As the administration focuses on Iran, we take a look today at the fallout – a disturbing deterioration in relations between the United States and Brazil.lula_brazil

Our exclusive report from Washington and Brasilia describes how a row over Iran has pushed relations between the two Western hemisphere economic giants to “rock bottom.” The fallout from Iran remains worse than either side will acknowledge publicly, and there is a real risk of a longer-term drift that could threaten trade and business ties. “They’re in the freezer,” was how an upper-level source in Brasilia characterized relations.

It is especially disappointing, of course, since both sides had anticipated improved ties under President Barack Obama, who made a point of fawning over his Brazilian counterpart Luiz Inacio Lula da Silva last year, calling him “my man” and “the most popular politician on Earth.”

For the full story by Brian Winter and Natuza Nery, read here.

For a graphic on how the United States is losing ground to China on trade with Brazil, click here.

On Iran, Obama was at pains on Wednesday to leave open a “pathway” for a peaceful settlement with Tehran over the nuclear issue, even as U.N. sanctions start to bite.  On Thursday, the State Department declared Iran the biggest state sponsor of terrorism in the world, and said its backing for extremists “threatened economic stability in the Gulf, jeopardized the tenuous peace in southern Lebanon, and undermined the growth of democracy.”