Last week, I wrote about a wave of good news for political and market stability in several Latin American countries.

Then there's Argentina.

Faced with an increasingly uphill struggle in financing a highly expansionary fiscal policy and with no desire to reduce government spending, Cristina Fernandez de Kirchner's government has refused to back down. They've now doubled down on a bid to reassert political control by claiming ownership of central bank funds with no clear room for compromise. The ruling Peronist party has already lost control of congress, and now it has drawn the judiciary into the fight over funds.

Argentina's opposition doesn't agree on much, but there is consensus that the Kirchners have now forced a fight worth having. A government battling for its survival won't have much time or political capital to spend on anything else. The current political crisis might even delay Argentina's plans to restructure the $20 billion debt in default.  As early as next week, both houses will probably reject a presidential decree establishing a "Deleveraging Fund" that the government hopes to use to tap $4.3 billion in central bank reserves to meet the debt obligations.

This is the most serious political crisis in Latin America. Fernandez de Kirchner's term will end in December 2011. She's determined to prove she's no lame duck, but her aggressive style may prevent her from even reaching the finish line.

Ian Bremmer is president of Eurasia Group.

By Hani Sabra

As President Hosni Mubarak recovers from gallbladder removal surgery in Germany, he's probably spending some time thinking about former IAEA director Mohamed ElBaradei. A day before his operation, Mubarak commented on ElBaradei's potential presidential candidacy and said that Egypt does "not need a new national hero." That's a significant statement considering that the 81-year-old president usually lets his subordinates respond to issues like this one. Mubarak's sharp comments indicate that ElBaradei's recent rhetoric has clearly unsettled him. And looking ahead, the political temperature in Egypt will get increasingly hotter between now and 2011, when presidential elections are scheduled to take place.

First, some context: As things stand now, ElBaradei actually can't run for president. He must be one of the leaders of a "recognized" political party in order to participate. When Mubarak engineered constitutional amendments in 2007, they were designed to ensure that members of "unrecognized" parties like the Muslim Brotherhood would be unable to field independent candidates in elections -- as it did with great success in the 2005 parliamentary elections. ElBaradei prefers to run as an independent, and he is wary of the baggage attached to being identified with one of the ineffectual "legal" parties. Given this, and the fact that the Egyptian authorities will almost certainly not heed ElBaradei's call for constitutional amendments that would make it easier for him to run, ElBaradei is unlikely to enter the presidential race in 2011. Even if he does join a party and somehow manages to participate, an opposition candidate stands virtually no chance of victory. Mubarak will likely run and will certainly win if he does. Meanwhile, his son Gamal will continue to raise his profile and likely take the reins when his father dies. (The longer that Mubarak lives, the less chance that aging security establishment figures like Omar Suleiman have to become president.)

Still, ElBaradei isn't just a passing fad. Mubarak can't simply imprison him a la Ayman Nour. He's a Nobel Peace Prize winner, and his mistreatment would put Egypt under a great deal of unwanted pressure and scrutiny. At the very least, ElBaradei will continue to be a thorn in the government's side. And since returning to Egypt for vacation last week, he has gone on the offensive. Despite almost certainly receiving calls from friendly ruling National Democratic Party members telling him to cool it, ElBaradei has refused to temper his statements about Egypt's calcified political system. He has met with his supporters and heavyweights like Arab League Secretary General Amr Moussa (who was previously Egypt's popular foreign minister) and continues to talk about what he perceives as Egypt's failings because of its authoritarian political system. ElBaradei will continue to be a popular force in Egyptian politics. But several thousand Facebook fans do not make him a viable presidential candidate.

Hani Sabra is a Middle East analyst at Eurasia Group.

By David Bender

On March 7th, Iraq will hold its second parliamentary election and the world will again see pictures of Iraqis' purple fingers. But these images of democratic participation may obscure more than they reveal: Iraq's democracy is in trouble. Currently, only 28 of more than 500 banned opposition candidates will be permitted to run in the election. Through clever political and judicial manipulation, the opposition has been eliminated before election day and left with no clear constitutional or legal recourse.

