A two-hour battle against a suspect band of insurgents winds up with no evidence the enemy was ever there. As Mexico's army deploys across the countryside in search of 200 members of the Popular Revolutionary Army (EPR), rumors abound, creating a mood of near-hysteria. PNS correspondent Joel Simon reports from a small town near the Guerrero state capital of Chilpancingo, where the counterinsurgency campaign is in full force. Simon's book on the Mexican environmental crisis, Endangered Mexico, will be published by Sierra Club Books next spring. (Third of three articles on the growing role of the military in Mexico).

HUITECO, MEXICO -- Hundreds of Mexican soldiers waged a pitched battle earlier this week against an unseen enemy on a hillside outside the Guerrero state capital of Chilpancingo. As darkness fell and soldiers set up camp for the night, those who had fought acknowledged there had been no visual sighting of the guerrillas and no returned fire. The army, supported by helicopters, seems to have been shooting at shadows.

This is the face of Mexico's new counterinsurgency campaign in the countryside as an army -- and a society -- nervously confronts the elusive and violent Popular Revolutionary Army (ERP). The guerrillas first appeared June 28 during a ceremony commemorating the one year anniversary of the massacre of 17 peasants by state police. A week ago, 30 masked guerrillas killed two policemen just up the road from Chilpancingo during a coordinated strike that left 14 dead and 23 wounded in three states.

The events that led to the battle on Tuesday, Sept. 3 began at 3:30 that afternoon when a taxi driver, Alfredo Bravo Cruz, reported seeing ten men in camouflage uniforms jump from the brush and run across a stretch of road about ten miles east of Chilpancingo. "It was them, the masked ones," said the 46-year-old army veteran.

Twenty minutes later, 15 State Judicial Police, some in snakeskin boots and carrying everything from Uzis to ivory-handled pistols, had deployed across a nearby dam towards which the rebels were seen running. Soon a military helicopter began circling over the pine-covered valley, unleashing a single round which sent the judicial police scrambling for cover.

By 4:30 three army trucks had arrived at the dam and 100 soldiers fanned out, slowly climbing the ridges in an effort to trap the small guerrilla force in the valley.

Five miles northwest, at the end of a canyon that opens into a series of undulating hills, a truckload of 40 soldiers showed up at the tiny town of Huiteco, hoping to cut the rebels off.

The leader of the army force, a general who arrived in an armored vehicle, asked to borrow a reporter's cell phone to call the capital. As he placed the call, a soldier came running toward him. "There they are, there they are!" he yelled.

"Who?" asked the general.

"The masked ones," said the soldier.

Without a moment's hesitation, the general gave the order: "Fire!"

Instantly machine gun bursts rang through the hills as soldiers took up positions in cornfields and behind trees. A frightened radio operator, his hands shaking and his gun left carelessly in the grass, began yelling into the telephone receiver. "I have a number one priority -- combat, combat!" he said. "Send me an eagle, send me an eagle."

Minutes later, three helicopters began circling the battlefield, periodically firing into the brush. Soldiers and judicial police officers took cover in the yard of Jose and Cleotilda Molina, a peasant couple whose house lay in the middle of the combat zone. Turkeys squawked while a pig tethered to a tree let out a periodic whine.

In the midst of the shooting, a half dozen judicial police began tearing apart the Molinas' house, looking for signs that the couple had been harboring the guerrillas. "We don't know any masked people," insisted Cleotilda, 70. "It's just the two of us here; we're old, we're peasants, we're with the government."

But the police soon found what they were looking for: a pair of muddy military boots and two ski masks. "Now I'm afraid," admitted Cleotilda as police officer hustled her husband outside for further questioning. "They sell the masks in the market. It gets cold here."

After two hours of intermittent firing, the sunlight began to fade and a chill descended on the mountain hamlet. The soldiers -- now some 300, backed by 100 judicial police -- began to pull back and set up camp on the basketball court in the center of town.

By next morning, Jose Molina had been released but rumors were rampant in the state capital of Chilpancingo. One newspaper reported that 14 people had been injured and six judicial police killed in the fighting. Another reported that eight guerrillas had been killed.

The rumors were promptly denied by the Interior Ministry which issued a press release acknowledging only that the military had been deployed in response to a rebel sighting.

Whoever -- and wherever -- the EPR turn out to be, they have already succeeded in creating an atmosphere of tension in which rumor feeds a kind of national hysteria.

After the firefight in Huiteco, police and military commanders speculated that perhaps the EPR had been massing for an attack on a nearby radio tower. But the general in charge acknowledged he had found no concerete evidence that the rebels had even been in Huiteco -- only the two ski masks and the pair of boots.