A few weeks ago, when Sen. Jesse Helms (R-N.C.) was quoted as saying that all Latins are volatile, the people of Laredo decided that they had heard enough. Mayor Aldo Tatangelo and several business leaders wrote a letter to Helms challenging his characterization and the tone of his congressional hearings on Mexico's drug and corruption problems. They invited the senator to visit the border for a front-line look at a city where relations between the two countries are not an abstraction but the essence of everyday life.

By the time the letter reached Washington, Helms, who said he had been misquoted on the disposition of Hispanics, issued another attack, accusing Mexican President Miguel de la Madrid of rigging his election, and Laredoans were seething. "Please Mr. Helms, don't come," said Dianne Mendoza-Freeman, director of the Laredo Chamber of Commerce. "We are so angry, you might not survive the streets of Laredo."

It is not uncommon for Laredoans to feel misunderstood or ignored -- the saying goes that Texas stops at the Nueces River 100 miles north -- but this year the sense of estrangement is stronger than ever. There is a feeling here that Washington is using Mexico as a scapegoat for U.S. drug and employment problems and seriously damaging border cities like Laredo in the process.

The citizens of Laredo have heard an immigration chief call the border a monster growing and feeding on itself.

They have heard a customs official apparently accuse the wrong Mexican governor of drug trafficking and corruption.

They have heard a Justice Department spokesman depict the border as being totally out of control.

They have seen the Rio Grande, great river of the Southwest border, portrayed as a sort of antipode of the Statue of Liberty, a symbol of all the sinister forces America wants to keep out: marijuana, cocaine, heroin, drug money, illegal immigrants.

Laredoans do not dispute facts. They deal daily with la mordida (Spanish for the bite, a Mexican form of bribery), and it is obvious to them that the smuggling of drugs and immigrants has reached record levels. But they express concern that Helms and federal officials are aggravating matters with their public slaps at Mexico, making it appear as though the river divides not only two countries but also good from evil.

"There is a lot of hypocrisy in this," said Dennis Nixon, president of Laredo's International Bank of Commerce. "The United States is the country with the drug problem. It is easy to blame it on Mexico, but you can't solve it by attacking the border. And you can't solve the alien problem by trying to keep them out. That must be solved by stabilizing the economy in Mexico, just as the drug problem must be solved in the United States. Washington doesn't have a semblance of a foreign policy on Mexico, so they use the border as an excuse for everything. They don't know a damn thing up there."

"We're not denying the underlying problems, but the thrust of the rhetoric from Washington is insulting and in many respects counterproductive," added Dr. Alexandro Velez, director of the Laredo Development Foundation. "Laredo is not out of control. I dare say Sen. Helms might be pleasantly surprised by what he would find here. He would by and large find solid people, decent people who honor family and God. All this talk of patrolling the river with radar balloons and military troops is not well taken. It adds to the sense of the river as a Berlin Wall." The River That Joins

That is not the function of the Rio Grande as it runs through los dos Laredos. The tradition of the river here is that it joins rather than divides. It joins the U.S. city of Laredo, population 108,000, founded in 1755 by Spaniard Don Tomas Sanchez, with the Mexican city of Nuevo Laredo, about three times larger, created nearly 100 years later by residents of Laredo who wished to remain part of Mexico after the Rio Grande was set as the boundary between the two countries. They dug up the remains of their ancestors from Laredo cemeteries and moved with them back across the river.

In many ways the two Laredos are one community of about a half-million people linked by family, history, commerce, language -- even a baseball team. Of all the cities along the border, they seem the most compatible. The Texas side, contrary to the image conveyed by the gunslinging song that made it famous, is not a western cowboy town: nine of every 10 people on the streets of Laredo are Hispanic. To them the river is a river and the bridges are for crossing.

The federal inspectors they encounter on either side are viewed no differently than toll collectors at the Baltimore Harbor Tunnel. When Carlos Villarreal, a Laredo city official, drives to Nuevo Laredo, he often counters the inspector's question -- "What is your nationality?" -- with the words, "Ask your mother." The inspector is his older brother.

The closeness of the two Laredos is symbolized by hundreds of families such as Villarreal's and Leonel Trevino's.

