- Fierce battles continued today between Sandinista guerrillas and Naational Guard troops as five South American nations announced a diplomatic effort to try to resolve the Nicaraguan civil strife and keep it from spreading to other countries in the hemisphere.

Meanwhile, the Sandinistas appeared to remain in control of Leon, Nicaragua's second largest city, although government troops moved to clear a roadblock the guerrillas placed on the main road leading into the city.

Reporters traveling to Masaya, 20 miles south of Managua, said most of that city was in guerrilla hands, with heavy fighting around the National Guard garrison in the center of town.

By late afternoon, however, a Guard contingent of approximately 250 troops, with at least one Sherman tank and several armored vehicles, arrived within a mile of Masaya in preparation for a counterattack.

Less than 10 miles southeast of Managua on the country's main southern highway, the guerrillas set up a roadblock. It is their closest approach yet to the capital.

Members of the Andean Pact, a five-nation economic group including Venezuela, Colombia, Ecuador, Peru and Bolivia, announced today that they will send amissaries to Costa Rica and Nicaragua during the weekend.

It is the first diplomatic attempt to bring peace to Nicaragua since the United States, Guatemala and the Dominican Republic failed in a mediation effort last fall after an outbreak of civil war in September.

In simultaneous news conferences in their respective countries, the Andean Pact foreign ministers indicated they were prepared to lend military assistance to Costa Rica, should it request aid for self-defense. The Sandinista guerrillas launched their attack last week from Costa Rica, and there is some fear there that Nicaragua will launch reprisals.

In Panama, former head of state Gen. Omar Torrijos accused Nicaraguan President Anastasio Somoza of trying to "blackmail" his country into withholding support for the guerrillas by threatening passage of Panama Canal treaty legislation in the U.S. House of Representatives.

In his first public statement on the subject since Nicaraguan officials testified before the House last week that Panama had supplied arms to the Sandinistas, Torrihos reportedly told a gathering in the Panamanian town of Chaepo, 60 miles from the capital, that Somoza is "a mental case."

He said that on a number of recent occasions Somoza sent emissaries to tell him to stay out of Nicaraguan affairs or Somoza's friends in Congress would kill the treaties. Torrijos apparently did not deny supporting the Sandinistas, but he said he did not think the evidence presented to Congress deserved consideration. He called Somoza's belief "that he can influence them an insult to the North American legislators."

Torrijos, however, denied recent rebel charges that U.S. transport planes carried supplies to the National Guard from the Panama Canal Zone.

"The U.S. has a very good nose for understanding that it is not convenient to send aid to Somoza now," Torrijos reportedly said.

Substantive news of many specific battle zones continued to be scarce here. Radio stations are operating under strict censorship and telephone links to many areas outside Managua have been cut.

La Prensa, the opposition newspaper, failed to publish for the second day today as all but two front-page stories - one about Pope John Paul II and the other about the Andean Pact announcement - were censored. Editors said they would not attempt to publish again until at least Monday.

The editors also said that a U.S. Embassy official went to the central jail last night and talked to editorial board member Edmundo Jarquin, a prominent local economist and opposition political strategist who was arrested Thursday morning. They said they had appealed for U.S. intervention in the case. In Washington, a State Department spokesman expressed official "concern" over Jarquin's arrest.

Radio news consists almost entirely of government announcements and appeals to patriotism. They regularly laud the "high morale" of the National Guard and denounced the "international brigade of Sandino communists" for destroying the peace here. According to one radio announcement today, Sandinista military commander Eden Pastora is known to be in Costa Rica "spending all the money from his bank robberies in Nicaragua."

Although a National Guard communique claimed "total government control" through the country, it was clear from even the limited amount of investigation foreign journalistts were able to do that a number of areas are under Sandinista control or currently contested.

Nicaragua's five or six largest cities, all with populations of less than 100,000 except for Managua, are located in a narrow band close to the Pacific Coast and are reachable but only by one, or at the most two, highways. Both the Guard and the guerrillas make frequent use of roadblocks, and there are often a series of alternating government and Sandinista barricades outside a city.

Both groups are usually cordial to visitors, but while the Sandinistas normally let journalists pass, the Guard generally does not. With most other communication severed, the approximately 50 foreign reporters regularly begin their days at 6 a.m.

Groups of at least two rental cars set off in various directions from the capital. Since virtually every city along the coast is reachable within an hour or two, correspondents meet back at the hotel at nightfall, just before curfew, to swap accounts of what they have seen and heard.

The roads are narrow and almost totally deserted. The eerie silence is broken only occasionally by the drone of a National Guard plane or cows along the sides. Hilly curves often hide deeply dug trenches and surprise roadblocks that bring the cars to a screeching halt, always unnerving because it means a number of government or guerrilla guns pointed directly at the car.

As National Guard troops gathered late this afternoon on the road outside Masaya, civilian residents, who often seem to have a sixth sense about when the troops will arrive and the battle and bombing begin, started to filter out to the small neighboring village of Nindiri. The Sandinistas had already been to the village this morning and burned the small National Guard post, abandoned two days ago. The townspeople pressed a reporter's car into service to carry bags of dried beans to the refugee center at the high school.

At the center, refugee families seemed close to hysteria. They nervously shouted at a reporter to tell U.S. officials to stop sending the "bombs and airplanes" to the National Guard. Masaya was strafed and rocketed by the Guard several days ago.

"The Sandinistas have been our defenders for 45 years," said one middle-aged woman. "They're not the ones with the airplanes. They are as defenseless as we are."

Edgar Hernandez, a 45-year-old road crew supervisor, told a reporter, "you make sure you tell people . . . this is the most important thing . . . we are not communists. Go ahead and use my name, they're killing everyone anyway."

One big question is why the National Guard, with superior weaponry, including tanks and aircraft, has had such difficulty in recapturing occupied cities - in some cases barely seeming to try.

Some informed observers speculate that the continuing battle along the Costa Rican border to the south has taken the bulk of National Guard manpower and weapons. At the same time, rain and fog have restricted Guard air attacks.