As I remember the situation (and I’m sure someone will be along to clarify and or correct any innacuracies), there were a limited number of slots from each global region. I believe the Americas had two slots. There was to be a round-robin series of games, with the top 4 advancing to a single-elimination tournament.
For some reason, several teams from the Americas dropped out (including the Dominican Republic! I’d sure like to hear the story about why they dropped out), leaving just 4 or 5 teams left. The US went undefeated in the round-robin, while Mexico lost all their games, save a single forfeit. The US was then matched up against Mexico in the final 4, and lost (I think 2-1). And that was that.
Baseball, more than any other sport, I think, can have a major underdog beat a favorite in any single game. That’s what happened here. It would be nice to have a best-of series to determine the final slots, but those were the rules in place at the time.