On a thick October morning in Sao Paulo's vast riverside industrial belt, as the heat and factory smoke began to shimmer in the air outside, a shirtsleeved technician at Engesa, Inc., flipped the switch on an office videotape player.

"Turn handle in order to obtain external machine gun elevation aiming." The voice on the tape was speaking English. "Press button to activate external machine gun electrically. . . . Turn on exhaust to circulate air in the interior of the turret, to expel new gases caused by the shots."

The technician smiled and flipped the switchh again. Smoothly, without a pause in the careful monotone, the narration turned to Arabic.

Nearly 7,000 miles away, out in the sand and low scrub of Dezful and Tabriz, Iraqis are shooting at Iranians with the products of a booming Brazilian arms industry that reached $1 million in sales last year and shows no signs of leveling off.

As Brazil furiously tries to industrialize in the face of huge oil import bills, the Third World's biggest foreign debt, and unpredictable prices for agricultural exports, this country has become the developing world's largest exporter of armed weapons.

From the factories of its government-supported private industries, Brazil sends tanks, airplanes, armored cars, revolvers, missiles, explosives, police equipment, napalm, machine guns, ships, submarine parts, cannons, and flame throwers. Its customers are on nearly every continent -- in Chile and Bolivia, in Togo and Liberia, in Belgium and France.

According to Roberto Pereira de Andrade, former editor of a defense magazine and author of a book about the nation's aircraft industry, two Brazilian light weapons manufacturers last year, sold $200 million worth of pistols, revolvers, shotguns, and carbines in the United States alone.

Of the armored vehicles used by the Iraqi Army, between 100 and 200 were made by Brazil's Engesa, according to company figures. The firm likes to mention its multilingual vedeotaped instructions as an added sales feature.

"French, Spanish, Arabic, and some day perhaps, Chinese," said Engesa Vice President Luiz Augusto Sacchi. "All South America is involved with us. And many African countries are good customers or potential good customers . . . . We are present in some 50 countries."

Their product line is advertised in a videotape that plays bright background music as camouflage-green vehicles plow up and down sand dunes.

The Cascavel, a top-of-the-line Engesa vehicle and one of the two models sold to Iraq, carries a 90mm gun, reaches speeds of 65 mph and sells, according to Sacchi, for up $500,000. Antiaircraft machine gun, laser range finder, and automatic transmission are optional.

Iraq has also bought Brazilian-made air-to-ground missiles. Brazil's industry offers relatively simple equipment, far less sophisticated than that of the United States or the Soviet Union. But this is said to be one of Brazil's selling points, particularly for smaller nations where elaborate weapons systems may be too expensive or too complicated to repair.

"What's important in a military vehicle?" Sacchi asked. "The vehicle should be able to go fast . . . should have a very good armament, should be simple, in order to allow soldiers that are not PhDs -- but very common people, in some cases illiterate people -- to know how to use it."

Brazil will sell, according to both manufacturers and industry observers, to just about any country except Cuba, Zimbabwe or South Africa. As the United States edges away from selling technology to what it labels "terrorist" governments, the increasingly independent Brazilians are moving in.

"We don't sell any ideology to these people," Sacchi said. "Brazil is a Third World country. We are very conscious of that. . . . We don't have, in fact, the chance of asking the political price, instead of only dollars or pesos and so on from these other countries."

Arms manufacture is not new to Brazil. Pereira says it sent a delegation more than a hundred years ago to examine the startling American warships called the Monitor and Merrimac, and that the Brazilians copied the design for ships used in their 1865-70 war against Paraguay.

But Brazil was agricultural, dependent on coffee, sugar and rubber exports.

The country produced ammunition for local use and military training aircraft during World War II. But much of its weaponry by the early 1960s, according to Pereira, was old U.S.-made equipment shipped to Brazil through the lend-lease program.

In 1964, the Brazilian military deposed president Joao Goulart. The country was trying at breakneck pace to industrialize, especially in Sao Paulo. The military wanted new equipment. The industrialists wanted new business.

By the end of the decade, companies that had formerly produced sewing machines or -- in Engesa's case, petroleum extraction supplies and suspension systems -- were, as Pereira put it, "up to the neck in orders" for Brazilian military supplies.

With the government either paying for or directly providing most arms research and design to private companies, and production lines churning out the arms, companies began looking for markets abroad. When the oil-producing nations announced their first major price increase in 1973, playing havoc with an already strained Brazilian economy, the overseas sales become crucial. w

"The market was created by the oil crisis," Sacchi said. "This opportunity gave us a chance to have a commercial relationship with the Arabs."

The United States is officially maintaining a watchful distance as Brazil expands its weapons industry. Brazil has not signed the Nuclear Nonproliferation Treaty, and although its atomic research program is officially for peaceful use only, Gen. Hugo de Oliveira Piva, director of the National Air and Space Institute, said in an interview that one satellite launching rocket under construction could, with considerable modification, carry an atomic warhead.

"As it reaches out, Brazil faces the same kind of policy inperatives that we have faced in our own past," said an American diplomat here. "It gets entangled in other people's priorities."

At Engesa, whose armed vehicles are fighting their first real battles along the Shatt-al-Arab, Sacchi was asked how it felt to see the war photos in the morning papers.

"I'm not happy with the war," he said. "I would prefer that our equipment would be like any other that one produced in more developed countries of the world . . . some kind of equipment for defense aspects, but not for being utilized in any kind of war.

"But the war exists," Sacchi said. "That's the truth. Then we hope the customer prove he was right when he chose that kind of equipment."