Debt is still a monkey on Latin nations' backs. GLOBAL MARKETS

Forgive us our debts. The next president of the United States is going to hear this request more and more from deeply indebted, economically struggling nations in the third world. And the next president's likely secretary of state - James Baker III if George Bush wins, Bill Bradley if Michael Dukakis wins - already has a view of how to deal with debtors.

For Mr. Baker, former secretary of the Treasury, it is the Baker Plan, a steady-as-she-goes policy under which debtors make economic reforms in return for $20 billion-plus in new loans from commercial banks and institutions such as the World Bank. For Mr. Bradley, Democratic senator from New Jersey, it is forgiveness of 3 percent of interest and principal on the debt in return for economic reforms.

But regardless of who is installed in the corner office at Foggy Bottom, the plea from the developing world is going to continue to be: Help us get the debt monkey off our backs. Last weekend, seven major heads of state, led by Brazil's Jos'e Sarney, issued a statement saying the $420 billion they collectively owe to foreign banks is a threat to the survival of their democracies and is causing a ``serious deterioration in the quality of life of the region's peoples.''

Javier Murcio, a specialist on Latin economies at Data Resources Inc. of Lexington, Mass., says that ``whoever is secretary of state in the next administration will face new democracies in Latin America, some of them very shaky, and all with a tremendous need for some form of economic relief.''

Latin America at the moment, he says, is going through recession, high inflation, and a worsening debt-servicing situation. ``We're talking about the general impoverishment of 400 million people,'' Mr. Murcio says. If it persists it would make Latin America look like ``sub-Saharan Africa'' economically in the 21st century.

A current tour of the Latin economic horizon by Murcio looks like this:

Mexico is struggling with an economic adjustment plan that could produce beneficial results within two years, if financing is available.

Brazil, flush with new financing, is about to launch an ambitious economic adjustment program.

Venezuela, facing collapsing oil prices and a change of administration, could experience some of the problems it so far has escaped.

Peru faces ``terrible economic chaos,'' with no clear economic program.

Argentina is undergoing adjustment similar to that in Mexico, but political problems could derail these efforts in the short term.

Chile is doing fine at the moment but could face difficulties in transition to democracy.

Each time loans are restructured -such as this week's Citibank-led deal covering two-thirds of Brazil's $120 billion in debt or last month's $3.5 billion bridge loan to Mexico - the total of outstanding debt mounts. It is now estimated at $1.2 trillion among less-developed countries (LDCs). Paying that money back is all but impossible for nations laboring just to keep their economies afloat. So there is more talk of debt forgiveness.

``There is less fear of using the word `forgiveness' than there was six years ago'' when Mexico teetered on the brink of default, Murcio says. ``But still no one has a clear idea of how to put it together.''

In general, debt forgiveness or debt relief would begin to wipe the slate clean, recognizing what most bankers admit privately: that the loans are worth less than half their face value on the secondary market anyway. But banks are reluctant to take the losses, so the restructuring and rolling over continue, and LDCs cycle through periods of borrowing, spending, austerity, and the resulting political instability.

The one group that is improving its position, however, is the banks that lent the money in the first place. LDC loans represent less and less in relation to bank assets, so defaults among debtors would hurt the banks less.

Lately, the World Bank has been taking up some of the slack left by the banks. The World Bank lends to indebted countries that cannot get money through commercial banks. Critics, such as economist Paul Craig Roberts writing in the Nov. 7 Business Week, say this is simply causing a new debt crisis between the LDCs and the World Bank to be created on top of the existing debt crisis.

But the World Bank says it does not want to become entangled in the debt web. It is lending only to help nations through tight spots, says Joseph Wood, vice-president in charge of financial policy at the World Bank. Taking the place of the commercial banks, says Mr. Wood, ``is not a burden we can shoulder. We help all parties find a solution, but we are not trying to fill the gap ourselves.''

The World Bank, he says, believes that while debt relief would be helpful, ``a fundamental solution to the problem will require far-reaching reforms within these countries.'' That is one point on which almost every party can agree. But carrying it out is another matter.

Noting the vicious cycle in Latin America of borrowing, spending, inflation, austerity, and instability, Jeffrey Sachs, a professor of economics at Harvard University, says that what is needed is debt relief to reward good behavior.

``I don't foresee outright debt forgiveness,'' Dr. Sachs says. ``But for countries that get their act together, we should give debt reductions as a promise that there is a future beyond the debt crisis.''