A lieutenant in a sweaty camouflaged uniform sits at a guard post, waving away flies and peeling an orange with a bayonet. Soldiers flag down trucks and buses, checking the heaped cargo of beaten suitcases and burlap sacks, and frisking passengers as they come and go in Bolivia's jungle Chapare district.

Suddenly voices issue from the back of a truck and five soldiers sieze the driver, clad in dusty blue overalls. A sack of papaya is spilled onto the ground before the officer's feet. A soldier pulls the top off of one fruit where it has been deftly sliced and fishes out a plastic sack filled with a powdery white substance: coca paste, the base from which cocaine is made.

"But my lieutenant," pleads the thin man with sharply cut features of the region's Indians. "I have nothing to do with this. I swear."

He is silenced as the lieutenant wags a forefinger in his face and declares, "You are a liar. You are going to jail."

Three hundred miles due southeast of the capital, La Paz, the broad asphalt highway becomes a road of dirt and gravel that snakes its way down 10,000 feet from the Andes, into lush rain forest. This is the single artery that brings commerce into Chapare, a vast and rudely developed swatch of the western Amazon as big as New Jersey.

In August, some of the world's most powerful drug merchants moved freely along this dirt road, openly buying tons of coca leaf or contracting hundreds of peasants to mash it into "base," the raw stuff of cocaine.

Now, the road is studded with military checkpoints like the one here. Seven hundred regular troops patrol the road, searching passers-by for caches of contraband or suspicious quantities of coca leaf.

These are the foot soldiers of Bolivian President Hernan Siles Zuazo's war against cocaine trafficking, aimed to wipe out the burgeoning $1 billion annual trade and bring law and order to a region known for neither.

Not since 1967, when the Bolivian government sent soldiers hunting for Ernesto Che Guevara, has the Bolivian countryside seen such military intervention. This battle is not against communist guerrillas but a sophisticated coterie of drug dons whose only ideology is that of acquiring personal fortunes. The battle is funded, closely monitored, and in some instances virtually commanded by the U.S. Embassy in La Paz.

The offensive is the fruit of increasing diplomatic pressure by the United States, the world's leading consumer of cocaine, and of a renewed determination by the precariously perched democratic government of Siles Zuazo, Bolivia's fourth president in as many years.

A pact signed in August 1983 spelled out an agreement that will pump close to $58 million in narcotics-control and rural-development money into Bolivia in the next five years. Bolivia is the source of nearly half the world's supply of cocaine, and all past drug control efforts have failed.

The idea of the campaign is to maintain a military presence long enough to suppress the illicit cocaine trade, driving up the risk of selling coca and driving down the price, so peasants will be induced to switch to other crops.

The U.S. Agency for International Development has also pledged to provide peasants seeds for substitute crops, technical assistance and credit, as well as to develop 165 miles of farm-to-market roads. But sustained aid will be contingent upon peasants' cooperation in reducing the 50,000 acres of coca.

No one thinks the plan will be easily implanted. Coca has become the mainstay of thousands of peasants who are hostile to outside intervention and accustomed to years of failed promises from their own government.

"We have spent 14 years in the Chapare with no help at all," declared Leonardo Quispe, head of the 20,000-member Peasant Union Federation of Chimore. His hand cut a sharp line before his forehead. "We are up to here with promises."

Coca, considered a gift from the Inca gods, was used for centuries in religious rites and for its medicinal properties. Indians chew it to ward off the cold and to suppress the appetite in the leaner seasons. Today it is also processed into a tea that calms the stomach, and some even say the plant can be made into a nutritious food additive.

It is also perfectly legal to grow, harvest and sell coca leaves for these purposes. Yet statistics show that 16,000 metric tons of coca fulfill the total legal demand, a mere fraction of the estimated 100,000 tons produced each year.

The rest is diverted into the massive clandestine market. That market functioned smoothly until the military intervention. But soldiers were not dispatched into the Chapare until late in August, a full year after the drug control agreement was signed.

Upon coaxing by the U.S. Embassy, which said it would not release the development money until the goverment acted, 1,500 soldiers and a 150-man, U.S.-trained and -equipped strike force, the Leopards, were sent deep into the lowlands.

Four raids of suspected haciendas turned up 1,540 pounds of coca paste, 100 more of the finished product, 7 unregistered airplanes, a stash of arms, sophisticated radio equipment, chemicals for refining coca, and thousands of dollars in cash.

The delay in dispatching troops probably avoided a bloody confrontation between traffickers and police. But it also gave the major dealers time to flee.

If the Bolivians were chary about storming the Chapare, they had good reason. The goverment was up against a well-organized ring of traffickers with heavy firepower, planes, and radio gear. Having "bought" a number of goverment officials in the past, the traffickers' reached the peak of their influence under the government of Gen. Luis Garcia Meza, who assumed power in a 1980 coup.

But the end of the Garcia Meza government in 1981 did not halt cocaine's sway over politics.