Since January, an aggressive campaign to ban more than 500 largely Sunni and secular Shia candidates -- mostly from Iyad Allawi's largely Sunni and secular Shia Iraqiyya Alliance for alleged Baathist links -- has started to undermine the weak democratic process that was beginning to take shape in 2009. The Iraqiyya Alliance presented a non-sectarian alternative to the increasingly unpopular Iraqi Prime Minister Nuri al Maliki; and as a pro-US, secular nationalist, Allawi is a nightmare for pro-Iran factions in Iraq. With Maliki's support, the Justice and Accountability Council (JAC), which is charged with de-Baathification and is run by two notoriously pro-Iran figures, Ahmed Chalabi and Ali Faisal al Lami, ordered electoral bans against many Iraqiyya candidates linking them to Baathism.

Read on

By Ian Bremmer and David Gordon

Now for the red herrings, the places and problems where we think there is less risk than meets the eye.

In Iraq, elections in March will spark violence as foreign militants try to undermine the transition to Iraqi national sovereignty. A U.S. troop withdrawal beginning right after the elections will invite more violence. We could see a Sunni election boycott. But compared to what we've seen before, and what might have happened, the overall story is remarkably positive. For the markets, Iraq is suddenly an opportunity. The institutions are becoming legitimate (even with the unresolved Kurdish issue), the army is starting to work, and most importantly, political leaders from all communities are beginning to recognize the value of Iraq's tremendous natural resource base from which all can benefit if they make the compromises to maintain stability in the country. For all their basic governance problems, there's very little chance of Iraq actually becoming a failed state at this point -- a meaningful risk even a year ago. It's not a place we're ready to vacation in, but we're bullish on Iraq.

Iraq is also moving in a positive geopolitical direction. Ties with Turkey have grown particularly quickly -- not just in the Kurdish region in the north, but in Baghdad. That's one of the few positive stories for Ankara this year. Arab states in the region are still hesitant to build ties with Iraq as they wait for clarity on its next government. Maliki hasn't been a popular figure with neighboring gulf Arabs, but they recognize that Iraq's economic consolidation won't wait for another four years, and they'll start making political overtures to Baghdad if Maliki's mandate is extended. And if the Iraqi prime minister isn't returned (which is certainly plausible), we'll see a stream of head of state visits to place relations with a new leader on a more solid footing. So whatever the electoral outcome in March, we're likely to see Iraq on a faster path to integration with regional political and economic infrastructure next year. Meanwhile, Iran's role in Iraq has quietly receded. Iran's controversial presidential election and subsequent state violence did nothing to improve Tehran's influence among Iraq's Shia population, where Iraqi nationalism has been steadily growing.

The headlines for Iraq next year will undoubtedly be the timing/delays/pace of the US troop withdrawal. But the real story is going to be a moderate government, growing geopolitical influence, and the most exciting new investment opportunities the region has seen in a decade.

Read on

By Ian Bremmer and David Gordon

After years of being wildly bullish on Brazil, we're in for a bump. The country stands to gain from a strong rebound in growth over the course of 2010, but Brazil's newfound economic abundance will lead to a drop in the quality of economic policymaking -- both on macroeconomic policy and, to a much greater extent, through leaning more heavily on state-owned enterprises. As a result, 2010 will be marked by growing investor concern on both macro and sectoral policy as the October presidential election draws near.

Brazil's challenge of abundance looms greatest in the oil sector. The government wants more control over resources, and has very little desire to allow the international community to profit unduly (or, in some cases, even duly) from the exploitation of the country's vast new oil frontier. With Lula's political capital running high, he should be able to approve legislation creating a new exploration and production framework which relies heavily on state-owned Petrobras. What's happening in the oil sector, while more extreme, should be seen as part of broader trend whereby state enterprises grow in relevance and industrial policy becomes more inward focused. That's a negative for Brazilian markets. A rosy economic outlook is also likely to impact the discipline of macroeconomic policymaking. The Lula administration isn't about to abandon a macroeconomic framework which has proved wildly successful, but lowered fiscal vulnerabilities will tempt the administration to keep fiscal policy expansive for longer than markets would like. That will put additional pressure on the central bank precisely when the membership of its board may be in flux...as Central Bank President Henrique Meirelles considers a run for elected office.

