FICTION : CONTINENT by Jim Crace (Harper & Row: $14.95; 144 pp.).

Here are seven related short stories that arrive on our shores already wreathed in praise. Jim Crace’s “Continent” won England’s Whitbread Prize for the best first “novel” of 1986, and the David Higham Prize for the year’s best first work of fiction. “Continent” seems more strangely native to our New World, though, than to the Old.

The stories take place, for one thing, in an exotic locale that seems to be Latin American, although the fanciful names suggest some generic Third World. And Crace dips his pen in an unstable mixture of fiction and fact, a blend made popular south of the border by the “magical realists” of the Latin American “boom.”

In “Cross Country,” for instance, a visiting Canadian schoolteacher, who amuses the villagers by his jogging, is suddenly pitted in a dramatic footrace against a native on horseback. Government soldiers in another story whisk an innocent man off the street into prison--where he succeeds in taking ingenious revenge. History and fantasy intertwine playfully here, and frighteningly. Like the mythical village of Macondo in Gabriel Garcia Marquez’s fiction, this “Continent” is another “intricate stew of truths and mirages,” and similarly captivating.

Crace writes gracefully: “A fistful of grit he scattered in the grass so that it fell among the leaf joints like sleet.” And he tells a good story. An aged calligrapher of the dying language Siddilic discovers that his work, pried loose from storefronts by visiting foreigners, is selling for high prices in America, especially in Chicago. A government minister orders the calligrapher to produce a vast amount of new work, to be sold abroad by the government. So the poor man, exhausted, is compelled to buy local forgeries of his work and pass them on as his own.

Crace’s language is alive, a distinctive voice, an engaging character in itself. Life not only is the subject of, but is subject to, his artful words. We welcome his new-found “Continent” to our maps.