President Carter said yesterday that he retains confidence in the government of Israeli Prime Minister Menachem Begin, strongly denying a report that the United States believes Begin must be replaced if there is to be a peace settlement in the Middle East.

At a news conference here in the Capital of Brazil, Carter acknowledged, however, that he has "no clear solution yet" to the major sticking point in the negotiations - Begin's refusal to consider an Israeli withdrawal from the occupied West Bank of the Jordan River.

The news conference, broadcast live back to the United States, came during the third day of the president's week-long trip to four developing nations.

Carter said the United States was seeking to marshal "the opinion of the entire world" in opposition to Israeli troops remaining in Southern Lebanon, which the Israelis invaded in retaliation for a Palestinian terrorist attack.

He sidestepped a question of whether Israel's use of U.S. supplied weapons in the invasion violated U.S. arms transfer laws, and said the invasion has not prompted him to reconsider his proposed package sale of warplanes to Israel, Egypt and Saudi Arabia.

Carter branded as "completely false" reports that following Begin's hard-line stance in his meetings with the president last week U.S. officials have concluded that the Israeli prime minister must be replaced or there will be no peace settlement.

While he expressed confidence in Begin's ability to negiotate a peace settlement, the president left no doubt that the United States wants further concessions from the Israelis even if it is perplexed about how to obtain them.

"The things that are of deepest concern is Israel's refusal to acknowledge that United Nations Resolution 242 applies clearly to the West Bank, their unwillingness to grant to the West Bank Palestinians . . . a right to participate in the determination of their own future by voting at the end of a five-year period for the kind of affiliation they would have with Israel or Jordan under a joint administration," he said. "This is a problem for which I have no clear solution yet. But I believe that the Begin government is completely capable of negotiating an agreement with Egypt."

U.N. Resolution 242 calls for an Israeli withdrawal from territories occupied after the 1967 war. Begin's interpretation of it is that the resolution does not applyto the West Bank, which he considers a historic part of Israel.

The news conference was the second Carter has held in a foreign country. The first was in December in Warsaw. As was the case then, the president accepted questions both from U.S. reporters traveling with him and local journalists.

The Brazilian reporters, noting Carter's warm words of praise for Brazil despite differences over the administration's human rights and nuclear nonproliferation policies, pressed him on whether he is weakening his position on those issue.

The president said he was not. Frankly acknowledging that such differences exist, he said that, nonetheless, U.S.-Brazilian relations remain good.

"I think that the overwhelming sense of my visit already has been that the strength of our friendship and the mutuality of our purposes now and in the future far override any sharply expressed differences of opinion on even the major and very important issues of human rights, nonproliferation, trade and so forth," he said.

In response to one question, he said he would veto any attempt by Congress to restrict loans to Brazil from private U.S. banks because of Brazil's human rights policies.