On the mountainous Nicaraguan border with Honduras, life is harsh. ''We are short of food and water,'' says Cesar Augusto Romero, the barefoot No. 2 in the Nicaraguan militia in this small, dusty settlement.
In its battle with guerrillas backed by Honduras and the United States Central Intelligence Agency, Nicaragua is paying a severe price: Part of it comes in the diversion of scarce resources to this northern border region to support the fighters, and part is to be found in the suffering of thousands of displaced persons, such as Cesar, who have been driven from their homes by the border war.
Nicaragua's Sandinista leaders acknowledge that more than 500 people, many of them militiamen, have been killed in this year alone by the CIA-supported ''counterrevolutionaries'' - or contras as they are known here. Displaced persons now number more than 40,000, evangelical church officials estimate.
But if one leaves aside the toll inflicted by the contras in human suffering, it is probably safe to say that the guerrillas have barely dented Nicaragua's Sandinista-led military machine. The fighting against the contras has been done mostly by the local militias and by reserve battalions called up from other parts of the country.
The professional soldiers of the Sandinistas' regular, 22,000-man Army - the men with the boots, good weapons, and lots of training - have seen some combat in the region. But most of them have been held in reserve.
Equally important, the vital economic heartland of Nicaragua, the swath of territory stretching along the west coast of the country from the city of Leon down to Granada, has hardly been touched by the contras' attacks. And that is the part of the country where many of the people live and much of the cotton, corn, and sugar is grown.
Some people in the Reagan administration seem to believe that more attacks, combined with unrest inside Nicaragua, will bring the collapse of the Sandinista regime. About five weeks ago, on May 22, administration and congressional officials told the New York Times that CIA Director William Casey and another senior official had predicted that the American-supported Nicaraguan rebels had a good chance of overthrowing the Sandinista government by the end of the year.
Mr. Casey subsequently denied having predicted this, but the story seemed to reveal one line of thinking in Washington. Administration officials speak of the increased strength of the anti-Sandinista guerrillas, placing their total number at 8,000 in the northern, northeastern, and southern regions of the country.
The largest rebel group, led in part by officers of the old Nicaraguan National Guard and known as the Nicaraguan Democratic Force, is said to number about 6,000. Some officials claim that the rebels operating in the southern part of the country, who are led by the renegade Sandinista Commander Eden Pastora Gomez, now number about 2,000. An undetermined number of Miskito Indians are fighting in the northeast, along the Caribbean coast.
But each of the three regions affected by the fighting is relatively lightly populated and among the least important to the country in economic terms.
Because of his personal popularity, Eden Pastora's great hope had been to get Sandinista troops and militiamen to defect to his side. But there is no evidence that they have done so in any significant numbers.
In the drowsy capital of Managua, a city of new parks and old shantytowns, diplomats say that unless there are considerably heavier attacks and much greater disillusionment with the regime, the Sandinistas can probably survive the type of pressure they are now facing for years to come.
Sources close to the contras predict that they will break out of the mountains and strike deeper inside the country in the coming months. But for the moment, the amazing thing is how normal much of Nicaragua seems.
A drive northwest of more than 100 miles toward the Honduran border from Managua shows people in some of the country's most important towns and villages doing business as usual. Last year's drought and floods damaged the nation's economy much more than the contras have.
A year ago at Nicaragua's main port of Corinto, 80 miles northwest of Managua , a two-motor plane carrying rockets attacked the gasoline tanks next to the port. The pilot, who presumably came from Honduras, missed the tanks by about 30 yards, and his rockets splashed harmlessly into the water. He then turned toward the nearby bridge connecting Corinto with the mainland, but missed again.
Some 30 miles north of Corinto, one begins to notice the first signs of the border war. Uniformed men carrying arms guard bridges. Others man checkpoints along the highway. A 50-yard-long bridge over the Rio Negro, situated not far from the Honduran border, was blown up by the contras in March 1982. It took nearly a year to repair. People speak of some destruction of electrical lines. But even further to the north at a second blown bridge (this one not yet repaired), there is little tension.
At the little settlement of Carrizales, just a few miles from the Honduran border, the people say they are short of just about everything, including food and water. More than 100 families left their original homes not far to the north for this spot when the war got too close.
But while these displaced people are poor and hungry, they are not destitute or starving. The government has provided building materials, and the people themselves have built new homes with dirt floors, clay roof tiles, and wood-and-mud walls. Assistance is also coming from the Evangelical Committee for Aid and Development, which is getting some support from evangelical communities in the United States.
The militiamen in the settlement said they felt safer now that their homes were grouped more closely together than they had been before.
One of the militiamen said that while chasing after a cow which had broken out of the settlement in the 95 degree heat recently, he and some of his men had come across about 15 contras, some of them carrying Israeli-made Galil assault rifles.
Having been sighted, the contras returned to the border. This might not have been the case had they been operating farther north along the most heavily contested parts of the border.
Only 10 miles east of here, at San Francisco del Norte, the contras last year killed 18 militiamen in a single attack.