It looks deceptively like a holiday camp, with rows of white stucco houses, palms and mango trees wedged between the Balsas River and the Pacific beach.

Yet just five minutes from the village, a massive project in under way which the old-timers here call the work of the devil and planners in Mexico City regard as the new face of Mexico in the 21st century.

Lazaro Cardenas, not long ago a community of just 3,000 people who worked their ancestral land, has been chosen as a focal point for Mexico's oil-financed industrial boom.The region, as a whole, about 200 miles northwest of Acapulco on the Pacific coast, is designed to absorb a portion of the 40-odd million Mexicans expected to be added to the current 69 million population by the end of this century. Lazaro Cardenas and a cluster of outlying villages are being prepared to support more than 800,000 people by 1990.

Among the intriguing issues raised by the birth of this new city is the role of the state which, as the recipient of oil income, is bound to take the lead in shaping development.

Lazaro Cardenas also provides one of the first clear examples of how the government intends to spend at least part of the oil funds to attain the greater measure of social justice it professes to seek.

Having chosen rapid industrialization as its route to development, Mexico is expected to shift even faster from a largely rural to an urban society.

But to spread opportunity and attempt some control over the chaotic growth of the main cities, the government is allotting vast resources to four major "development poles."

Lazaro Cardenas is one. A second, also on the Pacific coast, is Salina Cruz. The other two, both on the Gulf of Mexico, are the ports of Tampico and Coatzacoalcos.

While it is not the only provincial Mexican town facing certain metamorphosis in the coming years, Lazaro Cardenas -- starting virtually from scratch -- has attracted particular interest because it already is a test case of the perils and benefits of sudden bursts of capital-intensive development.

The story of the town-to-be really began almost half a century ago when Gen. Lazaro Cardenas, born not far from here, dreamed of building a steel mill to develop vast iron ore deposits, 15 miles from the village now named after him.

Although Cardenas became president of Mexico and gained fame by expropriating American and British oil companies, he was never able to build the mill.

Now a stell mill stands as the undisputed manor of the town: the first phase of construction of a $1 billion state-owned steel complex was recently finished on the site of an old coconut grove.

A new $2 billion expansion program is about to start and is to turn the mill, called Sicartsa into one of the biggest steel works in Latin America, with 18,000 employes producing 10 million tons of steel per year by 1990.

But Sicartsa is not the only pivot of development. Lazaro Cardenas, with the deepest bay in Mexico, is to become the country's main Pacific harbor. A sizeable delegation of Japanese is here to discuss construction.

Not hampered by an autonomous congress or by environmental, wild life or other lobbyists, the government is moving like a steamroller. Across the bay, about 7,000 men have started building a state-owned fertilizer plant. Pemex, the state oil company, is constructing a gas pipeline as well as moving all its west coast oil, fuel oil and gasoline deposits here from Acapulco. The Navy is following suit and moving its base here from Acapulco Bay. A new railroad, crossing the Sierro Madre mountains via 17 tunnels and bridges, is opening next month.

This onslaught has inevitably perplexed the local folk who until a few years ago lived in quiet isolation, with a few sandy tracks for roads and no electricity or telephones. These descendants of the Tarasco Indians watched armies of nomad workmen move in, followed by bars and prostitutes. There were shootouts and fights as their daughters and wives were accosted by the outsiders.

As the technicians moved ahead with the steel works, the government agencies in charge of urbanization lagged behind. Less than two years ago, for example, the village had turned into a vast shantytown, built by workers but expanded by fortune seekers, racketeers or the jobless and their families.

"The alcoholism, crime and open sewers were unbearable," said an engineer here during the early construction days. "I've only just now brought my family here."

Slowly Lazaro Cardenas is beginning to look like the "model" new town it was meant to be. It is, as a local economist described it, "Mexico's most perfect example of state capitalism. And as the state's economic power grows with oil money, there will be more of this."

At the moment this fast-growing settlement of 16,000 people is like a company town, almost wholly in the hands of the authorities who spent $40 million on urbanization and services so far. The government has built white rows of workers' houses, more elegant homes for engineers, clinics, schools and even a supermarket to keep locally inflated prices down.

Broad asphalted avenues have pushed away the jungle, but palms and tropical fruit trees are now being planted alongside them to camouflage the hard edges.

Although the area looks like paradise compared to the old industrial towns of Europe or the United States, the government is learning that creating new industrial enclaves is not enough.

"The villagers are living through a kind of future shock," said a federally employed sociologist. "They have left their land and their crafts and turned into shopkeepers of shoddy wares. They think they will make money but their adjustment problems are pretty serious."

Many of the newcomers, who are moving here from all over Mexico, have trouble staying.

"At first most of our employes would leave in less than one year," said Teodoro Arriaga, who runs public relations and social programs for the Sicartsa plant. "Now we have a staff turnover of 14 percent, which is still very high."

Reasons given for the turnover are the hot climate or education problems for children, but planners here feel it is the lack of social activity and the absence of a sense of community, spirit and fun Mexicans are so accustomed to.

With a "social action" budget of $400,000, Arriaga has been organizing classes ranging from crafts to folk dancing and brings singers, dancers and theater groups in from Mexico City.

Among the newcomers are many happy to take a little boredom in exchange for the chaos and pollution of Mexico City or Monterrey where they have lived before.

Growing pains for the Lazaro Cardenas region are far from over. This is evident in the village Las Guacamayas five miles from here, which has jumped from a few thousand to 18,000 inhabitants. Most of them are squatters living in self-made one-room shacks without water or light.

"There is no doubt about it: our greatest challenge is for industrial development to keep pace with social and cultural growth," said one of the many still idealistic federal planners here. "We create factories but also human deserts and slums. We are not publicizing Lazardo Cardenas. With high unemployment in Mexico, people are coming much faster than we thought."