TEHUACAN, Mexico (AP) _ Rescuers used shovels and cranes to search for victims today after a runaway freight train burst from the tracks at a busy highway intersection, crushing cars and smashing buildings in this southern town.

The death toll in Tuesday's wreck stood at 32, making it one of the worst Mexican railroad tragedies in memory. Hospital officials said at least 41 other people were treated for injuries.

Luis Gonzalez Castellan, who is coordinating the investigation, said earlier reports that more bodies were found in the debris, bringing the toll to 36, were false.

Officials were investigating reports that after the train's brakes failed, the crew uncoupled some cars and leapt to safety while the rest of the train - with no one at the controls - sped to more than 50 mph and derailed.

Soldiers and federal highway police searched for more victims through the night in this picturesque community known for its bottled mineral water by the same name.

President Carlos Salinas de Gortari issued a statement of condolences to families of the victims, most of whom lived in the Tehuacan area, 120 miles southeast of Mexico City.

The force of the derailment hurled some of the heavy railroad cars more than 40 yards from the tracks, scattering twisted steel, powdery concrete dust as well as sorghum the train was carrying.

Investigators said 19 cars waiting at a busy highway intersection on the northern edge of Tehuacan were crushed or damaged. Five buildings, including a discotheque and a restaurant, were damaged.

But the 12:30 p.m. accident spared a nearby school.

Herbe Ponciano Mokul, a federal district attorney heading a four-man investigating team, told reporters the locomotive had apparently lost its brakes, but refused to elaborate.

Officials in Minhuatlan, six miles north of the crash site, told XHTE radio that the crew of the train reported losing the brakes as they approached the town. Prosecutors told reporters the train was traveling 50-100 miles an hour.

Mexico's state-owned railroads are old and run down, and breakdowns and crashes are common.

The tracks run through a heavily populated part of Tehuacan, without bridges to separate automobiles from trains.

In front of Tehuacan's city hall, hundreds of people demonstrated, angrily demanding the removal of the train tracks. ''The train has to go. There is no other solution,'' one demonstrator shouted.