Representatives of the key sugar industry and rural workers signed an agreement yesterday mediated by the labor minister, bringing to an end one of dozens of strikes sweeping Brazil.

The accord signaled an important shift toward free collective bargaining between labor and employers as a new civilian government -- economically beset -- struggles to apply democratic norms to industry.

Labor Minister Almir Pazzianotto maintained in an interview that "only the two sides can reach agreement -- no authoritarian government action can remove the causes of dissension." His insistence on restrained mediation with strikers has been openly criticized by the more conservative industry minister, Roberto Gusmao, who is under pressure from employers, some of whom have sought military intervention.

This rift in the coalition Cabinet underlines the overall uncertainty of the new government's direction. It has oscillated between a commitment to social change and to consolidation of a free-enterprise society, with declining state participation.

President Jose Sarney, who is attempting to balance the promises of the late president-elect Tancredo Neves to improve workers' real incomes and industrial bargaining power while bringing down inflation, is seeking to reconcile the two ministers.

During the week-long stoppage by seasonal cane cutters in Sao Paulo State there was heavy policing and at least 80 pickets were detained. Last year, a similar strike led to pitched battles between workers and riot police and widespread destruction of property.

Cane sugar is distilled for fuel as well as food here.

Since the handover of power in March by the military there have been 38 significant strikes, including those by airline staff, postal workers, teachers, subway and bus drivers and trades involving 400,000 people.

All are attempting to restore living standards cut by up to 30 percent in the two-year recession since Brazil signed a rescue aid agreement with the International Monetary Fund. The country began spending beyond its income before an extended period of growth in the 1970s and continues to do so.

A seven-week strike among 90,000 auto assembly workers here has cost at least $200 million in lost exports and suspension of supply contracts in Iraq and Scandinavia.

Pazzianotto said the accord, which affects 300,000 workers in the production of ethanol motor vehicle fuel, represented the first state-wide collective labor agreement and anticipates needed new legislation.

Last week Pazzianotto, a labor lawyer once retained by a metal workers' union, completed the draft of a new right-to-strike law to replace 40-year-old suppressive legislation inspired by that in Benito Mussolini's Italy.

Although many recent strikes were declared illegal under old laws, Pazzianotto earned industrialists' criticism for refusing to apply what he called "the instruments of authoritarianism, favored offspring of dictatorship, which were widely employed by the past government without practical results."

Pazzianotto said his bill, when passed by Congress, would apply until redrafting of the constitution in 1987. It would reduce the state's powers in labor disputes but still limit the right of workers in essential public services to strike.

The proposed law would ban strikes in nine specific situations. Last week, Gen. Octavio Medeiros, formerly a minister and head of military intelligence, gave a public reminder of the old hard-line position declaring "the truncheon is no saint but it still works miracles."

"Our big concern is that among politicians in Brasilia there's an attitude that this labor positioning is a no-cost item -- just letting the boys blow off a little steam," said Knowlton King, a director of Sao Paulo's American Chamber of Commerce.

"But it's going to cost billions of dollars in income and cash flow they badly need" to service the foreign debt, said King, adding that Pazzianotto's legislation "will weaken the right-to-work option and weaken the ability of tribunals to declare a strike illegal."

Automakers say lost production exceeds 60,000 cars and more than $150 million in export earnings during May. Auto workers leader Jair Meneguelli said, "There's no plan to destabilize the government -- there'll only be a democratic government when it can live with union freedoms and the right to strike." The sticking point in negotiations has been the government's refusal to allow auto makers to pass on wage hikes through prices, an action that would undercut efforts to bring down the 220 percent annual inflation.

Executives say existing price controls mean margins are too low to grant Meneguelli's demands. The unions say their demands would mean only a 4 percent domestic price increase. With assembly-line pay around one-quarter of that in the United States, they argue that profits from booming exports could compensate.

The government has set a tough example in the state sector. A postal strike collapsed after 28 leaders were dismissed and the government moved to hire substitutes.

Economists say Brazilian workers can only expect to regain their living standards of 1980 by the end of the decade. Continuing economic constraints mean the government is unlikely to hasten this. Instead, it can only offer a democratic commitment to increased union freedoms and a right to strike -- despite the political risks attached.