A husky young man kicked hard at the locked schoolhouse gate, and on the third try, it shuddered open. Mayor Isabel Rodriguez watched approvingly.

"Here, the people rule," she said dramatically, and waved the musicians into the large central courtyard to set up their instruments.

The mayor, a member of the right-wing Nationalist Republican Alliance, or Arena, had just forcefully resolved a dispute with the school principal, a member of the ruling Christian Democratic Party, over whether the crumbling pink and green school should be opened for a community dance that night.

In this war-battered mountain town 40 miles east of San Salvador, the guerrilla conflict has receded enough that there is once again the luxury of petty political squabbles.

A reporter returning to San Esteban Catarina after a year's absence found the population nearly doubled by the return of citizens, although at 1,500 it is still well short of prewar levels.

After nearly five years of watching first leftist guerrillas, then Army troops and then the guerrillas again roll through town, leaving destruction and suffering in their wake, San Esteban has had no fighting for seven months.

But while San Esteban Catarina, where the government has been implmenting a plan of civic action, is returning to normal, other towns hit by the war, like Tenancingo -- about 15 miles to the northwest -- remain deserted. Despite the desire to move residents back to Tenancingo, the government of President Jose Napoleon Duarte does not have the resources to do so. Much of the government budget is spent on the 6-year-old civil war, and powerful industrialists and businessmen oppose spending scarce funds on small villages.

In San Esteban, though, "People are harvesting normally, working close to town," said Agustin Martinez, a tailor. "Before, they could only grow things in the mountains because of the conflict."

The road around the town square is paved as a result of the National Plan, which targeted this area for efforts to win over the populace, and so is most of the road that winds up the mountain from the Pan-American Highway. Last year, residents said a new mayor's office, also constructed under the National Plan, was blown up by guerrillas.

The rebels used to come to San Esteban when the small, rotating Army contingent moved to a nearby town. Now there is a permanent Army garrison of about 50 troops, also part of the National Plan, which was launched in 1983 as a classic counterinsurgency combination of major military drives and social action.

Now all is tranquilo, said the mayor and the tailor, except for one thing. The Army wants to set up a Civil Guard unit, arming village men to provide security so the Army troops can go out on operations.

This, too, is part of the National Plan, and military officials boast about Civil Guard units sprouting nationwide as proof of growing support for the government. San Esteban has not yet gone that far.

"If we stay civilians, the 'boys' [guerrillas] won't hurt us," Martinez said, "but if we're carrying arms, they'll come more often and there will be shooting."

The war is just beyond the hills and could return anytime, according to the Rev. Rene Valle, the Roman Catholc priest whose parishioners are spread over half a dozen towns and villages in this region. He laughed as he described how he had run, clerical robes flapping, down the street of a hamlet called El Tortuguero four days earlier as Army mortars rained in on a retreating guerrilla unit.

He remonstrated with the Army commander, he said, warning that mortars could kill civilians, and the commander promised not to use them in a town again, Valle said. He raised his eyebrows and smiled skeptically, saying, "We'll see."

Unlike Tenancingo, this area has not suffered from the Air Force bombardments that human rights groups say have killed many civilians, nor have there been any political assassinations since Valle's predecessor was shot dead as he stood at the altar of the town church in 1981.

The U.S. Embassy has counted 218 civilian political deaths in El Salvador between January and July of this year, attributing 128 of them to the guerrillas and only nine to rightist death squads. Another seven were blamed on government forces, while 31 were listed as killed in action and 43 dead from unknown assailants.

Valle said efforts to create Civil Guard units in nearby San Sebastian and San Lorenzo had failed because people feared they would reverse the apparent trend of decreasing violence.

Valle and the mayor agreed that the biggest problem here, as in most of El Salvador, is unemployment. The government admits to a 40 percent jobless rate, but that is a conservative figure. Forced relocations in the north of the country and the war itself have depopulated large stretches of farmland, increasing the strain on the country's food supply.

"We get a lot of aid from the United States, but that doesn't really help," Valle said. "Why don't you people open factories here, or schools?"

Tenancingo, unlike San Esteban, is usually a ghost town with the houses' front walls and doorways overgrown with heavy vines and grass. But one day last month two truckloads of villagers, a score of American visitors and three guerrillas increased the population from 0 to about 60. The only ones who stayed more than a couple of hours were the guerrillas.

The villagers, who said they hoped to move back, spent the time deciding how best to fix leaking roofs and blasted walls, and clearing away the vegetation.

The guerrillas came to preach revolution and to talk to the Americans. The Americans -- journalists and a delegation of Vietnam veterans -- came to see what the war has done here, and what kinds of economic and social medicine might help it recover.

There used to be a factory here that employed about 100 people making hats for export and plastic bags for El Salvador, villagers said. The fields around were heavy with fruit and the area was relatively prosperous, with about 12,000 people.

But in 1983, guerrillas overpowered the small local Army garrison and took the town. The government responded by bombing Tenancingo, killing dozens of people. The survivors packed up and moved out.

Spending for the war takes half El Salvador's budget -- about $400 million a year -- and there is a 50 percent budget deficit, according to the president of the Central Reserve Bank. There is no money to rebuild places like Tenancingo.

Like at least 40 percent of all Salvadorans -- and 80 percent of the country's 500,000 displaced people -- Sandra Fuentes, 17, is unemployed. She had come back to Tenancingo on one of the trucks "just to see if the house is all right," but she said the guerrillas had told her not to go on her street because they had put land mines there.

So she sat in the once-pretty central plaza, listening to a guerrilla who called himself Tulio condemn U.S. imperialism and Salvadoran injustice. She said she was more concerned about whether the hat factory would reopen.

Julio Rey Prendes, Duarte's minister of communications, said in an interview in the capital that restarting old factories was the government's number two economic priority, after keeping existing ones open. Third, "and this is what the big industrialists don't understand," he said, is strengthening small business and artisans.

Rey Prendes said the plan is emerging slowly as laws are passed. There have been no new taxes to pay for the war, he said, but there will be "sometime soon." Until then, there is no money for pay raises for teachers and other public employes, who have been staging protest marches and brief strikes lately.

As a pacification measure, Duarte imposed some price and profit controls, including one on spare vehicle parts aimed at making it easier for bus drivers to manage with fares frozen. But many buses stopped running to places like Tenancingo, giving the truck taxis a booming business. The controls were imposed without notice to the affected businessmen, who then stopped coming to a monthly meeting that Duarte's economists had billed as an effort to build mutual confidence.

Rey Prendes said the businessmen all wanted and got subsidies for sugar, textiles, cotton and coffee, "but they complain about price controls to help the peasants."

In Tenancingo, Jose Franciso Escobar, 48, spoke longingly of his fruit farm just outside town.

"We had citrus, plums, watermelon, papaya, everything," he said. "I hope I can get a government loan" to restart.

One of the guerrillas handed him a leaflet condemning "the gradual growth of economic, cultural and political dependence on Yankee imperialism," and Escobar spat.

"All lies," he said. "When the Army comes in, they lie, too."