A butterfly project in Mexico's endangered rain forest typifies the small-scale projects designed to create alternatives to cattle ranching and logging. In one poor town deep within the jungle, butterflies have transformed how residents view the jungle. PNS associate editor Joel Simon is researching Mexico's environmental crisis for a book "Bordering on Destruction: Exploring Mexico's Environmental Crisis" to be published by Sierra Club Books in 1996.

CHAJUL, MEXICO -- As dusk settles on this town deep in the Mexican jungle, butterflies dance along the river bank and the town erupts in hot pursuit.

Moises Vazquez Cruz, 13, stalks the jungle around his family farm. Domitila Santos Flores hunts them with her three daughters. Nicodemus Cruz, a 65-year old corn farmer with aching knees, nabs any butterfly unfortunate enough to land near his home.

"The whole town is crazy for butterflies," says Cruz. "I hope we never run out."

What has captured the town's imagination is not so much the colorful insects themselves as the cold cash shelled out by biologist Roberto Ruiz who comes each week to buy them. In the last nine months, Ruiz has spent $20,000 for the butterflies. The insects are shipped to Mexico City where they are carefully catalogued, warehoused and eventually sold to museums and international collectors.

The controversial project is part of a last ditch effort to save what remains of Mexico's tropical rain forest. In the last three decades the Lacandon jungle, in Mexico's southeastern corner, has been reduced from about 3 million hectares to less than 600,000. Montes Azules S.A., the company which markets the butterflies, hopes to develop a series of small scale projects designed to give poor residents an alternative to logging and cattle ranching.

More is at stake in the region than the forest itself.

The western slope of the Lacandon is home to the land-hungry Zapatista rebels. Despite a recent breakthrough in the peace negotiations between the Zapatistas and the government, most analysts believe that peace depends on finding new strategies and markets. The land can no longer support another generation of corn farmers and cattle ranchers.

In the meantime, the pressure on scarce resources is mounting. Zapatista supporters, driven from their towns by an army incursion, are squatting in the last remaining jungle inside the boundaries of the Montes Azules Biosphere Reserve. And the state government has lifted a logging ban, authorizing the logging of some six million cubic meters of tropical hardwoods this year.

"The jungle has no future," says environmentalist Homero Aridjis, head of the environmental Group of 100 in Mexico City. "The oil companies, the Zapatistas, the loggers -- everyone wants a piece of it."

Others are more optimistic. Ronald Nigh, an anthropologist and expert in jungle agriculture, thinks the campesinos are acutely aware of the need to diversify their economy.

In the Las Margaritas canyon, a number of communities have banded together to produce and market organic coffee under their own label. In the Lacandon Indian community of Lacanja, five families have set up bungalows for ecotourists. They offer guided excursions to the nearby Mayan ruins of Bonampak.

Nigh thinks it is the government which is blocking innovation and diversification. Last month, a pro-Zapatista peasant group proposed a developmental program involving organic coffee and ecotourism. The state responded by offering to fund chicken and pig farms.

Montes Azules, S.A., the company behind the butterfly project, is considering other small scale projects including producing perfume from a jungle fruit. The butterfly project is unique, however, because it challenges one of the cardinal assumptions of conservation -- that rare species should be untouchable. The project's designers argue that a much greater threat to the insects is the destruction of their habitat. They are killing a few butterflies in order to save many.

The income generated from capturing butterflies has helped change the perception of the jungle in the town of Chajul. Many families take in between $25 and $200 a month -- a substantial amount in this town with no plumbing or electricity.

Leonardo Cabrera caught five agrias, an extremely rare butterfly of luminescent fuscia and deep blue. He used the $500 he earned to buy a gas-powered generator. Ricardo Biseco's teenaged son convinced his father he could make more money collecting butterflies than cattle ranching. Biseco decided not to clear more jungle land.

To participate in the butterfly project, the town agreed to set 120 hectares of jungle aside as a community reserve.

The project is not without critics. Some call the biological research station at Chajul a jungle playground for Mexico City's environmental set. Others charge the designer of the project, renowned butterfly collector Javier de la Maza, with conflict of interest.

Jose Warman, who directs the project in Mexico City, argues that the project's long term success requires finding markets for the butterflies which, in turn, requires de la Maza's expertise. His company has created a CD ROM guide to Mexican butterflies and is developing a butterfly site on the Internet. Collectors will be able to peruse on any butterfly collection on-line and order any insect which catches their fancy through the Internet.