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Translated plot from the Japanese version's manual:

The Aliens are back!
December 2634. It seemed as if the Earth has finally escaped from the hand of black magic a year after the battle with the mysterious alien army.
One day, a strange radio message comes in from General Hal of the Federation Troops as he is heading for the base ruins in South America to oversee the GX Army's seventh military exercise.
" Allied GX troops are suddenly attacking us. No, it can't be!! They're not human! They must be..."
The message cuts off there. The top brass of the Federation Troops feel very strange about this message from the General and once again they deploy Bill and Lance, the greatest Contras in history.
A helicopter carrying the two men is sent out on a top secret mission. As it approaches the training site, it lands, drops off the two men, and takes off again immediately. There, they witness the tragic sight of the Federation Troops Facility completely in ruins. Just then, several soldiers came out of hiding to attack.
"Those madness-filled eyes. Their blue discolored skins. They may look human, but their souls are now something else..."
Bill began shooting. Just then, the two men saw the shadow of a vile creature that escaped from the inside of one of their aggressors' body.
"This is..."
The nightmare from last year has returned.
"I thought we wiped out these strange freaks."
"The two men glanced at each other and began to run.
The alien creatures that were believed to had been destroyed are alive again. The battle between the Contras and the aliens continues.

Plot from the American version's manual

Sipping cold lemonade with a couple of native lovelies, Mad Dog and Scorpion (Guerilla Warriors Extrordinare) relax on a Rio beach and boast of how they destroyed the vile alien war monger, Red Falcon. Little do they know that Red Falcon didn't flee with his pointed tail between his legs. Instead, he tactically retreated to round-up ruffians of the universe, friends from all walks of war, to mount a second assault on planet Earth.
One of these new recruits is Jagger Froid, a demented alien from the Black Hole Galaxy, who dishes out punishment with a laser sharp tongue. Red Falcon has also shuttled in The Babalu Bestructoid Mechanism, a giant alien attack tank, which was the primary weapon used to disintegrate the innocent solar system of Tralala.
But the genius behind the Red Falcon's Earth conquering concept is his plan to have thousands of intergalactic warriors seep into the the brains of the U.S. Army. It's a mind contamination trick which has already taken command of U.S. Forces at Fort Fire Storm.
How do we know that all out soldiers have been brain trashed? You can see it in their eyes.
Now, if Mad Dod and Scorpion fail to recuperate from their months on the beach in time to destroy Red Falcon's G.I. fortified Hate Nest, his sinister scheme will permeate the world's mightiest power (nuclear missile silos included).
And if that happens, we'll all be pushing up daisies.