By John Ward Anderson
Washington Post Foreign Service
Saturday, November 16 1996; Page A17

Mexico's ruling party early today scuttled a carefully crafted package of political reforms that were to be a hallmark of President Ernesto Zedillo's administration and move the country toward clean, uncontested elections.

The revolt by stalwarts of the Institutional Revolutionary Party, or PRI, came five days after the long-ruling group lost ground in municipal elections in three states. It reflected concern that the poor showing in last Sunday's local voting could foreshadow more reversals at the polls that would cause the PRI to lose its dominant majority in Congress next year.

The open revolt against Zedillo's reforms by members of his own party -- the latest in a series of moves by Mexico backing away from liberalization proposals -- was a stinging rebuke to the president, who had made political and electoral reform a keystone of his 1994 election campaign.

The action helped mark 1996 as a year of backtracking for Mexico and further illustrates the deep divide between the PRI's two wings -- the reform-minded technocrats represented by Zedillo, and the politically entrenched, authoritarian old-timers, known as the "dinosaurs."

Last month, Zedillo was forced to retreat on promises to privatize parts of Pemex, the state oil monopoly. And at his party's convention in September, opponents of change approved new rules for selecting presidential candidates that analysts say will bar liberal-minded bureaucrats who have never held elected office, such as Zedillo and his two predecessors as president, from rising to power.

The reforms, designed to limit official spending on campaigns and give opposition parties equal access to the media, had been the subject of two years of painstaking negotiations among Mexico's leading political parties.

A bill proposed by Zedillo containing many of the reforms was on the verge of being approved by Congress last week with near-unanimous support.

But after the PRI suffered serious setbacks in the municipal elections, PRI congressmen today used their legislative majority to ram through 16 amendments that opposition politicians say eviscerated the bill.

The vote was along strict party lines, with all but one PRI lawmaker voting in favor of the amended bill and the entire opposition voting against it.

"It seems that we're not going to have serious reforms, and that's very sad," said Sergio Aguayo, head of the Civic Alliance, a nationwide good-government and pro-democracy group. "What's left without fair elections to solve political differences? Nothing.

"It will not surprise me if next week there's another action by the EPR," he added, referring to a guerrilla group trying to overthrow the government, "claiming that there is no option left but armed struggle. And they have a point."

Foreign investors and independent financial analysts had encouraged Mexico to adopt significant political reforms, seeing them as part of the country's long-term political and economic stability.

While analysts sounded a note of disappointment, they said they were not surprised by the party's reneging on the reforms.

"I'm rarely surprised by the political news from Mexico these days," said Ernest W. Brown, an analyst for Morgan Stanley & Co. in New York, who added that the decision reflected the bumpy path of any serious reform program.

"People are expecting that they're going to be predictable and cease being a Soviet-style socialist state overnight, and that's not going to happen," he said.

Political analysts said that the PRI lawmakers, who have often promised political reforms but rarely delivered them, watered down Zedillo's proposals because of the drubbing their party took in local elections in the states of Mexico, Hidalgo and Coahuila.

Many were apparently worried that voter anger about the economy combined with liberalized election rules might cause the PRI to lose its legislative majority in critical midterm elections scheduled for next July.

The PRI has controlled the federal government for 67 years -- currently the longest uninterrupted reign of any governing party in the world -- often by employing tactics the reforms were designed to curtail.

In the most bitterly opposed new provision of the bill, parties will be allowed to spend $250 million in government funds contesting next July's congressional races, about half of which will go to PRI candidates.

The bill as it stood before would have limited these amounts.

Party access to the media during election campaigns is also tightly controlled in Mexico, and under the new PRI-backed rules, 70 percent of media time will be divided among the parties according to the number of votes that they have received in the past. Initially, at least, that will weigh heavily in PRI's favor.

Another new provision in the bill prohibits opposition parties from backing one consensus candidate and thus consolidating the anti-PRI vote.

There has been talk -- however unlikely it seemed -- of the conservative National Action Party and the leftist Democratic Revolution Party joining forces behind the same candidate in the Mexico City mayor's race next year as a way to ensure that the PRI does not capture the office.

Today's actions did not affect other important reforms that previously had been approved, including allowing an elected mayor in Mexico City, a post previously appointed by the president, the formation of an independent election commission and permission for Mexicans living abroad to vote in elections.