Markets will thus become jittery as the elections draw near, particularly given that some of the concerns will be overblown when investors awaken to these risks more explicitly. Lula's hand-picked candidate Dilma Rousseff enters 2010 favored to win the election, and she will undoubtedly deepen the government's turn toward a bigger state. Sectoral policy won't be evenly problematic -- in the telecom sector, these drivers exist, but are weaker; while in transport infrastructure, the political push actually goes the other way (more foreign investment needed given the scope of projects needing completion before the World Cup in 2014 and the Olympics in 2016). If opposition candidate Jose Serra wins, the sectoral up-side will be larger given the lack of a bias toward state-owned enterprises, and fiscal policy will be tighter. But markets will surely be concerned over his long standing criticisms of both exchange and monetary policy.

The situation is a little like post-Mandela South Africa (though from a more attractive economic trajectory), where people and markets expected continuity until Thabo Mbeki disappointed. Leaders like Mandela and Lula are impossible acts to follow. Post-Lula, Brazil will not have the capable policymaking of the past several years and Brazil will be in for a bumpier transition as a new administration seeks to put its stamp on managing the country's newfound economic wealth. Still, the long-term outlook for the country remains strong. By 2011, Brazil should be set for a bounce.

Next up: India-Pakistan

Ian Bremmer is president of Eurasia Group, and David Gordon is the firm's head of research.

By Ian Bremmer and David Gordon

On balance, 2010 is looking like a tougher year for President Obama than 2009 proved to be. Going into the new year, he has succeeded in kicking Afghanistan and climate change down the road, but pulling off real policy success on either still looks unlikely. Unemployment remains high as the country pulls weakly out of recession and mid-term elections appear on the horizon. While Obama's popularity may take a beating, the coming year will see considerably less actual domestic policy risk in the United States than in 2009. But the exception is in the process of financial regulatory reform. That's likely to be a tougher issue than people expect.

The reform package that passed the House of Representatives is comprehensive, though it will be moderated in the Senate, where for the first time under Obama a serious bipartisan effort is being undertaken. Either way, substantial change is afoot -- more far-reaching than anything we've seen since the Great Depression. The result will be a structure put in place to monitor and address systemic risk, largely self-financed from the financial community, as well as changes on many other issues, ranging from derivatives regulation to the proper role of the Federal Reserve Bank.

Unlike cap and trade or immigration reform, there's a very high likelihood that comprehensive financial regulatory reform will pass. But with mid-term elections approaching, it's likely to turn populist and lose a considerable amount of its bipartisan flavor. Congress as a whole is likely to imitate what's already come to pass in the United Kingdom, where an unpopular Gordon Brown government is going after the financial sector to try to lift its poll numbers from the morass. Congress doesn't want to be tarred by Treasury Secretary Tim Geithner, bailouts, or billionaire bankers. The best way to avoid that fate is to include some visibly populist elements in the new legislation, especially on consumer protection and executive compensation. Members of Congress will look to score points by taking aim at the Fed, but actual policy change there is a step too far -- the administration will likely ensure that nothing in the ultimate bill will undermine the Fed's political independence.

But while Obama's economic team will be wary of populist measures, Democrats in Congress and the president's own political advisors will see such measures as a necessary piece of "mobilizing the base" before mid-term elections. Big banks are an easy target, especially in the context of high profits and a strong recovery for the financial markets, but a weak overall economic rebound. The legislation should pass by late spring.

Regulators will be given significant new discretionary powers, including some authority for breaking up institutions deemed a systemic risk. A key risk is that, depending on the political environment, the newly empowered regulators could use their capabilities to issue strict rulings that go well beyond what is specifically included in the legislation. Regulators will also likely issue proposals for revising capital requirements upward next year.

Another key risk to watch will be efforts to impose further fees and taxes on the financial system. With the U.S. government running record deficits in the wake of the financial crisis, trying to recoup these costs from the financial services industry will be seen as a relatively low-cost political option. Executive compensation is one likely possibility; taxes on carried interest for hedge funds are another.

Both the Americans and Europeans are aware of the risk of driving the financial industry into the ground with too much (or too drastic) regulation or taxation. But as reform becomes an election-year domestic battleground, the need to serve political interests will be increasingly at odds with the need to create an efficient framework for regulatory reform.

Next up: Japan.

Ian Bremmer is president of Eurasia Group, and David Gordon is the firm's head of research.