Trevino is manager of Springfield Wire de Mexico, a twin plant that assembles heating defrosters on the Mexican side, where labor is cheaper, and distributes them in the States. He lives in Laredo and drives to work in Nuevo Laredo. He grew up in Nuevo Laredo, but attended Catholic school in Laredo, where most of his classmates were fellow Mexicans. Trevino's wife became an American citizen when they moved across the river. A daughter born in Laredo is also an American citizen. Trevino and his son, born in Nuevo Laredo, are still Mexican citizens.

The Trevinos are one family as the cities are one city. Every February, for Washington's Birthday, and September, for Mexico's Diez y Seis holiday, the people of Laredo and Nuevo Laredo celebrate as one. The best entertainers from Mexico City are brought to Laredo for Washington's Birthday, and in the parade that day armed troops from Mexico are permitted to march across the international bridge.

The cities also boast of the only truly international baseball team, the Tecolotes de los dos Laredos. Tecolotes means owls, a nickname derived from the fact that Nuevo Laredo held the first night games in the Mexican League. Since last year the Tecos have played half their home games on the American side.

The competition includes Saltillo, Monterrey, Veracruz, Mexico City, Guadalajara and other clubs in what is the equivalent of AAA ball. Andres Mora, a former Baltimore Oriole, is the team's slugger this year. Like the other players, Mora is greeted with a hometown serenade from a ragtag brass-and-drum band whenever he comes to bat. Reggie Patterson, a former Chicago Cubs pitcher and the team's only black player, hears "When the Saints Come Marching In" when he reaches the mound. A former shortstop at the University of Houston gets "The Yellow Rose of Texas." Barbaro Garbey, the Cuban who spent the 1984 championship season with the Detroit Tigers, played his swan song here; he was released by the Tecos a few weeks ago after struggling at the plate. They say he could not hit the Mexican curve.

When a game is held in Laredo, the buses carrying the Mexican teams and their equipment are passed through Customs without the normal inspection of equipment and green cards. It is one of several arrangements that the two cities have worked out for their mutual benefit.

Several years ago, when Nuevo Laredo opened a track for greyhounds, Laredo officials thought it would help their tourism if they could drive U.S. buses across the bridge to the races. This was a delicate subject because it might jeopardize the transportation union in Nuevo Laredo. But Mayor Tatangelo invited dozens of Nuevo Laredo leaders, including Mayor Ricardo de Hoyos and the local union chief, Pedro Perez Ibarra (known locally as "the professor"), to a barbecue in the exquisite ornamented backyard of his million-dollar home. After several hours of socializing, the deal was struck.

The cities also have agreements to share fire and water services during emergencies. Several years ago, when traffic across the old international bridge seemed too heavy, they began a joint project to build a second one, which now spans the river about a half-mile away. Laredoans are proud of the new bridge, but they have ambivalent feelings about the white-and-red structure that looms at the northern end, a $25 million inspection station and headquarters for the local branches of the U.S. Customs and Immigration and Naturalization services. So Many Needs Here

"That building is a white elephant," said insurance executive Hector Garcia. "They spend that much money and then they don't even staff it properly. There are supposed to be 20 inspection stations there, but on Saturday nights at midnight, the busiest time of the week, they have one or two open. They can't afford the overtime. We end up with people waiting two and three hours to get across the river."

"It sort of symbolizes how blind the federal government is to the real needs of this community," said Carlos Villarreal, Laredo's director of community development. "There are so many needs here, for housing, development, streets, basic services -- and what does Washington build for us? An inspection station. They think of the border only in one way, when they think of it at all."

The needs of los dos Laredos are obvious. In Laredo just a mile east of the new inspection station is the barrio known as Azteca, where hundreds of people live in crumbling wooden shacks on unpaved streets. The poverty level and jobless rate there are among the worst in the nation, comparable to a big-city ghetto. But as desperate as Azteca seems, it is a veritable middle-class subdivision compared with the sprawling colonias across the river.

The western rim of Nuevo Laredo is patched with several miles of shantytowns built by squatters, many of whom arrived in recent years from Mexico's interior and were thwarted in efforts to escape into the United States. Some of the colonias have electricity, but most of them lack running water and sewers. Much of the land had once been used for the dumping of chemicals and other toxic wastes. The dispossessed live in houses built from cardboard, wooden crates, crumbled brick, mud, poles. Residents of one of the worst colonias asked Mayor de Hoyos for funds to build a sewer system, but he was unable to help them because the property was privately owned, so they formed a brigade and dug the trenches on their own.

