The conventional wisdom in banking circles, strongly supported by Treasury Secretary James A. Baker III, is that the Latin American debt problem is under control, and that there is now little danger that it will trigger the kind of economic disaster once thought possible.

Baker said in an interview, "My view is that we're in considerably better shape than we were in August 1982, and that the principles that underly the case-by-case approach are still very valid if you're going to solve the problem on the private side.

"It's easy for anybody to say that we ought to solve the debt problem on the official side: that puts it on the taxpayers of the creditor countries."

But has the crisis really been resolved? Richard Feinberg, vice president of the Overseas Development Council, assesses the situation this way: "In terms of 1982 versus 1987, I'd say that the banks have dug out from under. But paradoxically, the borrowing countries are still mired in debt."

Feinberg points out that commercial banks have been gradually reducing, not increasing, their exposure of Third World loans relative to their total business, as they were supposed to do under the strategy devised by Baker. For the debtors, that means their ratio of loans to gross national product has been declining.

"People who look at the problem from the banker's side tend to feel that, 'well, you know, we're making gradual progress.' And that's right: the banks have been making gradual progress. But people who look at it from the debtor-country point of view see unresolved problems," Feinberg said.

Brazil's declaration early in 1987 of a moratorium on paying the interest on $78 billion it owes to commercial banks came as a shock to some in the financial community. It destroyed the illusion that, somehow, things would right themselves. Economic growth in Brazil in 1985-86, hailed by some as evidence that the system was "working," has now stalled.

Nonetheless, Baker said, the international financial system is "on sounder footing," because the banks have increased their capital and reserves and the International Monetary Fund, World Bank and commercial banks "have demonstrated their support for debtor reform efforts to improve growth and are working closely together to insure continued progress on the debt problem."

Essentially, Baker wants to stick with the strategy he outlined in a now-famous speech in Seoul in October 1985. The Baker plan called for $29 billion in additional loans by the commercial and multilateral development banks to a list of 15 key countries over a three-year period. In return for more loans, the "Baker 15" pledged to undertake basic economic policy changes to assure economic growth.

The countries are Argentina, Bolivia, Brazil, Chile, Colombia, Ivory Coast, Mexico, Morocco, Peru, Uruguay, the Philippines, Ecuador, Nigeria, Venezuela, and Yugoslavia.

In tune with Baker, William R. Cline of the Institute for International Economics argues that while some new techniques may be called for to mobilize the flow of money to debtors, the basic strategy followed since 1982 is still the right one, although he concedes that the "impressive" adjustments made by debtor countries have often also been painful.

Specifically, Cline rejects the idea that "the time has arrived for programs of widespread debt forgiveness," as suggested by banker Felix Rohatyn of Lazard Freres, Sen. Bill Bradley (D.-N.J.) and others in Congress. Bradley has contended for the past year that "piling new debt on top of old" only adds to the problem.

"I would argue that it makes good sense to act now" to provide debt relief, Bradley said. His plan is based on forgiveness of 3 percent of the principal and 3 percent of the interest per year over a three-year period.

Another key player who shows concern about current developments is Michel Camdessus, the new managing director of the International Monetary Fund. Camdessus believes it will take longer to resolve the debt problem than was once believed and that efforts to solve the crisis must be stepped up, especially in Africa, where the debt totals are less dramatic than in Latin America but have equally serious potential consequences.

The history of the past five years shows that most of the 15 countries expected to participate in and benefit from the Baker Plan haven't been able to achieve sustained economic growth. As the Morgan Guaranty Trust Co. observed, oil-exporting countries among the 15 were hit hard by the 1986 drop in oil prices, and 10 of the largest ones now have a combined current account deficit of $13 billion.

The bottom line, as the ODC's Feinberg sees it, is that there is now a "negative" flow of funds to the poor countries: the Third World is actually sending back around $30 billion a year to the rich world, mostly in interest payments on their huge debts.

Worst of all, as Morgan Guaranty says, real economic growth in the industrial world is sluggish, and protectionism -- which discourages Third World exports -- is on the rise: "There is little reason for confidence that any of these adverse trends will soon shift in the debtor countries' favor. It follows that improvement ... of their financial burdens will be a long, drawn-out affair."

The optimists who side with Baker believe that a recent $2 billion bank package for Argentina belies the contention that the banks are pulling out. They believe a similar new package will be fashioned for Brazil, and that a new "menu" approach -- modifying the Baker Plan -- will proliferate.

This approach allows the commercial banks to shift some of their outright loans into debt-to-equity swaps, or "exit bonds," or any number of other new formulas that will keep bank investment growing in the Third World.

Critics of the Baker strategy are skeptical that the "menu" options, by themselves, will be enough. They argue that the banks are shunning the continuance of their former major financing role in the Third World. Instead, they think that the World Bank, the IMF and other development banks must bear an increasing share of the burden of lending to the Third World.

The unspoken implication of that is precisely what Baker fears: if the private sector withdraws, governments -- and thus ultimately their citizen-taxpayers -- will bear an increasing share of the burden of helping recovery in the Third World.

