How does Python handle scope (ie. Private, Global, etc.) and how does it differ from .NET?

I have a python file with several variables declared right at the beginning of the code. I then have a few small classes declared (in-line inside of the same file) and finally a large loop with all the logic. What I've noticed is that at the end of the outer loop I zero-out the variable and begin again (note: the zeroing-out does work...I can see it in the debugger). The strange thing is that as soon as the loop starts again, the variables revert back to what they were when the loop completed (as if the zeroing...initializing...never happened).

I am stepping through line by line.

What am I not understanding here? Does python just deal with scope differently than other languages?

import statements
variables

class declared
class declared

outer loop:
  .
  .
  inner loop:
     .
     .
  reset variables

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