In handing over the Panama Canal, the United States also bestowed on the Panamanian government something far less desirable--thousands of acres littered with unexploded mortar shells, grenades and other munitions from decades of arms testing and training by the U.S. military.

As stipulated by the 1977 canal treaties, the U.S. government on Dec. 31 relinquished jurisdiction over the 360,240-acre Canal Zone, which includes the waterway and numerous properties formerly used by American armed forces--among them the Empire, Pina and Balboa West practice ranges. While the accords ended a U.S. troop presence in Panama that spanned nearly a century, they also required the United States "to take all measures to ensure insofar as may be practicable that every hazard to human life, health and safety is removed."

But the cleanup carried out by the U.S. military has been criticized as inadequate by Panamanian officials and environmentalists. It left at least 7,700 acres of rain forest with residual explosives that have rendered those areas too dangerous for human habitation or development.

U.S. officials said dense jungle and steep slopes made the task of clearing more unexploded ordnance too difficult and at times too dangerous. They also noted that further work would have caused significant environmental damage to the canal's watershed.

Much to the dismay of President Mireya Moscoso's government, U.S. Defense Department officials said that, based on empirical evidence and rough assumptions about munitions, they estimate that at least 110,000 pieces of undetonated ordnance may be scattered along the ground or buried under jungle cover in the most heavily used range areas. Before leaving Panama, the U.S. military recommended that those 7,700 acres of high impact--almost 20 percent of the ranges--remain closed to the public permanently.

"We have always said a small portion of the ranges would have to remain off limits to people because cleaning them up was not practicable or even possible in some cases," said Susan Wood, a deputy assistant secretary of state for Western Hemisphere affairs. Overall, she added: "We did the cleanup in good faith and complied with treaties. But there is always this problem of the definition of the term 'practicable.' "

For years, the U.S. military has posted warning signs around hazardous sections of the ranges, but Moscoso's government said the areas still pose a threat to residents of adjacent poor communities who venture into the fields to collect scrap metal for sale or to hunt for food and plant crops.

An estimated 60,000 people live in neighborhoods surrounding the ranges, a population that is expected to grow to around 100,000 in the next few years as Panamanians move closer to the capital in search of opportunities. In the last two decades, at least 21 Panamanians have been killed and others injured on or near the ranges by explosives that they stepped on or tinkered with.

The failure of the United States to clear more land has prompted Panamanian officials to accuse Washington of violating the treaties and to explore legal and diplomatic means of persuading the Clinton administration to complete the cleanup. The Moscoso government contends the United States undertook the ordnance removal late--not beginning in earnest until December 1997--failed to share information and ultimately skirted its responsibility by falling back on the word "practicable."

"I think the interpretation of the word is unilateral and self-serving," said Juan Mendez, director of the office of treaty affairs at the Foreign Ministry. "We do not want money or compensation. We want the ranges clean . . . and we will pursue it firmly and responsibly until that is done."

Panamanian officials and environmentalists acknowledged that getting rid of the unexploded ordnance could take years and cost tens of millions of dollars. But, remarked John Lindsay-Poland, director of Latin American programs for the Fellowship of Reconciliation, an American group that is urging the United States to clear the properties: "How feasible is it to clean up the areas? How feasible was it to build the canal?"

The dispute has raised questions about future bilateral relations following an otherwise smooth transfer of the Canal Zone to Panamanian control that marked the end of an era dating to 1903, when the United States facilitated Panama's independence from Colombia to construct the 50-mile-long waterway.

"The United States should be ashamed of [the contamination] that it has left behind. What a legacy," said Fernando Manfredo, a Panamanian who helped preside over a U.S.-Panama working group on the cleanup. He added: "Now we have to do the same thing we did to get the 1977 treaties. We have to build international support to convince the United States to finish the job."

In the meantime, the Panamanian government has retained the Washington law firm Arnold & Porter to provide legal analysis of U.S. obligations and to oversee an independent assessment. The report, which includes more than 60 photographs, contests the U.S. position that the vast majority of land outside the high-impact areas is cleared and ready for full use.

One of the photos shows what is said to be an unexploded 60mm mortar shell on the Empire range that is slightly visible above the surface of a road leading up a hill. Another photo identified a live rocket warhead lying in jungle terrain, while others showed practice grenades lying outside the impact areas as well as mounds believed to contain undetonated munitions. Researchers also found unexploded ordnance on surfaces of hilly terrain that were less steep than the maximum grade the U.S. military generally used as a limit for its cleanup effort.

"We are not sure we concur with their findings," said Wood. "The first step is to determine whether our assessment is the same as the government of Panama's."

The U.S. government said it cleaned up as much contamination from the ranges as was possible before starting to turn over control of the ranges in July. Officials estimated that the U.S. military cleared about 80 percent of the ranges, removing more than 8,500 pieces of unexploded ordnance and about 2.1 million pounds of scrap metal, mostly from the surface of maneuver areas where the prevalence of munitions was dramatically less than in the zones designated as high impact.

The U.S. government said that the cleanup did not begin earlier in part because portions of the ranges were still being used by the few remaining troops in Panama and because the United States had been negotiating with the previous government about maintaining a military presence in the country at a proposed regional anti-drug base. Those discussions eventually collapsed.

According to several sources familiar with the ordnance clearing operations, even some U.S. troops complained that the cleanup was not thorough enough. On many occasions, the sources said, troops were instructed to look only for unexploded munitions at ground level, particularly near paths, and often were not equipped with metal detection devices, relying only on visual assessments.

Robert Pastor, an adviser on Latin America in the Carter administration who was involved in the 1977 treaty negotiations, said: "It is clear that the U.S. government was slow to address the issue . . . and did as little as it could get away with.

It is expensive, the Pentagon is concerned with precedent, and the current administration never really attached itself to Panama."

CAPTION: A sign warns of the danger of unexploded ordnance, which the United States was supposed to clean up, on a firing range used by GIs in the Panama Canal Zone.