Bolivian voters, faced with the most severe economic problems in South America, go to the polls Sunday in a bitterly contested presidential race whose winner faces the difficult task of keeping alive this Andean nation's battered 33-month experiment in democracy.

Public opinion polls show that a former military president, retired general Hugo Banzer, 59, has in recent weeks surged past 17 other candidates seeking to lead South America's poorest and most unstable country.

Twice-president Victor Paz Estenssoro, 77, who led a sweeping social revolution in 1952 but now represents the center-right, and former vice president Jaime Paz Zamora, 46, representing the center-left, are seen in second and third places respectively. Roberto Jordan Pando, 55, the candidate of the current center-left government, is running a poor fourth in most polls.

Most political observers here agree that Pando's standing reflects the dwindling fortunes of the government he represents, headed by President Hernan Siles Zuazo.

Siles, who in 1982 became Bolivia's first popularly elected president in nearly two decades, was forced late last year by congressional and labor opposition to shorten his term by one year and call elections. Although Siles has been faulted for his government's vicious infighting and its failure to do more than dent Bolivia's estimated $1 billion-a-year illegal cocaine industry, it was the fast-decaying economy that brought a premature end to his rule.

Last year inflation reached a world-leading 2,177 percent annual rate and, according to the local association of private banks, it could reach a staggering 30,000 percent by year's end. Unemployment is more than 20 percent, and since March 1984 the country has stopped paying the commercial part of its more than $3.4 billion foreign debt.

Although the official exchange rate is 75,000 pesos to the dollar, the black market rate soared past the 800,000 mark. The difference has meant exporters receive less than 10 cents on a dollar's sales.

The distortion has allowed neighboring Peru, which does not produce its own tin, to become a significant exporter of the metal, as tons of Bolivian ore -- the country's most important legal export -- are smuggled across the border for resale abroad.

Even his political enemies concede that the Siles government was a victim of circumstance, saddled with falling world demand for once-promising exports of Bolivian oil and gas, a sluggish market for tin and a devastating drought two years ago. However, the campaign has been dominated by charges his rule has been both weak and incompetent.

Popular discontent appears to have focused on a seemingly interminable series of labor demonstrations, including a general strike in March that all but shut down the country for 16 days.

If a winner in the presidential contest is inaugurated as scheduled on Aug. 6, the national independence day, it would be the first time a democratic goverment transferred power to its elected successor here in 25 years. Voters will also elect a bicameral legislature and local governments.

The inauguration of Siles' successor and the coming to power of President-elect Alan Garcia in neighboring Peru later this month would mean the completion of peaceful, democratic transfers of power in the Andean region of South America that was begun with last year's election of President Leon Febres Cordero in Ecuador. All three nations have histories of military intervention in politics.

On the eve of the election, Bolivia's foreign minister, Edgar Camacho, resigned because of the "inability of the military High Command to comprehend government foreign policy" -- a reference to Bolivia's establishment of diplomatic ties with China and its corresponding break in relations with Taiwan, The Associated Press reported. Sources in the presidential palace, who spoke on condition that they not be named, said the armed forces had forced Camacho's resignation, the AP report said.

[On Friday, the military command bestowed three honors on Taiwanese Ambassador Eduardo Tsu Yu and issued a statement condemning the government's decision to break relations and expell the Taiwanse delegation within 72 hours. The government then withdrew the deadline and did not set another date for the ambassador to leave.]

As the final week of the campaign progressed and rumors of a possible coup increased, U.S. Embassy officials met with politicians and military leaders in an effort to ensure that the election went ahead as scheduled.

Until late last week, however, it was uncertain that today's elections would be held, as the government tried to convene a special parliamentary session to postpone the vote because of alleged voter registration irregularities. The move, called "desperation politics" by one diplomat here, was supported by the leftist Bolivian Workers Confederation.

The bid for postponement, which was defeated for lack of a quorum Thursday, was seen by many observers here as a sign that the left foresaw its own defeat in today's vote and was especially worried about the increasing possibility of a Banzer victory.

Worries about the consequences of a Banzer win stem from both his record and his platform of economic changes. During his seven years as president, Bolivia enjoyed relatively high prices for tin, gas and oil, and Banzer is credited with having brought stability to this country.

This year, however, Banzer has challenged the assumptions upon which past Bolivian governments, including his own, have rested. He has promised to prune Bolivia's inefficient public sector, float the peso and eventually plow mining revenues into the devastated agricultural sector. He has also put together a team of young, Harvard-educated technocrats who have provided his campaign with a series of working groups and task forces on various issues.

Human rights activists, however, paint a darker side to Banzer's legacy, charging that under his rule at least 33 political opponents disappeared, scores of peasants were massacred and more than 1,600 persons were arrested.

"We're afraid anything could happen under a second Banzer government," said Rene Duchen, head of the National Commission for the Investigation of Disappearances.

Banzer is also strongly opposed by the powerful Bolivian Workers' Confederation and their mineworker leader, Juan Lechin. Diplomats here say worker-peasant resistance to a Banzer win may lead to a confrontation. But Banzer appears ready to press for a radical departure from Bolivia's past.

"We need to shift away from the state capitalist model, where 80 percent of the economic activity is in the government's hands," Banzer said in an interview. "It doesn't work."

The most likely alternative to Banzer's program is the candidacy of Paz Estenssoro, who is still revered by many, especially Bolivia's large peasant population, for having carried out an ambitious land reform, implemented universal suffrage and snatched away the mines from the once omnipotent tin barons.

Unlike Banzer, Paz Estenssoro said he will try to hold down the social costs of economic reform. His eclectic program includes nationalizing state companies, reducing the fiscal deficit and putting an end to financial speculation.

In an interview today, Paz charged that Banzer's "radically antistate attitudes" would mean grave social dislocations.

"We plan to set aside dogma to achieve workable solutions," he said. "We will be practical above all else."

The key to the election may be held by another Paz -- Jaime Paz Zamora, a social democratic-style candidate whose campaign appeared to be stronger in recent days.

The constitution provides that if none of the candidates receives an absolute majority, Congress must decide among the three top vote-getters. If in the first parliamentary vote no one gets a majority, the two top candidates are pitted against each other. A word from Paz Zamora could tip the balance of that vote, analysts here say.