MEXICO CITY, JULY 1 -- Mexico's ruling party is lashing back at dissidents who are challenging President Miguel de la Madrid's right to designate his successor.

The dissenters, associated with the leftist-populist wing of the governing Institutional Revolutionary Party (PRI), are led by Porfirio Munoz Ledo, a one-time party chairman, and Cuauhtemoc Cardenas, a former governor of Michoacan State and the son of one of Mexico's most revered presidents.

In an unusual move just short of formal expulsion, a PRI commission last week officially "condemned, rejected and denounced" Munoz and Cardenas and prohibited them from using "party emblems and installations."

"We are going to continue our work as if nothing had happened," Munoz said in an interview. "The commission's finding was unlawful. It has no authority to pass judgment on the activities of party members."

The self-assigned task of the Democratic Current, as the dissidents style themselves, is to foment an organizational "revolution" in a party that has always been autocratically run by leaders loyal to the incumbent president.

Since October Cardenas, Munoz and other allied activists have been lobbying in the capital and touring the provinces, demanding a direct rank-and-file voice in party affairs. They also vehemently condemn de la Madrid's U.S.-backed economic policies, which they claim were implemented against the wishes of the party majority. Supported openly by only a few dozen nationally known PRI figures, the Democratic Current has nonetheless been getting warm receptions from many local PRI union and community groups.

The main target of the Current's reformist rhetoric has been the PRI's traditional mode of candidate selection -- the dedazo, or unilateral "fingering" of nominees by the president and a few close associates.

In early autumn de la Madrid is expected to choose one of his Cabinet members as the PRI's next presidential candidate. If tradition holds, the president's choice -- who by custom could not openly pursue the candidacy, and who may have never sought elective office -- will be nominated immediately by acclamation. Victory in the September 1988 balloting seems assured: In its 58 years in power, the PRI has never lost a national election.

The PRI dissenters threaten to disrupt this familiar scenario, however. If the nomination is handed to one of the administration's finance-oriented "technocrats," Democratic Current leaders vow to stage public protests. They say they might also consider backing an alternative presidential candidate. "The dedazo is being used to perpetuate a kind of dynastic succession," Munoz said. "What we are demanding is open registration of party candidates and open discussion of issues."

Aside from Cabinet members, Current spokesmen argue, other leading party figures should be allowed to compete for the presidency -- even if they have fallen out of the incumbent's favor.

"If the party doesn't commit itself to profound, genuine democratization," Cardenas said in an interview, "it will only lead to greater rigidity, and the party will become less attractive to its own membership."

The dissidents, hoping to tap grass-roots discontent with de la Madrid's budget-trimming economic reforms, are fighting government plans to lower import barriers, sell state industries and continue fully servicing the foreign debt. PRI leaders have suppressed debate on such issues "because they are trying to show our creditors an apparently monolithic political front," Munoz charged in an open letter from the Current to the party.

The Democratic Current's credibility has been challenged by critics who note that its spokesmen had failed to reform the PRI when they held key party leadership positions.

"The Democratic Current's real concern is economic policy, not democracy," said Luis Javier Garrido, a historian who has written extensively about the PRI. "But if the PRI were truly democratic, it would almost certainly reject the present government's policies."

"If the big peasant and labor organizations that are the PRI's foundation had a real say in the party, one wouldn't expect them to be enthusiastic backers of government policies," Lorenzo Meyer, a political analyst, agreed.

By focusing their early attacks on Cardenas, party leaders may have enhanced the prestige of their critics' most credible spokesman, commentators said. Cardenas is the most visible custodian of a fiercely populist PRI tradition that still commands broad support. His father, Lazaro Cardenas, as president from 1934 to 1940, consolidated the PRI's base by giving land to poor farmers and bringing militant unions into the party structure. But Munoz, a veteran political operator and recent United Nations ambassador, is said to be more feared by PRI insiders for his combativeness and party connections.