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Mexico City is actually considered a State by the Mexican Government as per a new local legalization passed in 2015/2016. Regardless, even before the legislation that doesn't mean that Entidad Federal / de la Federación is/was not a State. There is no other term of art in English that functionally [in Legal Translation there's this thing call "functional equivalents" in which terms that not exact equivalent, but still convey the meaning of the source] convey the meaning of Entidad Federal that State. And just because we don't consider Washington DC a state doesn't mean other countries don't consider their national capital a state, either. Furthermore, in Mexico ENTIDAD FEDERATIVA = ESTADO. That said, Terry has it right. By the way, this term is not exclusive to Mexico, but also used in Venezuela.