RIO DE JANEIRO, JAN. 27 -- Brazil is preparing to resume arms sales to Libya, the Foreign Ministry confirmed today, despite strong protests from the United States that the government of Col. Moammar Gadhafi continues to support terrorism and that such sales would be inappropriate.

A delegation of 12 Libyan Army officers visited Brazil last week, calling on Foreign Minister Roberto Abreu Sodre and Armed Forces Minister Leonidas Pires Goncalves and inspecting the plants of two major weapons manufacturers near Sao Paulo.

Libya was a buyer of Brazilian weapons in the late 1970s and early 1980s. However, in 1983 Brazil suspended weapons sales to Gadhafi's government after four Libyan cargo planes were caught in the Amazon port town of Manaus laden with a clandestine shipment of East Bloc weapons bound for Nicaragua.

The Brazilian press has reported that Libya is negotiating to buy arms worth between $1 billion and $2 billion, including armored cars, battle tanks and missiles from at least two Brazilian weapons makers.

The United States, which has placed Libya on an arms blacklist, strenuously protested the deal in a conversation Friday between Deputy Secretary of State John Whitehead and Brazilian Ambassador to the United States Marcilio Marques Moreira.

"It is clear from the record that Gadhafi has not abandoned his suport of terrorism, subversion and aggression," said a State Department cable read to reporters in Brasilia by the U.S. Embassy yesterday. "We encourage all civilized nations to deny Gadhafi the means to carry out his objectionable policies. We believe it is particularly inappropriate to sell arms to the Libyan regime which, in addition to supporting terrorism, is currently engaged in military aggression against Chad."

The protests from Washington "have no consequence," Foreign Minister Sodre said, adding that the weapons to be sold to Libya were "defensive" and that the sale was "in the final stages" of negotiation.

Asked about the reported $2 billion total value of the contemplated multi-year sale, Sodre said, "it could reach that figure."

The Brazilians, who generally keep weapons deals secret, reportedly offered the Libyans 250 Osorio tanks, made by Engesa in Sao Jose dos Campos, Brazil's arms-manufacturing center. The Osorio, a medium-weight, tracked battle vehicle, has performed well in tests under desert conditions. The Libyans also spent 2 1/2 hours touring the plant of Embraer, a state-controlled company that makes small passenger planes, military trainer planes and a subsonic fighter jet.

"They were interested in everything but didn't buy anything," said Embraer spokesman Joaquim Maria Botelho, in a telephone interview.

Other items high on the Libyans' shopping list are the Leo antitank missile and the Piranha air-to-air missile, both produced by Orbita Sistemas Aeroespaciais, a firm owned jointly by Embraer and Engesa.

Brazil's arms industry, based largely on homegrown technology, is recognized as the Third World's largest, and some industry observers rank it fifth or sixth in the world, just behind France and West Germany.

Arms earnings are not disclosed, but sources at Brazil's Foreign Ministry say the industry brings in $800 million to $1 billion a year. The International Defense Review, a military affairs publication, estimates the figure may be as high as $2 billion to $2.5 billion.

That may be a negligible figure compared with the nearly $1 trillion global arms trade, but for a developing nation, short on investment capital and burdened by severe debt, such sales are important.

The Brazilians have moved aggressively to tap the Middle Eastern arms market. Engesa's Osorio recently beat out tanks from France, Britain and the United States in bidding for sales to Saudi Arabia. Now the Saudis are negotiating a more than $3 billion purchase of 1,200 Osorios. The Saudis reportedly also are interested in obtaining licensing to assemble Engesa armored vehicles.

Brazilian weapons -- including Engesa's Cascavel and Urutu armored cars and the Astros II multiple-rocket system, made by Brazil's Avibras -- are deployed by each side in the Persian Gulf war. Egypt is assembling Embraer's Tucano military trainer planes, and Honduran Air Force pilots have trained in them. Embraer and two Italian firms are jointly producing the AMX subsonic fighter plane.

In the era of nuclear submarines and cruise missiles, Brazilian weapons are not always the most potent or technologically advanced, but they are often cheaper, lighter and made for easy repair, an important feature in the developing world. And Brazil, unlike the United States, does not require an "end user's certificate," which restricts resale of weapons.

Thus, despite a longstanding weapons contract with Iraq, many Brazilian arms in the early 1980s were funneled to Iran by way of Libya.

"We are viewed as a country that sells good products and collects no political price from our trade partners," a Foreign Ministry official has said. "We have no problems of conscience."