Echo $LANG returns C
just the single letter C

Here's the thing. I can create files in KDE all day long with accented characters. I also added the Spanish keyboard layout so I can easily type accented characters and it works perfectly. In the terminal when I do ls in the folder with accented filenames, the accented letters appear as a "?" (M?xico, for example). But I can do cat Mexico (accented e) and it displays the contents properly.