Yep, we're in Mexico.
Mexico was the setting for The Red Devil. There have been many references to the country in the series. The country's language is Spanish (or words that seem Spanish). It is shown to be a very corrupt and dirty place as most citizens are poor and are shown stealing items of value.The Burro Show is located in Mexico, but it is prohibited to watch a Burro Show by the 2nd rule of Mexico, but Red and Blue watched one anyways.
Posters about mexican food can be seen on the walls of some buildings.