MEXICO CITY -- On a rise overlooking a parade ground at Military Camp No. 1, Mexico's defense secretary and attorney general ceremoniously pressed a plunger and watched as more than a ton of narcotics went up in smoke.

"We are carrying out to the letter our president's orders to combat drug trafficking," said the defense secretary, Gen. Juan Arevalo Gardoqui, as 40-foot flames and billowing clouds of black smoke shot up from a cinderblock enclosure.

More than 1,000 troops in formation, a row of armored-car crews wearing helmets and goggles and a grandstand full of Mexico City's top military brass looked on solemnly last month as the fire consumed the cardboard cartons, gym bags, suitcases and plastic bags filled with 14 varieties of narcotics accumulated in various seizures around the country.

Included in the pyre, Mexican officials said, was more than 2,580 pounds of cocaine and nearly 50 pounds of heroin with a combined wholesale value estimated at $66 million.

The elaborate drug-burning ceremony was staged as part of a campaign to counter bad publicity about Mexican drug trafficking, most of which is to supply a demanding U.S. market consisting of about 500,000 heroin addicts, nearly 6 million cocaine users and millions of marijuana smokers.

The extensive drug-smuggling operations here have made Mexico the leading single-country source of heroin and marijuana entering the United States and a leading point of transfer for cocaine, U.S. officials say.

While Mexican authorities can point to some recent successes in eradicating opium poppy and marijuana fields, rooting out official corruption and battling drug smuggling gangs, the effort does not appear to have significantly reduced Mexico's production of narcotics or their flow into the United States.

"The world is not winning the war against narcotics trafficking," said Attorney General Sergio Garcia Ramirez. On the contrary, "the problem is tending to grow" and will lead to "additional frustrations" unless its causes are attacked on a global scale, he added.

In fact, Mexico's share of the U.S. drug market has been increasing, largely because of successful U.S. antidrug efforts elsewhere, favorable climatic conditions and the competitive edge of Mexican "black tar" heroin. This type of heroin, which hit the U.S. market about two years ago, is easier to produce, cheaper and more potent than the traditional variety, antinarcotics officials say. It sells for $150,000 for 2.2 pounds wholesale compared to $200,000 for the heroin sold two years ago.

Mexicans traffickers "are trying to corner the market," said a U.S. official who monitors the drug trade.

The Mexican share of the U.S. heroin market reached 90 percent in the mid-1970s, after the "French connection" was broken and a narcotics control agreement was signed with Turkey. Then, as a result of intensified antidrug efforts here, the Mexican share was pared down to about 20 percent by 1978. Since about 1982, however, it has been steadily creeping up, reaching 32 percent in 1984. Mexico's annual heroin production of 2.8 metric tons -- 98 percent of which is exported -- now accounts for about 46 percent of the heroin consumed in the United States, according to statistics of the Drug Enforcement Administration.

The changes reflect the versatility of international drug traffickers, who adapt their operations to exploit weaknesses that may develop in narcotics control activities when antidrug efforts are intensified in a particular area, officials say.

"We put our finger in another dike, and now we're playing catchup in Mexico again," said one U.S. official.

Mexico also has been increasing its share of the marijuana smuggled into the United States, passing Colombia last year as the largest foreign supplier, according to an intelligence report of the U.S. Drug Enforcement Administration in Washington. Mexico now is estimated to account for more than 40 percent of the roughly 8,000 metric tons of marijuana brought into the United States annually.

Increasing amounts of cocaine also have been flowing into the United States from Mexico, although the drug is not produced here. About a third of the cocaine smuggled into the United States -- amounting to 30 to 40 tons a year -- now comes through Mexico from production centers in South America, antinarcotics officials say.

The illegal drugs cross the 2,000-mile Mexican-U.S. border mostly in private or commercial vehicles through established crossing points or in small aircraft using 31 known air border penetration areas and more than 470 clandestine airstrips within 100 miles north and south of the border, according to the DEA and the U.S. Customs Service. The Customs Service reports that there are more than 760 land-border crossing sites used by drug smugglers.

Mexican officials say they take seriously U.S. concerns about the drug-smuggling problem -- a major irritant in relations between the two countries -- while insisting that the United States needs to do more to curb demand.

According to Gen. Arevalo Gardoqui, 408 Mexican soldiers have been killed fighting drug traffickers in the last 10 years. At least 27 percent of Mexico's 105,000-member Army are involved full-time in antidrug efforts, notably in eradicating poppy and marijuana fields, military officials say. Especially active has been a 5,000-member unit called the Mars Task Force, which was deployed earlier this year in Mexico's "Golden Triangle," the triborder area of the northern Mexican states of Sinaloa, Chihuahua and Durango.