At the moment, the IMF has a "negative" financing role: under current policy, if no changes are made, the IMF will be a recipient of large net repayments this year and next from the Latin debtors, including $2.1 billion from Brazil alone, according to Rimmer de Vries of the Morgan Guaranty Bank.

The IMF also will be receiving almost $2 billion a year from Africa, which in effect is recycled right back across the street to the World Bank.

So something new is likely to be shaped up for Africa, with the IMF in the lead: the Venice summit declaration went so far as to label the debt problems of some of these countries "unmanageable," the first-ever such explicit reference.

The World Bank boosted its loans to the major Latin American borrowers by $1 billion last year, but in the view of many, it can and should do more. Moreover, the bank will soon need a general capital increase, especially since its ability to boost lending will be restrained by the depreciation of the dollar, according to World Bank President Barber Conable.

De Vries points out that both the IMF and the World Bank should be able to jump into the void left by the commercial banks: the IMF not only has available a reflow of money from older loans, but it can tap Japan's wealth, that country having offered to lend the IMF large sums out of its current account surplus.

Japan is also making additional funds available to debtors through its own Export-Import Bank, and through the World Bank and the bank's concessional affiliate, the International Development Agency.

Defenders of the present strategy agree that growth is the objective, but say that the debt relief proposed by Bradley would be counterproductive. For principal debtors such as Mexico and Brazil, Cline says, great efforts have been made and substantial results achieved.

"It would be tragic to jettison these gains by failing to stay the course," Cline recently wrote. A similar sentiment was articulated by the new chairman of the Federal Reserve Board, Alan Greenspan.

In a commentary for The Economist on June 27, former presidential economic adviser Martin Feldstein wrote:

"The world has been muddling through the Latin American debt problem with reasonable success for nearly five years now. The frequently predicted crisis, in which debtor countries repudiate their debts and big banks are no longer able to attract deposits, has not occurred."

It cannot be denied that the original 1982 debt strategy -- largely managed by the IMF under the stewardship of its former managing director, Jacques de Larosiere -- channeled emergency aid to debtor countries, helped many of them adjust to new circumstances, and prevented the feared disruption of global trade and the international financial system.

De Larosiere, by asserting leadership and through the strength of his personality, kept the banks in line.

The Baker Plan was an important modification of the 1982 strategy, because it moved from emergency, short-term fixes to the concept that regenerating economic growth in key debtor countries was at the heart of the problem. It also displayed an understanding that the big industrial nations, through the World Bank and IMF, had a responsibility for assuring a continuing flow of money to the Third World.

But whether the Baker Plan will be enough over the next few years continues to be a subject of debate. What seems clear is that the commercial banks, regardless of what they say publicly, are fed up with the Baker Plan.

They resist the Feldstein notion that the "muddle-through" strategy can be validated if they keep boosting their loans to poor countries by 3 percent to 4 percent a year in order to maintain the current ratio of poor country debt to poor country GNP.

Horst Schulmann, director of the Institute of International Finance Inc., the official Washington lobby for big bankers, indicates that his clients are gun-shy from rollovers, reschedulings and actual losses. Now, they want to pick their spots for new loans.

"What we are saying is that if conditions are right, if there are sound projects, there is a lot of money in international capital markets that can be mobilized," Schulmann said in an interview. "But the developing countries will have to compete with all the others, and make it attractive for commercial lenders."

As detailed in a report by the institute's board of directors in June, the commercial banks' formal position is that the time has come for the World Bank and the IMF to take on the burden of loans for general or balance of payments problems, while the banks revert to the more conventional posture of lending for specific projects or investment purposes.

"Since 1982, banks have rescheduled principal obligations, rolled over trade and interbank lines, reduced spreads and fees, and participated in general purpose concerted lending. Despite these actions, banks have never envisaged playing the leading role in providing permanent balance of payments finance, and being the residual lender," the report by the institute said.

"Commercial banks cannot continue to accept this responsibility. ... Commercial banks cannot play the role of 'lender of last resort,' filling a residual financing gap."

Those who have trouble reading between those lines have only to consider Citibank President John Reed's action in May, setting aside large loan-loss reserves for Third World debt.

The logical explanation for Reed's move, along with that of other banks following his lead, is that major banks have finally faced the reality: many of their Third World loans carried at full value are worth only a fraction of the original debt, or will not be paid off at all. Surely, then, the commercial banks will resist new loans, whatever their pro forma support for the Baker Plan.

Even Feldstein's "muddling through" approach acknowledges that some debt, if not "forgiven," must be "forgotten" as part of a strategy to assure his infusion of new capital.

Feldstein would require no repayments of principal in debt rollovers, except in ways that allow the borrowers to retire their own loans at a discount, subsidize rates on new commercial loans, and allow debtor countries to continue to borrow to pay the existing debt servicing burden.

Feinberg's view is that it was not unreasonable, when the crisis first broke out in 1982, for the U.S. government to put primary emphasis on keeping the international financial system stable.

"Five years later, though, it seems to me, I would argue that, okay, enough progress has been made in that area. The banks are not entirely out of the woods, but the situation has improved. The reserve set-aside also strengthens the banks' positions, a generally welcome development. So I think this should free up U.S. policymakers and also the World Bank and the IMF to now give more attention to the developing country's side of the equation.