Magical realism takes place in a world intimately connected to ours. If not for the magic, the setting would be within our world — and devoid of wonder.
Fantasy, meanwhile, takes place in a world expressly disconnected from ours. It may use the material of our world to create, but the relationship between our world and the world of fantasy is like paint’s relationship to its canvas: material to be manipulated against the formless void.
Magical realism takes place here.
Fantasy, “anywhere whatsoever, anywhither, whitthersoever,” — as long as it’s not here.