As far as I can see, latin1 was the default character set in pre-multibyte times and it looks like that’s been continued, probably for reasons of downward compatibility (e.g. for older CREATE statements that didn’t specify a collation).
From here:
What 4.0 Did
MySQL 4.0 (and earlier versions) only supported what amounted to a combined notion of the character set and collation with single-byte character encodings, which was specified at the server level. The default was
latin1, which corresponds to a character set of latin1 and collation oflatin1_swedish_ciin MySQL 4.1.
As to why Swedish, I can only guess that it’s because MySQL AB is/was Swedish. I can’t see any other reason for choosing this collation, it comes with some specific sorting quirks (ÄÖÜ come after Z I think), but they are nowhere near an international standard.