By Carlos Ramirez

Allegations that WalMart-Mexico's executives bribed local officials to speed up permitting for new stores highlight the issues of corruption in Mexico, but will have little impact. In the short term, the Mexican federal government has announced an investigation regarding the federal permits granted to the retailer. But that seems to be a political response to the growing criticism of inaction by the authorities rather than a serious case against the company. Because the allegations of wrongdoing relate to local-level permitting, any federal investigation will likely turn up little, if anything, of note. Furthermore, with the present federal administration entering its last few months, the investigation will probably fail to reach any meaningful result before its November 30 deadline.

In reality, federal officials are legally constrained from pursuing the allegations. They would first need a formal accusation by a third party before being able to launch any investigation regarding the alleged bribery. Furthermore, the division of powers under Mexico's constitution gives states and municipalities control over construction and most environmental permits, and national prosecutors have limited leeway to investigate local affairs other than when federal crimes are suspected.

A formal investigation at the state and/or municipal levels is even less likely. Since Mexico's transition to democracy, political power has shifted from the once all-powerful presidency toward the 32 state governors and the mayors of some of Mexico's biggest cities. The governors have strengthened their leverage over important decision-making within their jurisdiction through their control of local institutions. Increased budgetary and debt resources, with little related accountability and transparency (which increase the likelihood of corruption), have only reinforced the governors' political clout. Moreover, because the alleged corruption occurred five or six years ago, and reelection is banned in Mexico, politicians who served at that time will no longer be in office, which would further complicate a formal investigation.

Ultimately, both federal and local governments welcome companies that bring jobs and economic activity and that will likely to trump other considerations. WalMart-Mexico is currently Mexico's largest private sector employer with more than 210,000 employees. Local and federal authorities are unlikely to constrain WalMart-Mexico's growth, particularly when citizens cite jobs as among their principal concerns. In fact, federal and local authorities are likely to continue to regard the company as an important contributor to the economy.

In the short term the most likely immediate outcome for WalMart-Mexico is increased scrutiny of its operations by the media, competitors, and NGOs that oppose its presence in the country, but this is unlikely to hamper the company's ability to keep expanding in Mexico.

The episode does raise questions about whether Mexico's next president, to be chosen in July, will be able to tackle the lack of local-level transparency and accountability. Not only do governors face few checks, but the ban on reelection also means that politicians have few incentives to govern with any concern for their longer-term public reputation. If Enrique Pena Nieto from the Revolutionary Institutional Party (PRI) wins the July election, cooperation between federal and local authorities would improve in some areas. Calderon was frustrated with the lack of cooperation from the states on security, leading to tense relations, especially with PRI governors.

But the fact that the PRI controls most states and many municipalities means there are few incentives for a PRI president to seriously attempt to improve transparency. If elected, Pena Nieto is likely to prioritize the need to win support from governors for his own agenda, rather than pursue the complex political reforms needed to seriously tackle accountability and transparency issues at a local level.

Carlos Ramirez is an analyst with Eurasia Group's Latin America practice.

By Jenia Ustinova

Before the December 4th, 2011 elections in Russia, no one could have imagined an anti-government rally in Moscow could attract tens of thousands of mainstream middle class students and professionals to march alongside socialists and nationalists. But the election results and the perception of fraud and irregularities spurred massive demonstrations. Those protests have brought politics back into the open after a decade in which President-elect Vladimir Putin was granted almost complete political freedom by Russians who wanted little more in return than stability and rising standards of living. Criticism of the turnout at the  March 10 opposition rally (20,000 attended) underscores the dramatic shift in the Russian political context over the last three months.

It was inevitable that the turnout at the opposition rallies would decline from the estimated peak of more than 100,000 who showed up on February 4 in subfreezing temperatures. With Putin scoring a clear win in the March 4 presidential election, the protests lost momentum. After the initial outburst it's hard to maintain enthusiasm, especially when most protesters are asking for greater accountability and transparency, and less corruption. These people want an evolution not a revolution that will disrupt their lives. Like it or not, these are people who have other plans for the weekend than attending protests.

Putin's calculus on how to govern Russia for the next six years will in part assume that the opposition will once again be marginalized as protest numbers dissipate and the Kremlin adopts a divide and conquer strategy. Putin may consider some concessions on electoral reform (for the middle class), and will likely provide additional social spending (for the poor and the regions) before hoping to return to business as usual in Moscow.

