Zedillo Signs Business, Labor Accord : Mexico: Pact controls prices and wages, provides job-creation incentives. Analysts say it should aid country’s ailing financial markets.

MEXICO CITY — President Ernesto Zedillo on Sunday signed a key agreement with the nation’s business and labor leaders that controls prices and wages, promotes economic growth and job creation, and shores up the government’s credibility amid Mexico’s worst recession in decades.

The agreement, officially known as the Pacto, marks the first time since Zedillo took office last December that he has secured such an accord with business and labor. Most financial analysts agreed that Sunday’s signing ceremony offered clear signs of leadership in the crisis-ridden economy that would help boost Mexico’s battered financial markets.

The 14-page accord contains a series of incentives to jump-start the economy. Zedillo’s advisers estimated Sunday that it would grow 3% next year, after experiencing a negative growth of about 6%, according to projections. The tax breaks include new deductions for corporate investment in plants and equipment and an exemption for all small- and medium-sized businesses from Mexico’s controversial asset tax, which imposes levies even on companies that show no profit.

As a concession to the nation’s badly hit labor sector, the pact allows two 10% minimum-wage increases--one in December and another in April. Unemployment rates have been soaring, and workers have endured an inflation rate estimated to top 50% this year at a time when wage increases had been fixed at just 18% since March. In announcing the new wage-increase ceilings, the government estimated 1996 inflation at 20%, which will still leave most workers with pay cuts in real terms.

Zedillo’s government also agreed to reduce scheduled price increases for gasoline, diesel fuel and electricity in the year ahead. Prices for those necessities will now increase 7% in December and 1.2% each month thereafter--except April, when prices for those will go up 6%.

Zedillo said during Sunday’s signing that the accord is cause for new optimism. It came more than 10 months after his government’s sudden decision to lift its exchange controls on the peso set off one the worst economic crises in modern Mexican history.

The peso has lost about 50% of its value--most of it in the first few weeks--after the government allowed it to float freely last Dec. 20. Last week it again took a nose-dive, to 7.23 to the U.S. dollar--its lowest value since March--partly because of political instability and reports that business and labor could not reach agreement on the wage and price pact.

Most analysts said that with Sunday’s agreement, the Mexican president had cleared a major hurdle of his presidency. It came after a marathon all-night session attended by beleaguered union leaders, corporate representatives and finance ministry officials. It involved significant concessions from all sides.

At the height of the crisis in March, the president was forced to cancel a critical speech unveiling his emergency economic plan after negotiations on the pact collapsed. Until they emerged successful early Sunday, labor leaders remained at odds and had been forced to accept unilateral wage and price ceilings from the government.

Before March, the pact, in each year since 1987, had been an annual ritual renewed under behind-the-scenes presidential pressure. But, the 43-year-old economist’s aides had said, Zedillo would not interfere in the negotiations after he took office.

In signing the accord Sunday, Zedillo called it “a good alliance for everybody.”

“It’s true that the crisis has caused the loss of jobs, the closing of businesses and a fall in our living standards,” Zedillo said at the ceremony, “but without the tasks that we have all carried out together, unemployment would have been greater and inflation would have been uncontrollable.”