You mean does it matter for syncing? In this particular case it shouldn't matter. The watch will attempt sync with Colorado when you set Mexico. It doesn't know whether you are actually too far or not. Mexico is turned on for syncing.
I set my watches to Chicago. In reality, I'm probably just as close to Mexico City if not closer but Chicago is in the same country. Just a matter of personal preference.
It would be the same for the European time zones. There are like 6 or 7. For syncing it doesn't matter whether you choose Madrid or Stockholm but it might make more sense to choose Madrid if you live in Spain and Stockholm if you live in Sweden. Somebody living in Zurich who has no "code" on the watch might choose Berlin based on the fact that it's in a German speaking country, too. If you were living in Geneva, you might prefer to pick Paris.
Till