President Bush yesterday outlined a package of initiatives to boost the economies of Latin American nations, including forgiving "substantial" portions of the $12 billion they owe the U.S. government and inviting them to join in a hemisphere-wide free-trade zone.

He called the debt relief plan "a way out from under the crushing burden that slows the process of reform" toward democratic governments and free-market economies in Latin America.

A free-trade zone offers "a prescription for greater growth and a higher standard of living in Latin America" and "new markets for American products and more jobs for American workers," Bush said during a speech in the White House East Room.

The third part of his plan involves efforts to encourage Latin nations to open their economies to foreign investment that will help them prosper.

The Bush package, which includes little new money, was timed to focus attention on Latin America in advance of the summit meeting of industrialized nations in Houston next month that will be dominated by discussions of the new order in Europe. Administration officials said the president wanted to ease concerns of Latin officials that their problems were being forgotten as world attention was drawn to the enormousness of political and economic changes going on in Eastern Europe and the Soviet Union.

But Republican congressional sources indicated that there was a domestic political reason for the timing as well, noting that the speech was put together hurriedly following the uproar that was generated by the president's retreat Tuesday from his campaign pledge of no new taxes and perhaps was meant to deflect attention from that policy shift.

The package was unveiled to an audience of diplomats, administration officials and business leaders, all of whom were invited yesterday morning. The speech drew praise from both business leaders and Latin American and Caribbean diplomats.

"From what the president said, I have the feeling that the United States is beginning to look at the problems we have in a very direct way," said Ambassador Keith Johnson of Jamaica, whose country was singled out by Bush as one that could benefit from the debt relief plan.

Richard Feinberg, president of the Overseas Development Council, which has often been critical of U.S. policy in the region, also praised the speech, calling it "a conceptually exciting and progressive initiative that is appropriate for the 1990s."

In writing down official debt, the president offered to refinance loans the United States has made under its foreign aid programs. Recognizing that the value of the debt has declined, the United States would cut the principal owed by nations that meet certain conditions -- basically a subscription to free-market economic principles -- and offer a shortened payoff schedule for the rest of the debt.

Treasury Secretary Nicholas F. Brady, meeting with reporters later, hinted that the same formula could be used to reduce some of the debt Eastern European nations such as Poland and Hungary owe the United States and other governments.

On the trade front, Bush promised "deeper tariff reductions" for products of interest to Latin nations in global free-trade talks known as the Uruguay Round. Beyond that, he held out the "long-term goal" of a "free-trade zone for the Americas" that would build on the existing free-trade pact with Canada and one that will be discussed next year with Mexico.

Bush also proposed a new lending program by the Inter-American Development Bank (IDB) for nations that remove barriers to foreign investment and a $300 million investment fund that would be given to countries that have instituted market-oriented reforms and sold state businesses to private investors. The United States would contribute $100 million to the fund -- the only added spending in the entire initiative -- and Bush said he would ask Japan and the European Community to kick in the other $200 million.

Bush also said the IDB should join the World Bank and International Monetary Fund in supporting programs under the Brady plan -- named for the Treasury secretary -- to reduce debt owed to commercial banks.