which netted him 75 percent of the vote - into a means of personalizing the regime. It is said that the military sensed that Pinochet has bored designs of converting the junta with power shared by the army, air force, navy and national police - into a one-man dictatorship.

Opposition to Pinochet, led by air force commandant Gen. Gustave Leigh, began to surface. Leigh began to talk about a return to democracy as a way of countering Pinochet's apparent grab for power, according to many observers.

Then came the U.S. investigations into the Letelier murder and a continuing stream of allegations that it was carried out by the secret police, known here as DINA, at the behest of Gen. Manuel Contreras, a close confidant of Pinochet's who headed the organization.

Supporters and opponents of the military agree that Pinochet has already been hurt by the revelations from the Letelier investigation and the intense international scrutiny and pressure to improve the human rights situation here.

The series of liberalization measures announced by the government so far - an end to the state of siege, a political amnesty, appointment of a majority civilian Cabinet and the speeded-up timetable for the constitution - are seen here as tactical concessions to world opinion.

Many opponents of the junta believe that Pinochet had no intention of seriously beginning the transition to real democracy but that the liberalization measures, coupled with continuing international pressure, have taken on a life of their own.

The country's largest political party, the Christian Democrats, has been working with two smaller parties to write a constitution that could serve as an alternative to the government effort, which is based on principles that would give interest groups - rather than polical parties - represenation in a new legislature.

A group of more conservative lawyers is also known to be working on a constitution while a source close to the absolutely illegal Communist Party said that a working group has been formed to consider which of the conservative economic policies implemented by the government the party could support afer a return to democracy.

The likelihood of the military allowing the Communists to become legal again, even after some form of democratic government is restored, is not considered to be very great, however.

The real unknown is the outcome of the Letelier affair. Many people here believe a large number of Chileans, including some military, could not stomach the idea taht DINA carried out a political assassination and many people would find it hard to believe that Pinochet did not know about it.

There is intense debate over whether Pinochet could continue as president in the wake of clear evidence that his old confidant Contreras was involved.At a minimum, it is thought that the return to democracy would be hastened if the junta is discredited by U.S. indictments.