But the genie is out of the bottle. The opposition will continue to challenge Putin and the regime. The rallies have already raised questions about Putin's legitimacy that will linger with the general public and with the political elite, weakening Putin. Opposition leaders meanwhile have grown stronger and can now attempt to channel their support into formal organizations and challenge system's hold on power at the local and regional levels.

Meanwhile, the Kremlin's room for maneuver has shrunk considerably. It will attempt to shore up its declining popularity with additional pension and salary hikes, but discontent is now sufficiently strong that any policy misstep or miscalculation by the authorities could spark a powerful public reaction. Any number of events from a national tragedy (such as the sinking of the nuclear submarine Kursk) to prolonged economic dislocation (like the recent financial crisis) could set off new protests.

Jenia Ustinova is an analyst with Eurasia Group's Russia practice.

By Christopher Garman and Jefferson Finch

At first glance it would appear that Brazilian President Dilma Rousseff has successfully weathered her administration's first political crisis: a scandal that led to the resignation of her chief of staff, Antonio Palocci (his second departure from a Workers' Party government due to accusations of shady dealings). Indeed, it'd be easy to think that it might be smooth sailing for the rest of the year. The president substituted Palocci with Gleisi Hoffman, a senator whom she knows well and who is loyal to her; the market's trepidation about inflation appears to be receding for the moment; and the latest unemployment data, released yesterday, reveal that seasonally adjusted unemployment has reached an all-time low of 5.9 percent. What's more, a public opinion survey conducted by Datafolha in June found that Brazilians' impression of the Rousseff administration had improved a little since March, with 49 percent of respondents saying her government was "good" or "great," compared with 47 percent before.

But Rousseff's political future might not be as rosy. If you dig a little deeper, a different, more challenging picture emerges. The same Datafolha poll found that the share of respondents who think inflation will stay high jumped from 41 percent in March to 51 percent in June. Likewise, the portion of respondents who think their purchasing power will increase dropped from 43 to 33 percent. Meanwhile, the National Confederation of Industry found that 71 percent of the people they spoke to expect inflation to increase over the next year, the highest percent in roughly a decade.

To make matters worse, consumer confidence is starting to drop. Datafolha discovered that 17 percent of respondents think the economy will worsen, almost double the number (9 percent) who felt that way in March. These shifts in popular sentiment may not be dramatic enough to change the political calculus of Rousseff's advisors, some who think her popularity might even rise later this year. But they do hint that the economic foundation of Rousseff's popularity is splintering. As Brazilians feel their purchasing power sapped, the rosy halo around Rousseff will likely start to fade. That said, the president's downhill slide will probably be gradual. After all, we're talking about higher inflation, not runaway inflation, and slower growth (just under 4 percent for 2011), not recession.

Christopher Garman is head of Eurasia Group's Latin America practice. Jefferson Finch is an associate in the practice.

The 11 people arrested and accused of spying for Russia have titillated the tabloids and reminded Cold War veterans of the good old days. But they won't do much damage to U.S.-Russian relations. In fact, the two governments are getting along much better at the moment. There are three major reasons for this, and all of them have to do with the view from the Kremlin.

First, Russia's recently ailing economy is now feeling much better. The financial crisis inflicted more damage on Russia than on most other emerging markets, in part because of a steep drop in oil prices. When Obama first proposed a "reset" in U.S.-Russian relations, Moscow was hemorrhaging reserves, and Kremlin officials hadn't arrived at any clear idea on what to do about it. Prime Minister Vladimir Putin was traveling the country assuring local workers that complacent oligarchs, not state officials, were to blame for the volatility, and that their government would ensure that all would again be well. President Dmitry Medvedev and his more western-oriented advisors were beginning to look like convenient scapegoats should the public become restive and Putin run out of businessmen to punish.

Things have changed. The economy has picked up thanks to some skillful economic management and a rise in oil prices out of the danger zone.

Second, Russia is feeling much better about its neighborhood. The Orange Revolution is now a distant memory. In 2004, a presidential election in Ukraine lifted the Putin-endorsed Viktor Yanukovych over Viktor Yushchenko. But Ukrainian nationalists and several Western governments charged fraud, and the race was re-run. Yushchenko won the do-over, fueling suspicion and hostility in Moscow. But his leadership earned little public confidence during his five-year tenure, and Ukraine's latest election elevated Yanukovych, who has now taken his country's bid to join NATO off the table for the foreseeable future.

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