Out of the blue, more or less, President Bush has offered an olive branch to Latin American and Caribbean nations, and they have eagerly seized it as "a turning point in inter-American relations."

The three key elements in the package: a free-trade zone, reduction or cancellation of $12 billion in U.S. government loans to the region and a new effort to stimulate foreign investment.

A high administration official admits that the timing, before the Houston economic summit tomorrow, was no accident: Bush wanted to send a strong political signal to Latin leaders that they are not being forgotten in the excitement over events in Europe. This being a cynical town, observers cite another ulterior motive. "We don't have enough at stake to push official debt reduction for Poland," says Latin American expert Richard Feinberg, "so we are taking this circuitous route."

What Feinberg means is that one of Bush's priority goals at Houston is to push West Germany and other European powers toward reducing Poland's $40 billion debt overhang, of which about $30 billion represents European government loans. The Poles argue that their efforts to move toward a free-market economy are being crushed by these obligations.

Bush's proposal for reduction of bilateral government debt in Latin America "marks a sea change in our attitude," said Treasury Undersecretary David Mulford. "It's recognition that if we are going to successfully tackle the debt issue in Latin America, we've got to tackle the question of bilateral debt." The Brady Plan is focused on countries with heavy debt to commercial banks. But many Latin nations owe 80 percent to 90 percent of their total debt to government sources, including the multilateral banks.

"But that door -- any thought of writing down World Bank loans -- is now even more firmly closed," Mulford said. On the other hand, when a new investment fund to be launched through the Inter-American Development Bank (IDB) is operating, the Treasury anticipates that payment for some of the written-down U.S. loans will be accepted in local currencies. The United States is offering a $100 million addition to existing IDB money to push the idea of the investment fund.

"We think this initiative will change the way the world looks at bilateral debt," Mulford said.

Feinberg's Overseas Development Council estimates that Latin America's interest payments on official debt would be cut $400 million a year, assuming that concessional U.S. loans are cut by 50 percent -- a figure that Treasury officials privately use -- and nonconcessional loans (such as Export-Import Bank advances) are reduced 25 percent. If other lenders match U.S. generosity, the Latin countries would save four times that much, or at least $1.6 billion a year in debt service costs.

Commercial bankers, who for a long time have contended that official lenders should be taking the same kind of debt reduction "hit" they have been asked to absorb, are pleased. A reduction of the official debt service load not only should give the Latin American economy a lift, but since money is fungible, it may also make it marginally easier for these countries to service their larger commercial bank debt.

Latin American politicians are tickled pink with the Bush initiative. They see a global trend toward protectionism that might be counteracted by a free-trade zone with the United States, already their biggest customer.

The Inter-American Dialogue, which periodically brings together concerned North and South American citizens, said last week that Bush's proposal for "a new economic partnership in the Americas is welcome, timely and potentially significant." Former Treasury official John Petty, a member of the Dialogue, said he regarded the Bush initiatives as a "historic overture," especially in view of current budget restraints.

But the proposal for a regional free-trade zone in Latin America, which involves selected groups of countries there, causes lifted eyebrows among America's trading partners. C. Fred Bergsten, director of the Institute for International Economics, thinks there is the risk that a regional free-trade zone will make the current round of international trade negotiations harder to complete. "Once you go down the road of special deals, there's the chance they will proliferate," Bergsten said.

The Mexican free-trade zone -- for which Bush's friend, President Carlos Salinas, had lobbied vigorously -- can be considered, like U.S. deals with Israel and Canada, a special exception to America's commitment to the multilateral trade principle.

But a Latin American regional pact with the United States would clearly be a major departure in post-war policy stressing multilateral trade negotiations, notably the current Uruguay round negotiations. U.S. officials stress that their offer to Latin America would come only after completion of the round.

Administration officials insist "we have no preference for regional trading blocs," but acknowledge that others may perceive things differently. A high official argues that Bush is trying to encourage the Latin American countries to drop trade barriers among themselves first as a condition of reciprocal lowering of trade restrictions with the United States. And as evidence that the United States puts the Uruguay round first, American trade negotiators plan to ask the Latin countries to identify products of most interest to them, and would then bring them up in Uruguay round talks.

Latin American officials, pressing hard for the free-trade arrangement, contend that, in effect, they have been denied access to European markets. They fear that things may be even worse for them with Europe 1992, when Western Europe will be focusing on trying to integrate Eastern European economies.