The major problem with his city, said de Hoyos in a recent interview, is not drug smuggling or violence or even corruption, though he knows the reality of all three. "The major problem is water and sewers," he said. "The primary services. The basics of life. Some places have none. In other places the lines and pipes were done over 40 years ago and need a major overhaul." 'How the Poor Make Money'

Some of those services are being installed this year in two new industrial parks that border the colonias. The success of these parks is dependent on U.S.-Mexican relations, for they are where American companies are locating their twin plants, or maquiladoras, which many view as the salvation of the border's depressed economy.

The concept of the maquiladora: U.S. manufacturers, looking for a cheap labor source to bolster profit margins and keep prices competitive in the world market, send raw materials to plants on the Mexican side of the border, where they are assembled into finished products and exported to the United States with a tax only on the value added in Mexico. There is a small office, or twin plant, on the American side, usually for distribution.

American unions generally oppose the twin plant operations, saying they take jobs from U.S. workers and exploit Mexican laborers. The theoretical advantages are that they provide thousands of new jobs to Mexicans, lessening immigration pressure, and bolster retail businesses on the American side since Mexicans prefer to buy foreign goods.

The maquiladoras here include a General Motors plant where ceramic magnets for electric motors are made. Known as Delredo, the plant employs 550 Mexicans and nine Americans. The manager, Ron Marienetti, said GM sent him to school in Vermont to learn about Mexico before he came to Laredo last year, and one of the first things he was taught there was la mordida, the way of Mexican graft.

"Since I got here I've had guys come in and ask, 'How much you pay in bribes every week?,' " Marienetti said. "The answer is we don't. We've been asked, subtly. We just said no. We said if we go down the tubes because we don't pay a bribe, then the guy who tried to hit on us is going down, too."

Another twin plant in Nuevo Laredo is Allen Coachworks, where luxury cars -- Lincolns, Cadillacs, Mercedes Benzes and Rolls-Royces -- are gutted and sawed in half, then refashioned into the limousines used by Arab princes, Hollywood stars and Washington diplomats. The owner, Carlos Perry Allen, employs 100 Mexican coachbuilders and carpenters who remodel 40 cars by hand each month. He sells the standard Lincoln limo for $51,000, the Rolls for $200,000. Most of his workers are paid double the minimum wage in Nuevo Laredo, the equivalent of about $5 a day.

"This is how the poor make money and stay alive," said Allen, a wealthy man who recently had his employes craft for his pleasure a half-million-dollar Eagle-Allen convertible, built from the frame of a 1937 Mercedes 540K.

Although los dos Laredos had the first maquiladora on the border -- a plant operated by A.C. Nielson Co., the television rating outfit -- only in the last few years has the area tried to compete with El Paso-Juarez and McAllen-Reynosa in the recruitment of American firms. Historically the economy here has relied on retailing and the import-export business.

The Mexican preference for foreign goods is so strong that most businesses in downtown Laredo sell 80 percent of their merchandise to customers from across the river. Some of the goods are purchased for family use, many more are bought in large quantities and smuggled back across to avoid the high Mexican import tariffs. The merchants of Laredo have been kept in business, and in many cases made millionaires, by these sales. But the peso devaluations of 1976 and 1982 had devastating impacts on Laredo retailers. More than 30 percent of the businesses were shut down and the unemployment rate reached 27 percent.

Today, although the exchange rate for the peso has reached an astronomical 640 to the dollar, retail trade is leveling off and may improve slightly over the next year, according to Phil Lane, director of the Institute of International Trade at Laredo State University. "Unless something drastic happens, we're probably through the worst of it," Lane said. "But there's no doubt many of the retailers are hurting right now. That's the way the game is played. When it's great they make money like crazy -- the J.C. Penney at the River Drive mall once sold more than any other franchise in the country. But when the peso is down, they're lucky to stay in business."

The import-export trade is steadier. Laredo, located on the main highway between Mexico City and the American Midwest, is the largest inland port in the United States, with more customs brokers and freight forwarders per capita than anywhere in the Western Hemisphere. Pancho Averill, a customs broker for Corrigan Dispatch, said he noticed a slowdown on the Mexican side soon after Helms began his public denunciations of Mexico.

