Initiative and Competence. Free Enterprise, Elections, Work. Peace and Love. These are some of the catch phrases of what is generally referred to as El Salvador's extreme right wing.

Its spokesmen do not talk about coups -- although the government and the U.S. Embassy say the night has tried to mount at least three in the last year. They do not talk much about terrorism and assassination, despite the repeated coincidence that people whom they denounce as communists often end up as the bullet-riddled, tortured victims of "death squads."

The leaders of the extreme right are educated and smoothly persuasive men who assert now that the leftist oppositon coalition of politicians and guerrillas has demonstrated its inability to seize power with a single massive push, and Ronald Reagan is in the White House, they and their friends in the military will soon be in San Salvador's presidential residence.

In any case, they say, the disastrous state of the Salvadoran economy will soon undermine the current government.

While former Army major Roberto d'Aubuisson, the handsome, charismatic, and some say utterly ruthless leader of the Salvadoran right is in hiding, a soft-spoken, Oxford-accented architect named Ricardo Jimenez Castillo has emerged as its principal spokesman. He is the founder of the Peace and Work Movement and cofounder of D'Aubuisson's Broad National Front, the right's answer to the lefist coalition.

In a recent interview, Jimenez Castillo outlined the scenario that he and his allies believe will bring them to power.

He predicted that the current military-Christian Democratic coalition government will be unable to handle El Salvador's economic problems. With the guerrilla threat at least temporarily diminished, he said, the civilian politicians in the government "cannot make anyone responsible for their failure but themselves. Government is the worst administrator. The Christian Democrats will fall by their own weight."

U.S. diplomats here believe that if the right comes to power the results would be disastrous. A repressive right-wing government in the old style would force new recruits into the ranks of the left from the masses of moderate and apathetic Salvadorans sickened by the country's continuing violence, these diplomats say.

"There is just about no way the left can win now," said one U.S. official recently "unless the D'Aubuissons take over."

Jimenez Castillo and his friends, however, many of whom operate openly here, exude a quiet confidence. They believe that many of the U.S. diplomats here now are targeted for removal by the Regan administration and will not be around much longer to stand in the way of a rightist takeover.

"The government cannot feel secure because they are responsible for the economic chaos that exists here," Jimenez Castillo said last week. "The government is no one and someone at the same time. It can easily return to the hands of those who can efficiently manage banking and external commerce."

Whether the cause is government incompetence or, as most people believe, the chronic violence from all sides that plagues the nation, the economy is a wreck.

Even in the middle of the guerrilla offensive earlier this month, Salvadoran officials were repeatedly pleading not so much for arms as for economic aid. About $82 million from the United States last year and another $65 million just signed last week helped, as did $47 million from the Inter-American Development Bank.

A key loan from the International Monetary Fund is still being negotiated. It could be as little as $25 million or as much as $350 million, and would provide for structural reform in all aspects of the economy and make the government's future "considerably rosier," as one North American anayst put it.

"But that will depend on politics in Washington, on whether the government can put together a satisfactory proposal and on peace in out time," the analyst added.

According to careful estimates by outside observers, the gross domestic product of El Salvador shrank 1.2 percent in 1979 and probably dropped anywhere from 8 to 10 percent in 1980. This year will be worse.

Unemployment is at least 30 percent nationwide and as much as 60 percent in the construction industry.

Although principal exports are agricultural, the growth of the 1970s was built primarily on manufacturing. In this tremendously overcrowded country industrialization is becoming virtually the only way to support the population. i

"El Salvador better make it as a Taiwan," said one foreign economist, "because it is not going to make it as Kansas."

But investment in manufacturing dropped 16 percent in 1979, and nose-dived 30.7 percent in 1980.

Following the first phase of an agrarian reform program that collectivized hundreds of the country's largest farms last March, agricultural production has been reoriented at consideralbe cost to foreign exchange earnings.

Meanwhile, credit from foreign banks and foreign suppliers virtually has dried up and the nationalized banks have cut their loans to the private sector by 9 percent while increasing credit to the government by 200 percent, according to official statistics.

"The violence colors everything," said one North American economic analyst in El Salvador. "The only growth industries are the government, which among other things has doubled its armed forces and security budget, the people who build walls [around the property of the rich] and guards."

Jimenez Castillo does not blame the violence, however. He blames the government and the social reforms it has instituted with the backing of the Carter administration. He thinks the Reagan administration will agree with him.

"Since Reagan's policy and [Christian Democratic President Jose Napoleon] Duarte's policy are almost totally antagonistic," said Jimenez Castillo, "there will probably be pressure on the junta to retrack themselves away from the policy they've been following."

This "retracking," said Jimenez Castillo, "would create antagonisms [inside the government] and stimulate those who have been keeping themselves in the shadows."

Many Salvadoran conservatives go so far as to call the Christian Democrats "cryptocommunists" and to advocate the complete extermination of the left at whatever cost.

Jimenez Castillo is much smoother and suggests "a peaceful realignment with a constitutional democracy."

Before that could happen, the government retracking would have to take place and there is no telling whether those rightist leaders who emerged from the shadows would share Jimenez Castillo's belief in constitutional democracy.

In the old days to which many conservative would like to return, fair elections, peaceful change and constitutional democracy were always espoused but never allowed.