Die Situation ist noch schwieriger in anderen Staaten.
Die Situation ist in anderen Staaten noch schwieriger.
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Version 2 is better, but even better (more idiomatic) would be
(3) In anderen Staaten ist die Situation noch schwieriger.
Why is this? Because the German Verbklammer applies to predicative complements as well as to verbal complements. Presumably you know that
*Ich habe ihn getroffen gestern.
is dispreferred and
Ich habe ihn gestern getroffen.
is preferred. The reason is that the elements of the Verbklammer are supposed to go around elements that modify the verbal phrase (Verbletztstellung). This is the reason that German verbs often come so late in the sentence (and the butt of a venerable tradition of jokes about the German language, starting at least with Mark Twain).
The same principle applies to predicative complements ("sein" + adjective). Here, too, material associated with the predicative expression is supposed to go between the elements of that expression. Since this delays the important part of the sentence until the end, a popular alternative is to topicalize the adverbial as in version (3). That way, the meaning-carrying word "Situation" and "schwieriger" are closer together and slightly easier to understand.
Both are possible. The difference is that in the first sentence I'd expect a (relative) clause to follow, which describes the other states. For example:
Die Situation ist noch schwieriger in anderen Staaten, deren Bürger ebenfalls ...
Die Situation ist noch schwieriger in anderen Staaten mit hohem Anteil von...
The second sentence puts some emphasis on "die Situation". Another possible word order would be:
In anderen Staaten ist die Situation noch schwieriger.
That word order would put some emphasis on "die anderen Staaten".