Okay, I'm back after a LONG, long, long, looong time... and have some serious catching up to do.
Anyway, I believe there was some discussion about the confusion of whether Resident Evil 4 could take place in Spain or South America. I'm not sure if it has been officialy announced where the majority of the game is situated... but as far as I believe, I think that it is in fact in Mexico.
Someone was saying that they noticed lots of Spanish refrences a few pages back, including the music and language, but according to history:
When Hernan Cortez landed on Mexico, he was greeted by the ancient Aztecs which he soon conquered for their amount of gold in the country. The Aztecs weren't completely destroyed, BUT the Spanish did inhabbit a lot of the land. They converted their sacraficial religion to Catholicism, and it is a fact today that a lot of Mexico is still inhabbited with thousands of Spanish. History even says that most of the Mexican language includes Spanish.
(Yes, I've done my research

)
This could also explain why it doesn't mention Euro Currency, due to the game possibly being in Central America. ALSO, Spanish architecture is very similar to "Gotchic" architecture, which could also explain the Gothic-like churches that Leon visits.
Well, this is my theory anyway... and it will probablly be washed down the plug hole after Capcom officialy announce that the game is based in Europe... but it's worth a try.