According to Giusti it was (ex-)Yugoslavia too. He quotes an interview with Caltabiano, who talks about his experiences in former Yugoslavia.
Personally I think too it was filmed overthere, the town looks like those towns in the Winnetou movies and Yugoslavia can be quite dry. The entire region (South-East Italy, Croatia, Albania) is known for long, dry periods, alternated with periods with a lot of rain. Furthermore it’s an Italian-German coproduction, there’s no Spanish involvement. Yugoslavia was the German Wild West, so to speak (the Indians were immigrant workers)