"I think there was a cause and effect. Mexicans were dismayed by what was being said in Washington. They felt as though they were being smeared," Averill said. "We are not against trying to stop drug smuggling. Let's stop it and clean it up. But you can't say, okay, everybody's a drug smuggler, let's close things off and put armed guards down here. When they start labeling this Miami 2, let's not forget there is a lot of commerce here that is above-board and very important to both countries." The Customs Cowboy

The streets of Laredo are new to Michael Woodworth. He arrived two months ago to run the regional office of investigations for the U.S. Customs Service. Woodworth is a streetwise Irishman from Long Island who won several medals in Vietnam and earned his drug-busting spurs in south Florida, where he was a member of the Operation Greenback task force that sent several major dealers to prison.

Woodworth likes to be where the action is, and this year Washington has decided that the action is along the Southwest border, in towns like Laredo. His colleague at the local Drug Enforcement Administration office is James Kuykendall, who had been the agent-in-charge in Guadalajara when his partner, Enrique Camerana Salazar, was murdered in February 1985. "They're beefing up the border," Woodworth said. "I guess we're part of the beef."

Few people in Laredo know that Woodworth is here, and he would like to keep it that way. His office in the new Customs Building is separated from the others by a set of locked doors. He said he never met a Mexican until he got here, and considers that an advantage. "That way I'll have no problems arresting any of them."

Sixteen agents work for him in Laredo and up the river in Del Rio, and Woodworth worries that some of them have been in the area too long and know too many people. The close relationship between Laredo and Nuevo Laredo also concerns him. "If there is a symbiotic relationship," he said, "then it might follow that what is corrupt on one side might also be on the other."

His method of fighting drugs has little to do with ultramodern equipment. He follows the money and uses the Bank Secrecy Act, which requires that all foreign deposits of more than $10,000 be reported to federal officials by the banks.

"The drug smugglers have to get their money into American banks so they can legitimize it and use it, so they can buy their houses and more planes and stuff," Woodworth said. "But they can't tell the truth on the forms, they can't say they acquired the money illegally. And if they don't report it we've got them on a violation. So we use that Catch-22. We follow all the money into the banks and then trace it back. The guys at the top are usually insulated from the dope, but not from the money."

Woodworth expects it to take about one year to crack the drug network in his sector. But he does not believe that his work, or anything done along the border, will diminish the flow of drugs into the country.

"When I got here, I heard that the south Florida effort pushed the drugs over to Texas," Woodworth said. "But it didn't even do that. If you look at the statistics in Miami, they're as high or higher than they were before. As long as people use drugs, you're going to have them coming into the U.S. We can't stop that. Even if you start shooting them, you can't stop it."

Woodworth said his mission is to keep the drug network from corrupting the structure of society. "The most we can hope for is to keep the honest guy from being corrupted. I've been doing this since 1971 and the problem has increased every year. We're not going to stop it on the border or anywhere else until people stop using it. Maybe three generations from now that will happen."

As the new cowboy in Laredo, as the local representative of the new federal initiative on the Southwest border, Woodworth carries a gun. He goes to the shooting range at night. "I'm getting a sense that it might turn out to be more violent here than in Miami," he said. "I could see having to use a gun here." CAPTION: Picture 1, Children perch on fence in La Sandia, a shantytown where many Mexicans, thwarted in efforts to cross the border, live. BY DAYNA SMITH -- THE WASHINGTON POST; Pictures 2 through 4, At dawn, the Rio Grande snakes between the two Laredos, with Texas and Mexico. The cities' mayors, Aldo Tatangelo and Ricardo de Hoyos, embrace in Mexico, Sen.Jesse Helms, has been challanged for remarking that "all Latins are volatile people." PHOTOS BY DAYNA SMITH -- THE WASHINGTON POST; Pictures 5 through 7, From Texas side of the international bridge, the view of heavy pedestrian and vehicular traffic symbolizes the social and economic interdependence of los dos laredos. New Customs Service agent Michael Woodworth tries out his Texas look after moving from Florida, while auto customizer Carlos Perry Allen relaxes in a model that he sells for $51,000. He has set pu his factory on the Mexican side of the border. PHOTOS BY DAYNA SMITH -- THE WASHINGTON POST