By Ian Bremmer

As 2009 draws to a close, Turkey appears high on the list of good-news stories gone bad. Central to the country's political stability and open investment climate over the past several years has been the popularity of Prime Minister Recep Tayyip Erdogan and his moderate religious Justice and Development Party. Known by its Turkish acronym AKP, the party first swept to power in 2002. Five years later, the AKP captured nearly 47 percent of the vote in a field that included more than a dozen parties, allowing it to govern without a coalition partner that might have obstructed reform and foreign investment.

But a sluggish economy and high unemployment have pushed the AKP's popularity below 32 percent, and the party finds itself in an increasingly bitter standoff with the country's most determined secularists -- including leading opposition politicians, the military brass, much of the media, and some of the country's most powerful businessmen. Negotiations with the European Commission over the country's bid to join the EU have all but ground to a halt.

Things took another turn for the worse last week, when Turkey's Constitutional Court voted to shutter the country's main Kurdish political party and to ban 37 of its members from politics for the next five years. The verdict has effectively scrapped the AKP's ill-fated "Democratic Opening," an attempt to boost the party's declining popularity with the country's Kurdish minority ahead of elections now scheduled for mid-2011 and to promote the kind of reforms that keep the EU process on track. If the move provokes more violence from alienated Kurds, the AKP could also face tough criticism from nationalists, who will accuse the government of being "soft on terrorism."

The AKP is also feeling pressure from conservative religious circles. The Islamist Felicity Party is picking up support among religious voters who aren't satisfied with the ruling party's commitment to their agenda and who are turned off by a series of corruption scandals involving senior AKP officials.

In other words, the AKP remains the dominant force in Turkish politics, but its latest actions have antagonized players across the country's political spectrum. We knew the next elections would provoke all kinds of tensions between the AKP and its secularist critics, but it's becoming more likely that the AKP will have to form a coalition government next year, putting an end to the single-party rule that has provided real momentum behind economic reform and welcomed much-needed foreign investment in Turkey's future.

Ian Bremmer is president of Eurasia Group.

ADEM ALTAN/AFP/Getty Images

By Eurasia Group senior adviser Jun Okumura and analyst Ross Schaap

The Democratic Party of Japan's (DPJ) huge victory last Sunday will bring considerable domestic policy change. That's where the DPJ's focus will remain for the foreseeable future. Ironically, though, the first policy crunch on a specific issue may come on national security, an area where the Liberal Democratic Party's (LDP) efforts to brand itself as the party most capable of protecting Japan from North Korea, terrorists and pirates fell mostly on deaf ears.

Yukio Hatoyama, the DPJ prime minister to be, has vacillated on the continuation of the refueling operations in the Indian Ocean in support of the NATO effort in Afghanistan. His current position is that Japan will terminate the operation when the current authorizing law expires in January but that he will offer President Obama something better on Afghanistan.

Logic tells us that there are three options: put a substantial number of non-combat personnel on the ground; pay a lot of money; or opt for some combination of the first two. Some DPJ members -- most prominently Ichiro Ozawa -- have long wanted to take the first road and assist the Afghan effort with people on the ground. But that's a risky proposition given the risk-averse Japanese public and the poor conditions there that, moreover, show few signs of improvement any time soon.

Besides, Japan put up a lot of money ($13 billion) for the Gulf War and was widely disparaged for its "checkbook diplomacy"; nobody wants to repeat that painful experience. The refueling operations are a highly effective way for Japan to maintain its seat at the table with minimal financial cost and physical risk. In fact, there have been indications in the recent past that Hatoyama wouldn't mind seeking an extension on his own. The LDP will, of course, be happy to oblige him; which is precisely why this will be such a politically painful course of action for the new administration. Whichever course Hatoyama decides to take, he must make up his mind and take action during the autumn Diet session. Current refueling operations are authorized through January but renewed authorization needs to come in well before that deadline for the Maritime Self-Defense Force to manage deployments.

And besides the refueling operations, it appears the issue of US troop redeployment within Japan will also hit the new government early on. As much as it might prefer to focus on domestic political change, foreign policy matters that have to be addressed will remain a draw on the new cabinet's time.

TORU YAMANAKA/AFP/Getty Images