MANAGING MEXICO’S ECONOMY : Stimulus Package Announced : Budget: Salinas proposes tax cuts, wage hikes and other measures. The plan addresses the NAFTA critics’ complaints about labor practices.

Confronted with a stagnating economy and elections next year, Mexican President Carlos Salinas de Gortari on Sunday announced tax cuts, wage hikes, price drops and farm incentives aimed at stimulating growth after more than a decade of austerity.

Salinas’ package is the first attempt by the government in 13 years to redress the erosion of wages that has cut workers’ spending power in half. Wage controls have been a principal feature of the campaign to control the country’s once-rampant inflation.

Mexico’s lowest-paid workers will receive tax rebates that will increase their take-home pay up to 10.8%, immediately making up for spending power lost over the last three years. Salinas also removed a cap on wages negotiated under union contracts and outlined a plan for raising the minimum wage based on increases in productivity.

While he said the measures are being taken “independent of foreign circumstances or trade agreements,” the package addresses some of the objections about Mexican labor practices raised by critics of the North American Free Trade Agreement. Critics fear that by removing trade barriers among the United States, Mexico and Canada, NAFTA will encourage companies to move south in search of low wages.

The move may also quell some domestic criticism.

Since this summer, when the annual inflation rate dropped below 10%, the Salinas administration has come under increasing pressure to use federal budget surplus to stimulate the economy, which is expected to grow about 2% this year.

In his announcement Sunday, Salinas said the entire $6-billion surplus will be plowed into the economy.

“Today is the time to harvest and use our budget surplus . . . to reactivate the economy,” he told government, business, labor and farm leaders who gathered to ratify the package, the latest in a series of pacts among such groups that have guided economic policy since the mid-1980s.

“This is the most generous pact of all,” Salinas said.

The new plan will double to 2.6 million the number of low-wage earners who pay no taxes. It will give tax rebates to 6.9 million workers--nearly half the labor force--who earn $579 a month or less.

Officials said the package will not be inflationary because it also provides for price cuts of up to 40% for government products and services, including fuels, utilities and transportation. The inflation target is 5% for 1994, compared to 8% this year.

No peso devaluation or other change in exchange rate policy is included in the package, which is subject to congressional approval but is expected to pass easily.

A senior government official said 31% of the $6-billion surplus will be used to benefit consumers in the form of tax rebates or lower prices for government products and services.

Another 28% of the surplus will provide part of the financing for a $4-billion adjustment program for farming, long considered the most troubled part of the economy. The rest of the program will be paid for through current spending.

Business will receive 14% of the surplus in the form of a 1% cut in the corporate tax rate, faster depreciation and easier tax payment terms for struggling companies. The tax on money borrowed from foreign banks will also be slashed by two-thirds, to 4.9%.

The remaining 27% of the surplus will be used for social programs, such as education and health care.