The outstretched hands of the U.S. Agency for International Development are everywhere in this shell-shocked city.

Less than six weeks after Berlin was laid waste by government rockets and guerrilla torches, the red, white and blue AID project signs--tidily painted symbols of the Americanization of the war--mark it as a new model of Washington's efforts to set things straight in El Salvador.

The United States and the government it backs in this country are planning what they hope will be a decisive campaign of military and civic action here in Usulutan province and nearby San Vincente province. Although Berlin is not part of the grand strategy, which probably will not begin for several more weeks or possibly months, its reconstruction is clearly intended to show right away what Washington can do when it decides to do good.

Mayor Santiago Yazbek is clearly pleased with the latest turn of events. He expects $3 million to be pumped into this town of, at most, 40,000 people, during the next few months. The American ambassador flew in by helicopter last week (landing in the cemetery) to pay his respects, and even before that an influential member of the U.S. Congress had dropped by to see what had happened here and what was required.

"The most famous mayor in El Salvador is out in the street sleeping on a borrowed bed," Yazbek said in response to a bit of flattery. His home was burned by the rebels. "But we are struggling and we have sources of work now, which is what we need."

One AID public health program is busily cleaning out stagnant water and exhuming about 15 corpses, mostly soldiers, hastily buried around the city during the fighting. But there is also AID money for rubble removal, for building sewers and rain water collection systems and new housing, among other things. Some of the construction had been on the local drawing boards for years but had been stalled until now for lack of funds.

A showcase enterprise is the Clarence D. Long nursery school and kindergarten. A three-room brick affair, it was built on a site where there were "only some refugee houses" before, according to the construction supervisor. It is named for the Maryland Democratic congressman who heads the foreign operations subcommittee of the House Appropriations Committee and makes crucial determinations about aid to this country. He visited here late last month and some State Department officials say the experience "turned him around" from opposition to support for more assistance to El Salvador.

None of the workmen or passers-by are quite sure who this Clarence D. Long (KlaRENseh Deh LONNG as they read the name from the sign) might be. "A gringo?" asks one. "Some important personage who's figured in things. . . ," opines another.

With Yazbek and the rest of the town fully aware that there are large guerrilla concentrations still in the immediate area, there is not much confidence that all this will last. Asked how long the school would stand, for instance, the construction supervisor smiled and said, "Oh, until the muchachos guerrillas come back and blow it up."

Berlin is seen by some officials who take a long-range political view of this reconstruction as "a propaganda response to a propaganda gambit." As one put it, "If the guerrillas are really stupid, they are going to burn down everything we put up."

Berlin is the second largest town in Usulutan province, one of the richest regions in the country and the scene of some of the guerrillas' greatest military advances during the past few months. When the Salvadoran Army made the mistake in early February of massing all of its combat units in distant Morazan province, the guerrillas hit Berlin's little garrison, took the town and held it for more than three days before the Army could respond effectively on the ground.

In the meantime the Salvadoran Air Force blasted rockets in suspected rebel hiding places in and around the city, bringing a new level of terror to the war here. The whole battle was a major psychological victory for the rebels, who had not only succeeded in outmaneuvering the Army, but in seizing a hitherto relatively prosperous coffee town where many of the most wealthy people in the country have family roots, and, in some cases, still maintain homes.

The rebuilding of Berlin is now proceeding with startling speed, but as the money starts arriving, so have a number of problems that some officials fear could come to plague the even more ambitious programs yet to come.

Most of the money is to be disbursed through the government's existing credit agencies. The interest rate currently being asked is 13 percent with two years of grace and 15 years more to pay. Regular commercial rates in El Salvador range above 20 percent.

"We want soft loans," said Yazbek. "If AID wants to help us, they have to give us 5 percent; 13 percent is very expensive." At the moment there are about 750 people, mostly refugees, employed by the AID projects. Of those, a third are receiving the equivalent of $3.20 a day, while the rest are supposed to get $1.60, plus food, according to the mayor.

This part of the plan is intended, as one military officer put it, "to get these people off the streets and earning their beans."

But a group of workmen scraping up rubble and tearing down the remains of blown-away walls in the city center gathered around visiting journalists to complain. They said they had been working at the $1.60 rate for three weeks now, that some of them had not been paid at all yet, and none have received the promised food.

Two National Policemen walked up to the edge of the group, and their presence dispersed it along with its complaints.

The military is supposed to be playing a major role in the reconstruction, improving its badly tarnished image through shiny new public works. But Yazbek said that thus far there has not been much coordination. The Army civic action teams "come by surprise, collaborate with us, leave by surprise. They don't tell us when."

This is the week of the town's Saints Day and most offices are closed. Rickety amusement park machinery has been trucked into the city and the townspeople are playing games of chance amid the ruins, tossing coins to win warm bottles of soda pop, pushing the carousel by hand because the motor doesn't work.

A lot of hope is evident in this incongruous scene, but little apparent faith in the permanence of the peace that allows it. Although the government and the U.S. Embassy have worked hard to turn the rebels' psychological victory into a propaganda defeat, neither the mayor, nor the manager of the bank who was "asked to cooperate" by the heavily armed insurgents and open the vault for them, nor the owners of several local stores spoke critically of the rebels, who might come back anytime.

"I had the opportunity to get to know them," said Yazbek, a member of the right-wing Nationalist Republican Alliance party of cashiered major Roberto D'Aubuisson. "I don't know if it was just their policy, but they were very kind."