The year is 1938 and Spain is being torn apart by civil war. As one of several cordial collaborations between General Franco and Adolph Hitler, a small Spanish film crew is invited to Berlin's prestigious UFA Studios to shoot two versions of a popular Andalucian musical, one in Spanish and one in German. Initially, the group is more than happy to have escaped the misery of their war-torn country, however they soon begin to doubt the fortune of their predicament when the German Minister for Propaganda, Joseph Goebbels, falls for the charms of the young Spanish actress Macarena Granada (Penelope Cruz), the German lead actor makes homosexual advances towards Spain's leading man and the only Andalucian-looking extras they can find to appear in the film are gypsies recruited from a nearby concentration camp.