"Welcome to the Capital of the Transmazon" says the sign by the side of the rutted dirt road. Trucks, buses and burrodrawn carts move slowly past on their way in and out of this drab jungle frontier town, raising clouds or reddish-orange dust that nearly obscure the small historical marker a bit further down the highway.

The plaque marks the spot where Gen. Emilio Garrastazu Medici, then Brazil's president, lifted a symbolic spadeful of dirt in 1970 and began construction of the Transamazon highway that now passes through here. The plaque praises Medici's initative as an historic advance toward the conquest and colonization of this gigantic green world."

Today, though, those words have a hollow and exaggerated sound. Five years after being inaugurated in a blaze of publicity and a fanfare of euphoric nationalism, Brazil's 1,600-mile-long Transamazon Highway has fallen into decay and disrepair.

During the brutal Amazon rainy season, from November to May, the unpaved dirt road turns into a sea of mud. Long stretches become completely impassable. Even during the dry season, conditions are at best precarious:enormous potholes from previous rainy seasons impede travel and testify to a lack of maintenance.

As a result, a growing number of Brazilians now look upon the Transamazon as a costly boondoggle. Leading the way has been the nation's leading newspaper, O Estado de Sao Paulo, which recently labeled the road "the longest, poorest and most useless highway ever built on the face of the earth."

Like many of the other grandiose schemes of the early 1970s, the Transamazon has fallen victim to the worldwide energy crisis. The quadrupling of oil prices in 1974 rendered the highway impractical even before it opened, and price rises since have crippled its usefulness even further.

With an oil import bill of over $4 billion a year, largest in the Southern Hemisphere, Brazil had discovered it simply cannot afford to support a development program based on a road system that is seldom used and is expensive to maintain. This has affected not only the Transamazon, but also the six other major highways constructed at great cost and effort as part of a projected Amazon road network.

The Transamazon has also felt the consequences of the hastly construction and inadequate planning that preceded its opening. Air photo and radar surveys published by the Brazilian government last year revealed that much of the Transamazon passes through low-laying swamp land that, in the worlds of an official report, "does not offer favorable conditions for the planning and execution of highway projects."

But the Amazon highway have perhaps been most affected by the vicissitudes of Brazilian domestic politices. The change of governments that occurred two months after the Transamazon was inaugurated on Jan. 30, 1974, with Medici giving way to Gen. Ernesto Geisel, brought with it important modifications in Brazil's Amazon development policies.

The Transamazon originally had been planned and built as the spearhead of a program that would settle millions of poor peasants from other parts of Brazil on the virgin soil of the Amazon. But the Geisel government almost immediately scrapped this "project for national integration" and replaced it with one of its own, called "the Polamazonia program."

Announced in September 1974, the Polamazonia program picked out 15 "poles of development" in which cattle-raising, mining and timber ventures were to be encouraged. Government funds have been channeled to those projects, which rely heavily on air transport, and the highway program has been relegated to what one banker called "a dark corner on the back shelf."

High on the list of current government priorities is the 11 millionkilowatt Tucurui hydroelectric power project. When that dam is completed, it will inundate a 150-mile stretch of the Transamazon between here and Maraba.

"You have to realize that the Transamazon was Medici's baby and that Geisel has simply not given it priority," said a foreign diplomat in Brasilia. "Nothing that [future President Gen. Joao Baptista] Figueiredo has said so far gives any indication that he is going to change things when he takes office" on March 15, 1979.

"The Brazilians have always had big plans for the Amazon," the diplomat added. "But let's face it, as things stand today, the Transamazon is nothing but a white elephant."

That judgment is readily accepted by the bus and truck drivers who make their living traversing the Amazon highway network.

"West of Itaituba, the road is dead, dead, dead," said a driver for the Transbrasiliana bus line. "I think they've decided to abandon it."

The precarious condition of the Transamazon was evident on a recent 300-mile bus trip from Itaituba to here. During the 15-hour journey, in which the bus encountered only 18 other vehicles, the driver was repeatedly forced to stop to test and make impromptu repairs on the makeshift wooden bridges, erected in the early 1970s and never replaced, across jungle streams.

"You're lucky to be traveling in the dry season," he told a passenger. "A lot of these bridges won't last out the rains this winger. Either they'll rot away completely or the floods will carry them off along with the road."

The other highways making up the Amazon road network are beset with similar problems. The 880-mile Cuiaba-Porto Velho highway, for example, suffers frequent washouts, especially during the rainy season, and it presents major problems to the army engineers who are trying to pave it.

"Last year the mud was so bad that there were over a thousand trucks backed up for weeks along the highway," said Michael Airey, manager of a tin mining camp in the jungle 75 miles south of Porto Velho. "The truck drivers got so hungry and so desperate that they were breaking open their loads, eating what they could and trading the rest for food."

The only highway in the Amazon road system that has been asphalted so far is the lightly traveled 545-mile Porto Velho-Manaus highway. But users of the road claim that the paving was done so hastily and in so slipshod a fashion that the highway can support only the lishtest of loads.

"I just had a piece of equipment shipped from the United States to Manaus," complains a businessman in Porto Velho. "I'd like to bring it the rest of the way by truck, but they're telling me I'm going to have to ship it downriver by raft because the highway simply can't support the weight."

"What good is the damn road if nobody can use it?" he asks.

The downgrading of Amazon highway projects also appears to have led to the scrapping of the "northern perimeter highway," the most ambitious of all the Amazon road-building projects announced at the height of Brazil's "economic miracle." Only 400 miles of the highway, originally planned to run for 2,500 miles in a curve roughly parallel to Brazil's northern border, have been completed.

According to a recent Transportation Ministry report, the halting of work on the northern perimeter highway, which one Brazilian senator has acidly rubbed "the road that goes from nowhere to no place," is a temporary measure taken for "budgetary reasons." But no date has yet been set for the resumption of construction.

The Brasilia-Manaus highway seems to have met a similar fate. It stops at the junction with the Cuiaba-Santarem road -- less than halfway to its planned destination.

Just how much money has been spent on such highway construction is a mystery. Although former transport minister Mario Andreazza once estimated the cost of the Transamazon highway at $80,000 a mile, the Brazilian government has never offered a full accounting for its Amazon road building efforts.

"The Transamazon is a political decision by the Brazilian government," said the head of Brazil's National Department of Roads and Highway in an effort to explain the official silence soon after construction began. "The classic rules of economic analysis cannot be applied to so enormous an undertaking."

When bus and truck drivers get together at their favorite bar here, their conversation centers on the consequences of that policy and the changes that have followed it. Amid tales of adventures and tips on driving condition, one question, always with laughter, repeats itself: Does Luiz Acco have any gas at his gas station yet?

It has been more than two years, the drivers say, since the state oil monopoly delivered gas to Acco's station, located 800 miles west of here in one of the most dense and most remote stretches of the Amazon. His pumps by now exhausted, Acco has abandoned the station and now grows rice, corn and mandioca in the jungle surrounding his isolated outpost.