BUENOS AIRES, SEPT. 13 -- The Bush administration's strategy to fight cocaine in the Andean drug-producing nations with military aid is running up against the producer nations' reluctance to commit their armed forces to the anti-drug effort and demands that the United States provide more funds for economic development.

On Wednesday night, Peruvian President Alberto Fujimori said his government had decided not to sign a pending agreement to receive $35.9 million in military aid from Washington, indicating that he wants development aid instead.

Since the military aid "is destined only for the fight against drug trafficking," his government does not intend to sign the agreement, Fujimori said, calling the proposed pact "inconvenient for our interests."

Peru grows more than half the world's coca, the plant from which cocaine is processed. U.S. State Department officials were left hoping for an 11th-hour renegotiation of the rejected accord and emphasizing that other anti-drug programs, such as cooperation with the police, are continuing.

In Bolivia, the other major source of coca, frustrated U.S. diplomats are still waiting for the government of President Jaime Paz Zamora to develop acceptable plans for the Bolivian army to spend roughly $40 million in pending military aid.

And in Colombia, where powerful drug cartels refine 80 percent of the world's cocaine, officials have also been unenthusiastic about increasing military involvement in the drug fight. President Cesar Gaviria has made clear that his emphasis is on ending the terrorist violence of the drug barons and that he believes the trafficking industry cannot be eliminated until the United States acts to curb demand.

Officials of the three countries have expressed concern about corruption that might result from bringing the armed forces into closer contact with the drug traffickers, whose capacity for bribery and coercion is considered enormous. In Peru and Bolivia, which have seen frequent military takeovers, there is also reluctance to make the armed forces more powerful and independent than they already are.

The standoff over military aid comes amid other signs that the U.S. approach to curbing the cocaine trade in South American remains in conflict on several key points with what Latin leaders see as their nations' interests.

Colombia's Gaviria has offered drug traffickers a chance to give themselves up and avoid extradition to the United States, formerly a cornerstone of the campaign against the cartels. In Peru, an administrative shake-up ordered by the new government has led to the removal of the police general with whom U.S. officials have coordinated anti-drug efforts for years.

And in all three producer countries, officials have been increasingly critical of the United States for not providing more of the economic aid that they say is necessary to wean hundreds of thousands of their citizens away from dependence on the lucrative business of cocaine.

Getting the Andean military establishments more involved in the anti-narcotics effort was a central component of the strategy President Bush articulated with leaders of the three South American nations at a one-day "drug summit" last February in Cartagena, Colombia. The United States agreed to provide hundreds of millions of dollars in new military aid if the Andean nations would commit their armed forces wholeheartedly to the drug fight.

Until now, primary responsibility for anti-drug activities in Colombia and Peru has rested with national police agencies. Bolivia's air force and navy are already involved to some extent, but the army has been kept out of the fray.

The idea behind the strategy was that involving military forces would dramatically increase the manpower and equipment the Latin governments could bring to bear against drug trafficking. Military units, the argument went, could provide needed support for police operations and carry out other functions like sealing leaky borders.

For example, several months ago the special Bolivian anti-drug police force staged a raid on a drug-processing village, backed up by U.S. Drug Enforcement Administration agents. The townspeople took up arms and resisted. "If you had army involvement, you could do that same raid, but you could have the army surround the town," a U.S. official said.

The Colombian military has conducted some spectacular raids against the cartels, but more than 80 percent of all anti-drug operations have been conducted by the police. Sources close to Gaviria have said that he favors the police as the lead agency and is reluctant to reverse that situation, although he has been more open to the increased military aid than leaders of the other two nations.

In Peru, most of the coca is grown in the remote Upper Huallaga Valley, which is a stronghold of the Shining Path guerrillas, a growing Maoist insurgency. Efforts to attack traffickers' facilities such as airstrips and laboratories, and ultimately to go after the coca fields themselves, are hampered by the guerrillas' effective control of most of the valley.

"Security is the number one issue up there," said a U.S. narcotics expert in Lima, the Peruvian capital. Supplies and personnel must be airlifted to a U.S.-financed police base at Santa Lucia in the heart of the valley because the roads are not safe. Suspected guerrillas attacked the base in April, engaging U.S. pilots in an exchange of fire.

A major thrust of the $35.9 million that Fujimori said he will not accept was to provide training and equipment to the Peruvian army to better combat Shining Path, clearing the way for police and DEA agents to operate more freely.

Former president Alan Garcia refused to take the money, complaining that the United States was reneging on agreements Bush made at Cartagena to provide meaningful economic assistance.

Since taking office July 28, Fujimori had declined to state clearly his intentions regarding the pact, but U.S. officials believed he would sign it. A joint press release had even been drafted announcing the acceptance of the aid.

However, even before his election Fujimori was saying that any solution in the Upper Huallaga Valley had to be based on creating realistic economic options for the tens of thousands of coca growers. Alternative crops must be developed, he has often said, and roads and bridges must be improved so those crops can be brought to market.

"One of the factors is that it is destined only for the fight against drug trafficking," Fujimori said in announcing he would reject the aid. "There are also other conditions that the Peruvian armed forces and my office consider inconvenient for our interests." Fujimori left some room for hope that he might accept an amended agreement, and a U.S. official said the Bush administration believes "it's not over yet. We're going to keep talking to the government down there."

But time is running short. The money is for the current fiscal year, which ends Sept. 30, and if not quickly accepted must be reprogrammed for other use.

Some Bolivian officials have spoken recently of using the army's new anti-drug funds to create environmental protection units that would enforce laws against pollution and deforestation, rather than directly attack the drug trade. Before civilian rule returned to Bolivia in 1982, the army was widely seen as riddled with drug-induced corruption. Governments since then have tried to keep the army away from the drug trade, and some officials see the United States as trying to coerce Bolivia into a return to the past.