All this year, factories in the industrial belt around this southern financial capital have been shutting down assembly lines, and construction cranes stand frozen over the skeletons of new plants and steel mills.

But the bad news in Latin America during a world recession is perhaps best recorded in Sao Paulo's downtown, behind the gleaming facades of a dozen big foreign banks.

Here on the ledgers of Citibank, Chase Manhattan, Barclays and their counterparts in New York and Europe, Brazil and a half dozen other South American countries have marked up the world's biggest and most threatening bill: more than $240 billion in accumulated foreign debts.

In these accounts, once ignored by many regional leaders, lies the record of a decade's bold strategy for development that now appears to be in danger of an explosive series of failures. Here also is the fodder for a regional political debate that during the past six months has taken on growing heat and importance.

Latin America has been swept by the phenomenon of near-crushing foreign debt. During the past decade and especially since 1975, these developing countries have borrowed huge sums from international banks, multinational corporations and international aid organizations.

The banks have been more than willing partners in the financing of rapid growth and the reshaping of internal economies. Flush with the deposits of shifting world wealth, they saw Latin America and its rich economic potential as an ideal investment for their surplus billions.

Now, with a recession or political turbulence halting expected growth, clipping Latin American exports, and boosting interest rates, some of the countries and their bankers are beginning to wonder if they went too far -- or if the huge loans can ever be paid.

At risk is the future progress of major developing economies and the health of the international banking system that has emerged in the past two decades.

Many analysts see the recent near failure of Mexico to keep up payments on its $80 billion foreign debt -- leading to a frantic bailout and major revamping of the country's banking and exchange systems -- as a warning of what is in store for Latin America and the big banks.

In all, the region's developing countries have more than tripled their foreign debts during the past six years to more than $240 billion, or well over half the foreign debt outstanding in the world. The largest part of this money is now due to private investors, and U.S. banks alone have more than $61 billion at stake.

Although Mexico is reported to hold the world's largest foreign debt of $80 billion, Brazil owes just under $80 billion and Argentina is next with almost $40 billion in loans.

And nearly every country in South America -- from big borrowers Brazil and Argentina to the smaller economies of Chile, Venezuela, Bolivia, Peru and Uruguay -- may face years or even decades of strain and internal sacrifice to come up with the necessary funds.

"We no longer manage our debt problem," said Alkimar Ribeiro Moura, an economist at Sao Paulo's Getulio Vargas Institute. "Instead, it manages us. It constrains every aspect of our economy."

The foreign debts of Latin America are different from governments' internal budget deficits, such as the more than $1 trillion national debt of the U.S. government. Foreign debts, borrowed by both governments and private businesses, are a more complicated problem. Because they are taken in foreign currency, such as dollars, the interest must be paid largely by earnings from trade, tourism and foreign investments in the country.

After financing the economic programs of many countries in the 1970s, the mounting foreign loans have begun to force reversals or harsh new measures in those same programs as payments add up. In countries like Argentina, a primary qualification for any new economics minister has become good relations with the international banking community -- and a willingness to adopt policies those bankers trust.

As a result, the debts have emerged during the past year as major political issues in many Latin American countries, with some arguing that the internal sacrifices needed to pay the debts on time are too great.

Meanwhile, the urgent need for large countries like Brazil to earn export profits had helped increase trade tensions with the United States, a primary market.

Already, prominent economic leaders, including Brazilian economist Celso Furtado, are calling for the formation of a "debtors' union" among big Latin American countries that could use the size of their outstanding loans -- and the danger default presents to the international economy -- to negotiate long-sought changes in the rules of international trade and aid.

Until now, bankers in the region have remained confident that no such radical moves will develop, and that most Latin American countries will successfully reduce their debts over time.

Bankers here concede, however, that the collapse in Mexico, the growing size of the loans and political upheavals like Argentina's war with Britain have slackened confidence in Latin America this year, and they have reduced the available money for countries like Brazil that normally still would be considered a good credit risk.

And economists point out that the banks are bound to take the most positive outlook.

"The Americans have confidence because they have to have confidence," one Brazilian analyst said. "They have so much money here that they cannot possibly let the word spread that Brazil is not going to pay the debt."

