Dr. Raul Prebisch, 85, an Argentine economist who had headed both the United Nations Economic Commission for Latin America and the U.N. Conference on Trade and Development, died yesterday after a heart attack in Santiago, Chile.

In recent years Dr. Prebisch advised Argentine president Raul Alfonsin on the nation's $50 billion foreign debt, including policies Argentina should adopt to increase its dollar earnings to pay the debt and reduce its need to borrow from foreign banks.

Dr. Prebisch's most important theoretical contribution to economics were his long-term studies of so-called "terms of trade," which showed that commodity-producing nations steadily lose purchasing power to industrial countries. In turn, diminishing terms of trade hinder commodity-producing countries from creating the wealth needed to diversify and develop.

As a top economic official in Argentina during the Great Depression, he witnessed the steep fall in grain prices that decimated the once-rich agricultural nation.

But Dr. Prebisch's main impact was as a practical economist rather than a theoretical one, according to John J. Murphy, an international economist and executive vice president of Catholic University.

As director of the U.N. Conference on Trade and Development (UNCTAD) in the 1960s, he pushed his theories of the deteriorating terms of trade and won important trade preferences for developing countries from richer nations. He also helped encourage increased funding for regional development banks such as the Inter-American Development Bank, Murphy said.

Dr. Prebisch was born in Tucuman, Argentina, in 1901, and received his education at the University of Buenos Aires. During the 1930s and 1940s, he was one of the leading economic officials in Argentina.

He established and became the first head of the Argentine central bank and revamped the nation's tax system during the 1930s. During the political turmoil of the late 1940s Dr. Prebisch left Argentina, and in 1950 was named executive secretary of the Santiago-based U.N. Economic Commission on Latin America (CEPAL), a post he held until 1962. In 1963 he became head of UNCTAD. He has held a number of other international posts.

Dr. Prebisch lived in Washington for 15 years. He returned to Argentina early in 1984 shortly after the democratically elected Alfonsin replaced a military dictatorship. He also was special adviser to the executive secretary of CEPAL and was visiting the organization when he died.

Dr. Prebisch, who lived in Buenos Aires, is survived by his wife, Liliana, and a son, Raul.