There was dancing in the streets of Adams-Morgan yesterday. The contagious rhythms of congas, bongos and maracas reverberated off the buildings around Kalorama Park, and although it rained on the parade, the spitits of nearly 40,000 people gathered for this year's Hispanic American Festival did not seem dampened.

"It's a beautiful time, said Giulio Domingus, a Peruvian-born waiter at the Mayflower Hotel. "Everybody Spanish is together - Panama, El Salvador, Brazil, Peru, all over - and it is good."

"In this kind of festival, this big party," said Carlos Morales, sitting under a tree with his wife and little boy, "we find the people are all friends."

Morales, who came to the United States from El Salvador five years ago, said this was his fourth Hispanic American festival. "This year I see a lot of American people, too.Maybe they come here to see how the Spanish people enjoy their life."

And enjoy they did, as groups from different Latin countries competed to see who could play the most compeling music in the parade and, at the concert afterward, who could serve the best food from the ring of kiosks in the middle of the park.

All day, the air was redolent with the aroma of antecuchos grilled like shiskebab behind the Peruvian stand, a whole roast pig served up by Ecuadorians, empanadas (meat pies) from Chile, carimanolas (another meat-filled pastry) from Panama, tostadas and tamales from Mexico and fried bananas from Nicaragua.

There were a few reminders of the political turmoil in parts of Latin America. "Boycott them," said one woman, pointing to a Chilean empanada stand, "they're junta."

Many people were wearing red T-shirts picturing a raised rifle, a machete and a hand grenade with the motto "Support the Struggle in Nicaragua." And Partida Communista Marxista-Leninista members were selling literature on the sidewalk.

But most people seemed more interested in buying lemonade and the bright yellow Inca Kola than the "Saying of Chairman Mao" in Spanish.

All three District of Columbia mayoral candidates - Sterling, Tucker, Marion Barry and Mayor Walter E. Washington - were in evidence, but not garnering much attention from the sambaing, celebrating crowd.

The more serious side of Latin life in the United States was the subject of festival activities earlier in the week. On Thursday workshops were devoted to problems of Hispanic women, with talks on nutrition, employment, immigration and housing. There were also activities for Spanish-speaking senior citizens, many of whom find the problems of aging compounded by life in an alien culture.

But the main purpose of the festival, as its president Marcela Davila described it, was for "people to get together and have a reminding of their home countries, a chance for them - these are very hardworking people - to relax." The festival's programs were organized with a constant mingling of the serious and the festive, both to inform and to entertain.

"People are beginning to think of themselves as Latinos, not just from one country or another," said Dr. Ricardo Galbis, director of the Andromeda mental health center.

"At least there is the acceptance of the fact that we have to be united. Tribalism and nationalism are still rampant, but people are starting to realize that if they cooperate they can get much, much more."

With such activites as the festival, Galbis said, "They have a found something like an anchor - a cultural anchor in the community."

The parade that marched down Columbia Road NW yesterday afternoon displayed that cultural foundation in its most varied forms.

An Argentine couple tanged in the streets. A barefoot girl from Paraguay danced barefoot, a bottle gracefully balanced on her head.

One vibrant band followed another until, near the end the Brazilians had the whole crowd swayings to their samba rhythms.

Even after the parade ended the Brazilian drummers continued to hammer their rhythms around the corner on 19th Street, drawing hundreds of people into their dance. "Otra vez! Otra ves!" shouted the crowd. One more time!

As their performance finally ended, the stage bands prepared to strike up in the nearby baskeball court, and the park full of people kept dancing into the night, umbrellas swaying to the syncopated rhythms.

"I've never seen a celebration like this," beamed a young man from EI Salvador. "We are happiest today. We are very, very happy."