I will elaborate on how this Mexico was created in the game:
Okay, so, America goes to war w/ Mexico again in 1914. WWI is averted and the only war is in the Balkans. America occupied and forced the Northern Region of Mexico to be friendly to them. They assumed this would cripple the rest of Mexico. So, the remainder of Mexico balkanized into: Mexico, Yucatan, and Azteca.
America, in preparation for a Mexican counter-attack, began mass industrial programs in Northern Mexico. A series of events happens that decreases American-British/French tensions greatly. America gets closer to Germany, and France secretly begins sending aid to Mexico, while Britain secretly supports Yucatan, and Azteca plays a slightly neutral role, telling things to both sides.
Mexico comes under a good old fashioned dictatorship (if I remember correctly. It may have been communist). Finally, Mexico outright attacks the US-puppet of Northern Mexico. Mexico is once again beaten.
Mass reparations, after the army is humiliated multiple times. But, the point of the conflict is that Mexico learns modern warfare, very well. Afterwards, they begin lobbying for industrial programs imported from Britain and France. Azteca, claiming to be fearing a Mexican invasion, asks for American help in building a navy, and means to support it.
American-British/French tensions get worse and worse, as America slowly moves to the central powers camp. Northern Mexico eventually petitions America to take it's troops home (Teddy Roosevelt in wheelchair is president at the time. He dies around 192X TTL, and Al Smith became President). So, we end up with very nationalist Mexicans, encompassing 4 nations, each being industrialized by different powers. The people eventually get a fascist government up, disatisfied with the status quo.
Finally, in 1920 (I believe it was January), Mexico annexes Northern Mexico, Azteca, and Yucatan. This is a much different Mexico than OTL. This one has been industrializing and practicing methods of modern warfare for six years.
Now, there's the "Penlem" Mexico the OP is speaking of.