By LARRY ROHTER

GUATEMALA - He was an icon of the Latin American left and an early victim of the cold war. But more than 40 years after being ousted in a coup sponsored by the Central Intelligence Agency, and nearly a quarter of a century after he died in exile, Col. Jacobo Arbenz Guzman has finally come home.

"So that we may advance toward national reconciliation," as President Ramiro de Leon Carpio put it, Arbenz's remains were exhumed from a cemetery in El Salvador and returned to Guatemala and a hero's welcome on Oct. 20.

To shouts of "Welcome home!" and "Long live Arbenz! " thousands of people crowded into the streets and National Palace to catch a glimpse of his horse-drawn coffin.

Arbenz had been forced to leave Guatemala in humiliating circumstances in June 1954, stripped to his underwear at the airport by his enemies. The son of a Swiss immigrant pharmacist, Arbenz joined the army as a teen-ager and was elected President in 1950 on a platform of social reform, but was overthrown after trying to carry out a land redistribution program that alarmed the Eisenhower Administration and the powerful United Fruit Company.

For those reasons, the former President's tomb here, a simple white pyramid just to the right of the main entrance of the General Cemetery, has quickly become a magnet for Guatemalans who seek an alternative to the four decades of right-wing rule that have followed.

On a recent Sunday afternoon, the Davila family, four generations strong, was among those who came to pay their respects to the man popularly known as "the Soldier of the People"

"There has never been another like him, with such great ideals," Gerardo Davila, 93, told his great-granddaughter, Ana Lucia Bran, 8. "Since his fall, there has been no progress in this country, only stagnation."

Soon, the Davila family was joined by Matias Perez, 83, and his son and daughter-in-law. Had Arbenz been allowed to remain in power, Mr. Perez said somberly, Guatemala might have been spared its 35-year civil war, still unresolved, in which more than 100,000 people have been killed, mostly by the Guatemalan military.

"In Arbenz's time there were no guerrillas, because he loved the people and worked for them," he said.

Mr. Perez paused, and then began to sob. "I loved him very much," he said, wiping his eyes. "And I hate that other one over there," he added, gesticulating toward a large gray mausoleum about 50 yards away.

There, bunches of wilted flowers and a metal tablet mark the burial place of Col. Carlos Castillo Armas, who was recruited by the C.I.A. to overthrow the Arbenz Government and who ruled until he was assassinated in July 1957. "To the Liberator of Guatemala, Anti-Communist Martyr," the plaque reads.

Those who had a hand in bringing the remains of Arbenz back to Guatemala deny that his placement so close to Castillo Armas was a posthumous act of revenge. But Arnoldo Ortiz Moscoso, the Arbenz family lawyer, acknowledged, "There is a certain irony in the fact that Arbenz is on the right when you enter and Castillo Armas on the left."

To the National Liberation Movement, the political party of Castillo Armas, Arbenz's mere presence in the cemetery is an affront. The return of the "cowardly" leader of a "bloodthirsty" Government can only "bring bad results and national discord," complained the right-wing group's longtime leader, Mario Sandoval Alarcon, who took part in the 1954 coup.

But nearly every other political force in Guatemala now seems to be rushing to stake a claim to the Arbenz legacy. Former President Vinicio Cerezo, a Christian Democrat, has just published a largely favorable assessment, and during the recent presidential election campaign the main slogan of the left-wing New Guatemala Democratic Front was a vow to resume the tasks that Arbenz left unfinished.

Somewhat surprisingly, the Guatemalan military has also made an effort to link itself to Arbenz. Gen. Marco Antonio Gonzalez, the Defense Minister, went to the military airport here to receive the remains, made a point of announcing that the former President had recovered his military rank and medals, and sent a cadet to speak at burial ceremonies.

"This is an army that is trying to reinvent itself because it has a terrible image problem and is going to have to find something new to do once peace comes," said a foreign official here. "Arbenz provides one of the few positive memories people have of the armed forces."

Even some of the children of wealthy landowners whose estates were confiscated by the Arbenz Government have found good things to say about their former foe. Business leaders have recently praised him for building a dam, a port and a highway to the Caribbean coast, projects that were intended to break the hold of the United Fruit Company over the Guatemalan economy and are now cited as models of modernization and "nationalist development."

Further efforts to rehabilitate the image of Arbenz are under way. Mr. Ortiz Moscoso intends to organize an Arbenz Foundation to "perpetuate his memory through a center of documentation," and intellectuals are calling for his restoration to the history books from which he has been largely stricken.

"Ours is a country that lacks leaders the people can believe in, that does not have a Washington, a Jefferson or a Lincoln," Mr. Ortiz Moscoso said. "I'm convinced the Arbenz phenomenon is in part an answer to this need to find heroes and symbols -the deader the better, because then they do not disturb people."