A headline was incorrect on a story about the Latin American debt in last Saturday's Business section. It should have said commercial banks were not ready to act quickly to lend more money to debtor nations.

Assistant Treasury Secretary David C. Mulford said yesterday that commercial banks are not prepared to make new loans to debtor nations, despite their pledges of support for the Baker plan.

In a speech prepared for delivery before the Bankers Association for Foreign Trade in Phoenix, Mulford said that, once debtor nations take the requisite steps to reform their economies -- a key element of the Baker plan -- commercial banks "must be ready to lend without delay."

The plan calls for debtor nations to take steps such as selling money-losing state companies, removing trade barriers, enouraging private investment and savings, and reducing inflation to create a climate more conducive to economic growth. In return, multinational lending institutions such as the World Bank and commercial banks are supposed to step up their lending to debtor nations, most of them in Latin America, to provide some of the resources needed to promote modernization and investment.

Commercial banks, which hold about $250 billion of Latin America's $370 billion in foreign debt, have pledged support for the growth initiative unveiled by U.S. Treasury Secretary James A. Baker III in Seoul in October.

"Yet, I am concerned that not enough has been done by commercial banks to assure that, when the time comes, they will in fact be ready to lend," Mulford said.

He said banks have not decided how the loans will be made once countries fulfill their part of the bargain. Nor have the continuing rifts between big banks and smaller banks, many of whom are reluctant to make any new loans to the region, been resolved. Mulford also questioned the wisdom of the big banks' policies requiring all banks that have made loans to a particular country to participate in any new loans.

He said that, under the current system, top financial officials of debtor nations have to travel throughout the United States to "sell their program to virtually every potential lender right down to those with a few tens of thousands of dollars of exposure." Mulford said that much of the selling is a waste of those officials' time.

The Treasury official praised a new program in Chile that encourages the conversion of loans held by private Chilean companies into equity. He also called upon the bankers to come up with other innovations to permit countries to reduce their debt burden without having to use hard-earned dollars that they need for imports and investment.

Under the Chilean program, any investor can buy Chilean loans, usually at a discount from face value, and redeem the loans in Chile at face value -- in Chilean pesos. The investor must use the pesos to pay domestic debts in Chile or invest the pesos in the country.

The loans, usually owed in dollars, cannot be redeemed at the central bank for dollars.

An investor might find a bank or supplier that wants to sell some of its Chilean debts for, say, 75 cents on the dollar. The investor might pay $75,000 for a $100,000 loan and receive $100,000 worth of Chilean pesos from Chile's central bank