It took just a few minutes of solid, frenzied gunfire for the Guatemalan Army to clear the village square at Panzos.

When the shooting stopped, bodies of children, women and men lay bleeding among the trees. Survivors, many of them wounded, had fled screaming down the sand roads. Five terror-stricken women holding babies had jumped into the nearby Polochic River and drowned.

It has become known as the "Panzos massacre," this bloodbath in a Nekchi Indian village, 80 miles northest of here on the morning of May 29. A newspaper here called it Guatemala's Mylai.

As is so often the case when armed military, unarmed civilians and mass graves are involved, casualty figures were distrusted. The government said 38 people were killed and as many were wounded. Catholic church workers in the area prepared a provisional list of 114 dead. The Red Cross was unsure.

The army had kept out their ambulances until late afternoon. By then, recalled Juan Cus, whose father had been piled, lifeless, on a truck, "They had thrown all the dead into a big hole."

Guatemala, though perennially troubled by political violence and for three decades described as "dangerously polarized," has been badly shaken by this mass killing of Indian families. Violent death usually comes in smaller numbers here, and preferably at night, when the assailants remain unidentified.

Land claims by the Indians triggered the massacre although it is only the climax to more than two years of tension, murders and evictions in the isolated provinces of Quiche and Alta Verapaz.

At stake are the lands inhabited by Kekchi and Quiche Mayan Indians for longer than they can remember. But their often communally held farms never got the titles by which Western society in the capital regulates property.

Then, a decade ago, these unappealing highlands and jungles proved to hold oil and nickel deposits. A nickel mine opened and the government brought in electricity and started building a highway.

In a country where 2 percent of the population already holds 62 percent of arable land, it was easy for wealthy people to move in and start buying up large tracts of land around the highway.

"The government made one great mistake there, it gave away or sold land titles to outsiders," said an official of the Agrarian Reform Institute. "It went to poiliticians, the rich, the military. They all grabbed what they could. There are large untouchable estates we call "the zone of the generals.'" Those new titles, he said, now made squatters of the illiterate, unsuspecting Indians.

The event at Panzos has brought tens of thousands of protestors out to rallies in Guatemala City. Students, members of religious groups, lawyers and unions shout, "cowards, assassins" in front of the government palace.

A week-long barrage of newspaper advertisements denounced the government's versions which alternately said the Indian peasants had "attacked the army garrison" - although Panzos has no military garrison - and that there had been a peasant uprising, instigated by leftist guerrillas, Fidel Castro and religious groups.

As pieced together from interviews with military spokesmen and Kekchi survivors, Panzos seems to be another clampdown on the country's Indian majority which is slowly starting to assert its rights. Over the last three years, the government has slightly eased the repression of peasant organizations, which brought bitter protests from the elite.

"The elite in Guatemala are not ordinary conservatives," a well-placed Western diplomat here commented, "they are close to neanderthals."

The week before the Monday massacre, wealthy landowners who had traditionally enjoyed government support called in the military, claiming Indian peasants were going to take over the Panzos village hall and invade lands.

The Indians wanted to discuss their land tenure problems once again with the mayor. The mayor, not an Indian, reportedly told one of the Indian leaders to come "on Monday, but come in a large group, otherwise you may be attacked."

On Monday morning, some 700 Kekchi Indians from hamlets nearby gathered on the village square, the men carrying their tools, and the women holding babies.

"We did not go to attack we would not have brought out women and children," said one of the Indian leaders, now hiding outside Panzos. "We were going to hand over a petition" to the mayor.

But instead of the mayor, the Kekchis found soldiers holed up in the town hall. There was some pushing and shoving at the door. Then the soldiers opened fire.

"The shooting came from everywhere - from the rooftops, the windows and from the houses around the square," recalled one Kekchi survivor, whose left elbow and knee were shattered by bullets.

Several embarrassed government officials have condemned the massacre. One is the brother of President Kjell Laugerud, who co-directs the land reform institute and blamed the incidents on "the landowners' greed."

Among those here who support social and economic change, there is hope that Panzos has served to dramatize the plight of the country's Mayan descendants who account for 3.5 million of Guatemala's 6.3 million population. Most of the Indians live on tiny patches of land or work in serf-like conditions on huge estates, often for 25 cents a day. According to government statistics, 80 percent of their children under five suffer malnutrition and most of the adults don't speak Spanish, let alone read or write.

But foreign development experts here have little hope that the country's small military and landed elite will tolerate much change. Gen. Romeo Lucas, who will take over the presidency on July 1, and comes from an area not far from Panzos, has promised to improve the Indians' lot.

State Department officials have said privately that Guatemala has one of the worst human rights records in this hemisphere.

"Violence had diminished somewhat in the last few years, but every month there are still 25 to 30 unexplained pocial said recently, "this does not come from the government per se, but from people in the intimidation business who are officially tolerated."

But rather than bringing a promise for change, Panzos has served to illustrate the spiral of violence in which Guatemala is caught.

Last week, a mine was thrown into an army truck, killing 17 soldiers and wounding others. The Army of the Poor, a leftist guerrillas group that has been active for more than a year, said they did it to revenge the peasants of Panzos. Long-time observers here fear that this country is still a long way from working out a way to bring social change peacefully.