PAPERBACKS; LIFE UNDER THE MILI-TECHS

AND STILL THE EARTH An Archival Narration. By Ignacio de Loyola Brandao. Translated by Ellen Watson. 374 pp. New York: A Bard Book/Avon Books. Paper, $4.95.

BY the year 2000 Sao Paulo is expected to be the second-largest city in the world - a megalopolis where 26 million people will be competing for food, shelter, clothing and jobs. It is difficult to imagine what it will mean to live in such a setting; already, with a population only half that size, the city seems ungovernable, and riven by the enormous disparities between its few rich and many poor. In ''And Still the Earth,'' the Brazilian novelist Ignacio de Loyola Brandao tries to envision what 21st-century Sao Paulo might be - a nightmare that exceeds anyone's worst fears for the future.

In his vision, ''the constant, nauseating odor of death and decomposition'' hangs over Sao Paulo, rising from an unending stream of corpses dumped in the pauper encampments on the city's outskirts by trucks painted a cheery yellow and green, Brazil's national colors. Commuters constantly find themselves caught in the crossfire between the authorities and bands of criminals and illegal migrants who have invaded the city. Because the Amazon basin and large parts of the rest of the country have been turned into a desert, food and water are rationed and ''only the very rich have real plants,'' which are ''sold in art galleries, for incredibly high prices.'' A Brazilian proverb says, ''God puts right at night the mess man makes by day.'' But in Mr. Brandao's Sao Paulo, God has finally wearied of man's folly and has left him to fend for himself.

Presiding over this chaos and misery are the Mili-techs, military technocrats who came to power almost without the populace knowing it. In their quest for order, the Mili-techs have turned Sao Paulo into ''a walled city, divided into districts with magnetic passes to get from one area to another, superpolice like the Civil Guard, food produced in laboratories - a thoroughly systematized, regulated, rationalized life.'' To reduce Brazil's foreign debt, they have auctioned off the states in the northeastern part of the country as Multinational Reserves from which Brazilians have been expelled to make way for Germans, South Africans, Chinese and other foreigners.

Our guide to this grave new world is Souza, a blacklisted former history professor whose Mili-tech nephew has found him a useless job in a Government office. Souza is resigned to his lot until one morning when he wakes up to find he has acquired a hole in the palm of his hand. By refusing treatment, he sets off a chain of events that leads to his being abandoned by his wife, Adelaide, driven from his apartment by fugitives from the Multinational Reserves and forced to begin a wandering that takes him, like Dante in ''The Inferno,'' through ever more horrifying circumstances until he can sink no lower.

In a strikingly Brazilian way, Mr. Brandao has tried - successfully for the most part - to write a cautionary anti-Utopian novel in the tradition of Yevgeny Zamyatin's ''We'' or George Orwell's ''Nineteen Eighty-Four.'' Souza (the name is as common in Portuguese as Smith is in English) is a kind of Brazilian Everyman, struggling to preserve his integrity and hope in the face of tyranny. Some of Souza's peregrinations through the ''Forgotten Center'' of Sao Paulo recall Winston Smith's meanderings among London's proles in ''Nineteen Eighty-Four,'' and the rule of the Mini-techs is just as suffocating as that of Big Brother. ''There is nowhere, no way out, everything has been exposed to view,'' Souza muses.