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All Spanish speaking people will understand Spanish from any other country, whether Latin America or Spain. There are of course differences, not only in grammar or use of different words, but also in dialect, people from for example Chile or Perú usually speak very fast and if you are used to Spanish from Mexico than you might have some problems at the beginning to follow everything well. Argentinian Spanish is spoken in a very ´´singing´´way and Cuban spanish tends to swallow the ´´s´´.
Spanish from Spain tends to be a bit faster than Mexican Spanish as well, but usually doesn´t cause much differences.
About use of USTED, it´s not being used only with older people and in formal situations, but out of politeness with people you don´t know who have passed the state of kid and teenager.
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