The government promised a sharp improvement in the impoverished, largely Indian southern state of Chiapas, but it refused rebel demands to link national political changes to a settlement.
'There cannot be a real solution to Chiapas without a solution for Mexico,' the rebel Zapatista National Liberation Army (EZLN) said in a weekend communique when it rejected the government peace plan. The rebels called for a national convention to establish a transitional government and a new constitution, but said they would maintain a six-month-old ceasefire and not disrupt the August poll.
President Carlos Salinas de Gortari late on Sunday also ordered that the truce be maintained. There have been skirmishes since a truce was agreed on 10 January - after at least 159 deaths during an uprising by peasants - but no major offensives.
Zapatista rebels want to break the effective stranglehold on power that the Institutional Revolutionary Party (PRI) has held for 65 years, during which it has regularly been accused of election fraud and voter intimidation. The rebels have demanded guarantees of a fraud-free vote in August.
The image of President Salinas' administration and Mexican stability was badly damaged by the January rebellion which coincided with the beginning of the North American Free Trade Agreement aimed at attracting international investment.
For their part, the Zapatista fighters, who number an estimated 2,500, have been surrounded by Mexican army troops, tanks and artillery and are keenly aware of their military weakness.