New Support for Free Trade Agreement : Economics: Mexican envoy to U.S. says earlier suggestions that pact was in trouble have actually boosted its prospects.

The brouhaha that erupted two weeks ago when Budget Director Leon E. Panetta declared that the North American Free Trade Agreement was in deep trouble in Congress actually boosted the pact’s prospects, the Mexican ambassador to the United States said Thursday.

“The effects have been much more positive than negative,” envoy Jorge Montano said, because it brought forth a round of follow-up statements by key Administration figures supporting the treaty--which would create a free trade zone in Canada, Mexico and the United States.

The ambassador offered his assessment at a breakfast meeting with editors and reporters in The Times’ Washington Bureau--during which he also said Mexico would spend “in the region” of $10 million to $11 million this year to promote the prospects of the pact.

Negotiators from the three nations are scheduled to resume talks next week in Canada on supplemental agreements intended to protect the environment and labor standards, and to make sure that industries are protected against the competition of surging imports stemming from lower production costs or wages elsewhere. The Clinton Administration wants to wrap up the talks in July.

Administration officials have acknowledged that gaining House and Senate approval of the trade pact will be difficult, even as they backed away from Panetta’s pessimistic view. On Thursday, a group of lawmakers--including Rep. David E. Bonior (D-Mich.), the House Democratic whip--announced that they were forming a caucus to defeat the agreement.

In addition, Rep. Richard A. Gephardt (D-Mo.), the House majority leader and one of the most important votes Clinton could nail down in the fight, has expressed strong reservations about the agreement.