The general consensus has always been that the film takes place in Val Verde, but at no point in the film or its novelisation is Val Verde mentioned (the novel does mention a similar fictional nation named Conta Mana, but this is where Phillips briefs Dutch at the start of the story; the bulk of the action, as in the film, takes place "over the border").
Isabelle says in Predators that things went down in Guatemala, which is also the location implied (but not outright confirmed) by the Predator novelisation. The novel adaptation of Concrete Jungle, meanwhile, implies Dutch's mission took place in one of two small, adjacent, unnamed republics, seemingly adding weight to the idea that it might be set in Val Verde (with the other unnamed nation perhaps being Conta Mana).
Steven E. de Souza (the writer of Commando who first came up with Val Verde) seems to think Predator takes place there, but as far as I'm aware he was completely uninvolved with the film, and his comments on it seem far from definitive.
So where do Dutch and co. get stalked by the Jungle Hunter?