Yes, you're incorrect here. Function definition introduces a new scope.
# coding: utf-8
def test():
var = 1
def print_var():
print var <--- var is not in local scope, the var from outer scope gets used
print_var()
print var
test()
# 1
# 1
def test1():
var = 2
def print_var():
print var <---- var is in local scope, but not defined yet, ouch
var = 3
print_var()
print var
test1()
# raise Exception