"Economic power tends to accumulate political power," said Vice President Jaime Paz Zamora. "The drug traffickers have gathered considerable economic resources."

But there is an obstacle far greater than the cocaine impresarios: the peasants themselves.

Under the Garcia Meza government, "cocaine was democratized," as Paz Zamora is fond of putting it. Estimates are that in the three growing areas -- Beni, Chapare and Yungas -- perhaps as many as 400,000 peasants grow coca, are hired to stamp the leaf into paste with their feet, or transport the contraband.

Bush pilots earned tens of thousands of dollars for each flight ferrying contraband.

Even today, with the military intervention suppressing the coca market, it is still far and away the most attractive crop. Peasants harvest the leaves three to four times a year while other crops, like oranges or coffee, are harvested once a year. It is simple to crush into paste, and buyers would come to the peasants' doorstep to purchase leaf or paste. Best of all, coca paste does not spoil.

"So long as coca production remains legal and vastly more profitable than other crops, there is little incentive for farmers to reduce production," concluded a State Department study submitted to the U.S. Congress earlier this year.

When drug enforcement efforts threatened to destroy coca in a campaign more than a year ago, peasants marched in protest shouting " Viva la coca." In August, peasants blockaded the road into Chapare for several days when the government announced its troop intervention, disbanding only upon assurances that no coca leaf would be destroyed.

"There would be bloodshed, demonstrations, bridges blown up if we went in and burned down the coca fields," said an American diplomat. Peasant unions have demanded the immediate withdrawal of troops and "free trade of coca."

Yet the price of dependence on the crop has been high. It has turned the Chapare into a net food importer. Rice, vegetables, flour, and other foodstuffs are trucked into this lush lowlands from the urban markets of Cochabamba, Santa Cruz and even distant La Paz. The absence of local markets and the unreliable roads leave little outlet for farmers' perishable goods.

Coca has earned the peasants considerable cash and has left numerous monuments scattered about in unlikely places. Luxury, ranch-style hotels have sprung up in the tiny farming and cattle towns of the Beni. The smallest towns boast fine restaurants, movie theaters and shiny modern wares in stores.

In La Paz's "Little Miami," brimming with electronic gadgetry and other luxury items, coca's largesse thrives even as the debt-strapped republic pares imports and passes austerity measures. However, even a cursory look at Chapare's rude shacks of mud and wood shows that little of the coca fortune was ploughed back into the community. Rather, the cash brought in hosts of prostitutes and swelled the tiny villages with a massive floating population of fortune seekers.

The "coca dollar" inflation battered the peso. It lost value so rapidly that merchants in Chapare weighed the "bricks" of bills instead of counting them.

Also, for the first time in Bolivia, local drug consumption has reached alarming proportions. Bolivians smoke a blend of unrefined coca paste. Estimates put the number of habitual smokers anywhere between 15,000 and 50,000. Unlike pure cocaine, the blend is riddled with kerosene, sulphuric acid and other toxins used in processing paste. Instead of cocaine's stimulating effect, it can produce depression, paranoia and tremors.

Yet despite the rising incidence of local use, everyone knows that the Latin cocaine trail leads directly to the U.S. consumer.

"This is a transnational problem," said the vice president. "On the one hand, there is the super development of the United States, which encourages exaggerated consumption, on the other there is our own underdevelopment, whch induces the peasant into producing this drug. No program of crop substitution will work in which the peasants earn less than they do from coca."

Despite the initial success of the campaign in Chapare, the overall results have not been impressive. "Not a single major drug trafficker has been arrested," said one DEA official. "The jails are full of poor Indians caught with a couple of kilos of coca paste."

About 70 "mid-level" drug violaters have been detained this year, but no one is betting on how long they will stay behind bars. Last December, two suspected Bolivian traffickers were arrested on charges linking them to a clandestine laboratory, a mountain of cash and 130 pounds of coca base. In four weeks, they were free again because of "lack of evidence." Their confiscated property was returned, including an airplane.

In the Beni, with hundreds of clandestine airstrips, there is no radar tracking, and under lax customs regulations there has been no effective monitoring of the import substances used to refine cocaine. Planes come and go at Santa Cruz's old international airport with no customs or immigration checks, and not even any police on the ground. The town of Santa Ana, with about 5,000 inhabitants, has 50 planes on the ground, and no officials asking awkward questions.

The drug-control money spigot was shut off for a long time in Bolivia because of the country's reputation for corruption. To guarantee that the multimillion-dollar control and aid program will not end up lining the pockets of corrupt officials, U.S. officials keep a close watch on its implementation.

The Secretariat for Bolivian Tropics that distributes the aid money is a virtual creation of U.S. AID and the U.S. Embassy. Administrators were chosen by Bolivia, but the Americans used veto power twice when the secretary was chosen.

The United States also monitors the program, regularly dispatches inspectors and reviews every phase of the operation before new funds are extended. Said one U.S. official, "We control every penny of aid money that goes into the Chapare."