Since .co is positioned as an alternative to .com, Google is more flexible
The rather new .co country code top level domain is gaining quite a bit of popularity. There have been plenty of other ccTLDs that have become popular as international domains, but this one is being marketed as an alternative to .com by Colombia, which owns it, itself.This poses an interesting question, does Google treat .co domains as any other local ccTLD or does it treat it like a global TLD, like .com or .org.
It's an interesting question given that Google itself has bought a g.co to use an official URL shortener.
In one of his trademark YouTube videos, Google's Matt Cutts answered this very question. He said that Google recognizes that many will be using .co internationally so is has made it possible to set the countries that your site will be targeting in Webmaster Tools.