Secretary of State George Shultz met today with top Mexican officials in the first of two days of talks on Central America, trade, drug trafficking and other issues.

Both Shultz and Mexican Foreign Secretary Bernardo Sepulveda said that the discussions had begun notably well, and a U.S. official said that "the vibrations are very good." The two countries agreed to begin talks in September to consider establishing a formal framework for handling investment and trade disputes between them, senior U.S. officials said.

Shultz headed a U.S. delegation that came for the fifth annual meeting of the U.S.-Mexican Binational Commission, a forum established in 1981 for regular, Cabinet-level meetings between the two countries.

Shultz said that the first round this morning was "perhaps the best meeting that we have had of this commission," while Sepulveda praised the discussions as "positive and fruitful."

Accompanying Shultz were U.S. Trade Representative Clayton Yeutter and Undersecretary of Commerce Bruce Smart, as well as lower ranking U.S. officials.

While officials of both countries stressed the importance of seeking a negotiated settlement in Central America, Shultz rebuffed a proposal by Sepulveda that the United States resume direct talks with Nicaragua's leftist government, U.S. and Mexican officials said.

At a news conference this evening, Shultz reaffirmed the U.S. position that the Sandinista government must seek first to achieve "internal reconciliation" with its opponents inside Nicaragua.

Mexico is one of four members of the Contadora group, which is trying to put together a peace accord for Central America. The group recently issued a formal call to the United States to resume talks with Nicaragua that Washington broke off at the start of this year.