The Mexican attorney general's office, which says it spends half its $36 million annual budget on antidrug efforts, has 52 helicopters assigned to an eradication program aided by the United States. U.S. funding for the Mexican antinarcotics campaign this year amounts to $15 million. The United States trains Mexican pilots to fly on drug location missions and has about 30 DEA agents assigned to the country.

It was the murder of one DEA agent, Enrique Camarena Salazar, in February 1985, and the torture of another, Victor Cortez, that helped to galvanize U.S. criticism of Mexican drug smuggling and the official corruption that allows it to operate so extensively. According to a report by the DEA in Washington, Camarena and his Mexican pilot, Alfredo Zavala, were abducted, tortured and murdered by a drug-smuggling ring "with the assistance of former and present Mexican police officials."

The ring that Camarena had been investigating was principally involved in cocaine smuggling, antidrug officials say. They say it had been raking in $30 million a month, paying millions of dollars in bribes to corrupt Mexican officials and using mafia-style tactics to buy up legitimate businesses, including ranches, hotels and a third of the country's only privately owned domestic airline.

After initially reacting defensively to the uproar in the United States over the murder of the American agent, Mexican officials in the past two years have quietly been trying to clean house, U.S. officials say.

However, as appears to be symptomatic of Mexico's antinarcotics efforts, the kingpins of the ring have not been caught, and the house-cleaning of official corruption has not resulted in the prosecution of top authorities.

So far, 67 persons have been jailed in connection with the Camarena killing, including the strong-arm man of the gang he was investigating, Rafael Caro Quintero, a trafficker who once employed as many as 10,000 peasants in a huge marijuana-growing operation. In addition, the government has fired more than 500 agents of the Federal Security Directorate, an intelligence agency under the Interior Ministry, and 300 members of the Federal Judicial Police, and both organizations have been restructured.

In Sinaloa state, where the narcotics ring was headquartered, a new governor who took office in January, Francisco Labastida, has dismissed the chief of the state police, fired more than 100 state policemen and had the local military commander reassigned, narcotics officials say.

As a result of the Camarena murder, they say, the ring he was investigating has been effectively "disbanded," having splintered into a number of smaller groups.

Among those still sought in connection with the Camarena killing and other offenses is the cocaine ring's Mexican kingpin and the DEA's most wanted man in Mexico, Miguel Felix Gallardo. Mexican authorities say they cannot find him and do not even know whether he is still in Mexico.

"If you find out where he is, let us know," a spokesman for the attorney general's office said at the drug-burning ceremony.

However, U.S. officials have said Gallardo continues to operate in Mexico, and he has even been spotted attending a large private party recently in Culiacan, the state capital of Sinaloa.

If Gallardo is arrested and starts talking, a lot of officials who received payoffs and are still in their jobs stand to lose, a narcotics official said in explaining the apparent Mexican reluctance to catch the country's reputed number-one trafficker.

One of the leading officials on Gallardo's payroll was the former Federal Security Directorate chief, Jose Antonio Zorrilla, who was receiving $1 million every three months, antinarcotics officials said. In return, they said, Zorrilla provided Caro Quintero and other drug traffickers with credentials of the security directorate and another elite Interior Ministry agency, the Office of Political and Social Investigations. Zorrilla was allowed to resign in February 1985 and later fled to Spain, officials said. No charges are pending against him.

There have been charges filed against the former Sinaloa governor, Antonio Toledo Corro, who has been accused by U.S. officials in Washington of heavy involvement in the drug trade and corruption during his six-year term, which ended in January. Toledo Corro, who now lives comfortably in the Sinaloa beach resort of Mazatlan, has denied the charges.

Another drug kingpin wanted by the DEA in connection with the Camarena case is Ramon Matta Ballesteros, a Honduran who is described as the "executive director" of the Mexican cocaine operation. According to antinarcotics officials here, he was the contact between the ring's Colombian cocaine suppliers and the Mexican smugglers and ranks as one of the top narcotics traffickers in the world.

Ballesteros escaped from a Colombian jail last year after reportedly paying a $1 million bribe to prison officials. He now resides in Honduras, where he has been beyond the reach of the DEA despite the heavy U.S. influence in that country, antinarcotics officials said.

Also seemingly beyond the reach of the law has been an autonomous, family-run Mexican heroin smuggling operation in the state of Durango that has won local support by building schools and establishing a number of job-providing businesses.