No Oscar nomination for best foreign language film, why?

Maybe why 'Pan's Labyrinth' co-Spain-Mexico, but filmed in Spain with Spanish history (Civil War), Spanish actors. Academic thought they were 2 films from the same country?

The Spanish Film Academy gave up this film for the Oscars, but had priority because Spain was economically majority in production (Telecinco Cinema, Picasso Studios & Ministerio de Cultura)