You're returning all countries that have a city with population larger than 10 millions. Loop over the cities instead (and please, use meaningful variable names):
for $city in doc("etc/factbook.xml")/mondial/country/city
where $city/population > 10000000
return $city
Or just go for an XPath expression doing the same:
doc("etc/factbook.xml")/mondial/country/city[population > 10000000]