A bitter feud between the Honduran Army's two most influential officers is undermining Washington's efforts to make this country--long known for little but bananas, coups and corruption--a bulwark of Central American democracy.

On one side is Gen. Gustavo Alvarez, who rose in the last year from head of the military-controlled national police to commander of the armed forces.

His strength is based partly on his hard-line anticommunism and a stern military professionalism learned in Argentina, and partly on the clear endorsement of the Reagan administration and a tacit pact with Liberal Party Leader Roberto Suazo Cordova, who won the presidency in November.

On the other side is ex-colonel Leonidas Torres Arias. For six years, until last January, he was chief of the military's G-2 intelligence network, widely viewed and feared as the gray eminence of the past two military governments.

Their conflicting charges and countercharges keep pulling skeletons out of the military's closet -- murder, corruption, cronyism, repression, war-mongering -- just as Washington and the government here hope to portray Honduras as a developing democracy backed by an apolitical Army.

After Torres Arias and a few allies tried unsuccessfully to block Alvarez's early promotion to general last spring, the former colonel was forced into "diplomatic exile," but he refused to fade into the woodwork of his country's Buenos Aires embassy. On Aug. 31, he began a series of public attacks on Alvarez, publishing a full-page statement in a newspaper in Mexico, where he had taken refuge. At the heart of his case are charges that the general is leading the country toward war with Nicaragua and operating what is in effect a personal death squad to root out suspected "subversives" and eliminate opposition. These efforts, Torres Arias charges, are aimed at Alvarez's personal aggrandizement and at bringing him recognition as an anticommunist "liberator" for the region.

Torres Arias reportedly took two years worth of confidential files out of the country with him, and for a month before he was forced into exile, he occupied Alvarez's own previous post as commander of Public Security Forces, or FUSEP.

Thus while not everyone believes Torres Arias is telling the truth, few doubt that he knows what the truth is. His charges have played on very real fears among a people feeling increasingly menaced not only by the wars of their neighbors and rapidly increasing subversive attacks within the country, but also by their government's reaction to these threats. Hondurans are famous for being taciturn, with little or no desire for war, and they are accustomed to a military that has often been corrupt but rarely repressive.

Since civilian government was inaugurated after a hiatus of almost 18 years in January, a triangle of mutual support has emerged between Alvarez, Suazo Cordova and U.S. Ambassador John D. Negroponte.

As diplomatic and government sources outlined the arrangement, Alvarez, by keeping the Army under tight control, eliminates the possibility of a coup. Suazo Cordova in turn defends Alvarez's military policies. The embassy lubricates the relationship between the Army and the civilians with military and economic aid.

"I think the top leadership of this country is pretty much on the same wavelength," Negroponte said in an interview. "For those of us who are able to observe the relationships between the very top leadership in this country, there's no question Dr. Suazo is in charge."

The most frequently cited example of this -- noted in separate interviews by Negroponte, Interior Minister Oscar Mejia Arellano and Minister of the Presidency Carlos Flores -- is that Suazo has not increased the allocation for the military in the national budget over what it has been for the last three years and has said he will not do so for another two years.

But foreign aid is not included in those budget figures. In the last three years U.S. military assistance to Honduras in various forms has increased more than ten-fold, from about $3.3 million in 1980 to $31.3 million in fiscal 1982, and military construction projects are pushing that figure even higher for next year.

At first, Torres Arias' charges were dismissed by Honduran and U.S. officials as the vendetta of an embittered officer whose own record is plagued by sordid associations and allegations.

Suazo Cordova accused Torres Arias of trying "to stain the decorations of our armed forces chief with calumny and infamy."

A senior U.S. official said, "I don't think the police in Honduras are perfect. That's one issue. But to leap from that to the conclusion that Torres is trying to propagate--that Alvarez is trying to eliminate opposition--is just preposterous."

But the scandal won't go away, and the reaction of the Honduran government and the U.S. Embassy occasionally has appeared so defensive--even vindictive--that it raises more questions than it puts to rest.

In September the former intelligence chief was accused of treason and dishonorably discharged, in absentia, from the armed forces. Four-year-old allegations of his involvement in a sensational drug-and-murder case, of which a military tribunal cleared him at the time, have been dredged up in the press. It is suggested privately in diplomatic and government circles that Torres Arias has somehow "sold out to the communists" who are accused of mounting the growing campaign of violent subversion against the country. Meanwhile the U.S. State Department revoked even his U.S. tourist visa.

Yet there is concern here over his charges. "Why has the president tied his own destiny so closely to that of Alvarez? Suazo Cordova has just about made himself into Alvarez's defense lawyer," said one conservative politician. "Why is the embassy so satisfied with Alvarez that it ignores this situation of human-rights abuses denounced by Torres Arias ?"

Several newspaper editorials have asked why Torres Arias' charges and the charges against him are not investigated by the National Congress, which is what he has asked for, or even aired in the regular courts.

"In this country you resolve everything by accusing your adversary of being a communist or leftist," said a front-page editorial in the liberal daily El Tiempo (which has often suffered that fate, even at the hands of Torres Arias). "Going after a judgment for common crimes could verify a lot of things."

Dr. Ramon Custodio, head of the Honduran Human-Rights Commission, said he couldn't comment on the charges of Torres Arias' own corruption, but he noted in a newspaper column that Honduran "justice is so just that it's not only blind, it's deaf."

"Torres Arias may be a murderer and a drug dealer," said a wealthy businessman in San Pedro Sula. "But he may also be telling the truth."

Some influential civilian members of the government suggest in private that the impact of Torres Arias' accusations may be a good thing, reasoning that what weakens the Army strengthens their own hand and reduces the chance of war.

"To me, this scandal has been very satisfying," said one influential member of the government. "It has put into bold relief a question that worries many of us, which is that the country will get into a war."

Following his newspaper statement, which was also reprinted here, the ex-colonel has made a tape recording, now circulating privately here, on which he makes a specific and detailed accusation against Alvarez that many Hondurans feel could shake the government to its roots.

Alvarez "had and has under his direct command a 'Special Investigations Staff' whose chief is Capt. Alexander Hernandez," says the former intelligence chief. He goes on to cite seven specific and well-known cases of political "disappearances" and kidnapings of leftist political leaders or their relatives, which he alleges were carried out by the special unit under direct orders from Alvarez.

Military sources confirm that a Capt. Alexander Hernandez does command a unit by that name, but said they did not know its exact functions. Neighboring Nicaragua's Sandinista government also has charged, based on testimony from a prisoner accused of counterrevolutionary activity, that Hernandez is a go-between for funds to anti-Sandinista commandos operating in Honduras.

Alvarez himself has been unavailable for comment, but one spokesman for the military described any suggestion that Alvarez or anyone else in the Army is responsible for extra-legal disappearances as "absurd, absolutely absurd. Gen. Alvarez doesn't permit infractions, much less crimes, much less order them."

Although people do disappear in Honduras, their numbers do not come near to matching those in Guatemala or El Salvador. The Committee for the Defense of Human Rights in Honduras now counts only 36 Hondurans who remain "disappeared."

Many people once feared to be gone for good have since shown up at liberty. But of these, several have said privately that they were threatened with death if they talked about their experience. The few willing to take that risk tell of secret cells, torture and interrogation about guerrilla supply lines between Nicaragua and El Salvador.

According to one official with close connections to officers at all levels of the armed forces, Torres Arias' charges about human-rights abuses, more than any of his other accusations, "have raised doubts and questions."