Much of the public debate within the debtor countries has focused on the question of how such a debt accumulated, and whether the money was borrowed and spent wisely.

For more than two decades after World War II, most Latin American countries depended on bilateral aid -- such as grant programs from the United States and international organizations -- and direct investments by multinational companies to boost their economies and make up for gaps between incoming and outgoing capital and goods.

Borrowing gradually increased in the late 1960s and early 1970s, and the big shift came in 1974, after the first large oil price increases by the Organization of Petroleum Exporting Countries. Billions of dollars were effectively transferred from oil importers to OPEC, which, unable to digest all of the money, deposited much of it in international banks, swelling their total lending capital by 10 percent or more.

Meanwhile, rapidly developing countries like Brazil, hit hard by the rising oil import bills, were suddenly faced with a difficult choice. Either they could slow their economies to meet the rising costs of imports, or they could keep growing and borrow money to make up some of the difference.

Faced with this choice, Brazil, with a booming population and vast natural resources, chose to keep growing.

"It was adventurous, it was a bit risky, but in a sense Brazil needs to take risks," said Edmar Bacha, an economics professor at Rio de Janeiro's Catholic University, who has specialized in Brazil's finances.

"The U.S., after all, took its chances when it was developing to open up the West," Bacha added, "and it worked -- there was gold in California."

Brazil's military planners devised an ambitious development program around the loans and added some safeguards that bankers now say have prevented Brazil from facing -- at least in the short term -- the same kind of crisis of Mexico and Poland, which could not meet the payments falling due this year.

In theory, the added funds were to be used for major development projects and facilities -- roads, hydroelectric dams, steel plants or mining operations -- that would eventually more than make up the cost of their loans by producing new income and exports.

Not all of the money came from banks and international agencies. In many cases, foreign companies with subsidiaries in Brazil lent money to their own branches rather than invest cash in the country -- a practice that made up as much as 30 percent of the loans and that critics charge unnecessarily increased the debt total to the advantage of foreign companies.

Other Brazilian critics argue that much of the money was invested in projects that bypassed the principal priorities of a developing country for those of foreign investors.

"A French company would want to sell a radar, and so a French bank would offer a loan to Brazil to buy the radar on good terms," said Eduardo Suplice, a leading economist of the Brazilian opposition.

"And so Brazil would take adventage of her credit worthiness and buy the radar. But for what? And you could cite 100 examples of this."

In Argentina, a similar national debate has focused on the worth of investments, and some political leaders have called for investigations of military officials who used funds to buy expensive but unneeded jumbo jets for the state airline or $400 million worth of equipment for Argentina's sponsorship of the World Cup soccer championship in 1978.

Argentina also spent an estimated $6 billion during the past five years on the planes, missiles and other arms it used in the Falkland Islands war and invested hundreds of millions more during and after the war to replace lost equipment.

In both Argentina and Chile, critics also charge that the foreign debt buildup was a direct result of military attempts to implement free market economic policies. Measures implemented by both governments encouraged borrowing abroad by business and banks, and the dropping of protectionist policies made imports more available and less expensive than local products -- resulting in a flood of imported goods paid for directly or indirectly by foreign borrowing.

No matter how the money was borrowed or spent, the recession has begun to make the weight of the loans heavy. With each half-point rise in interest rates, Brazil's debt has leaped $500 million. Inflation and devaluations of the Argentine peso have made its dollar loans more and more expensive.

Meanwhile, as world trade has slumped, the prices of the exports meant to pay for the debt have slumped and their growth has dropped off, so the money that was supposed to be generated to pay the loans simply has not appeared.

The result has been the broad reorientation of economic policy in Brazil, Argentina and other countries designed simply to keep up with the mounting interest payments, rather than promote growth. Brazil and Argentina have slashed imports deeply -- Argentina's have fallen by 50 percent this year -- and Brazil has pushed its economy into a recession.

Neither country, nor their neighbors, can look for a real reduction in their debt amounts soon, bankers and economist say. Instead, the countries, and in particular Brazil, will have to focus on exports and keep checks on imports and internal consumption simply to stay ahead of the debt and the interest.

The solution to the problem may depend on the extent to which the developed nations -- and in particular the United States -- agree to share more of the wealth of their international markets with countries like Brazil, or step in to help when the debts become overbearing.