Iran and Nicaragua, both of whom the US looks at with disfavour, have signed an exchange deal under which Iran would develop Nicaragua''s infrastructure in exchange for agricultural exports from the Central American country.

The bilateral barter exchange would see Iran developing a farm equipment assembly plant, four hydroelectric plants, five milk-processing plants, a health clinic, 10,000 houses, and two piers in the western port of Corinto, in exchange for Nicaraguan bananas meat and coffee.

The US, has warned Nicaragua that closer ties with Iran, to whom it has held out threats of a showdown over its nuclear programme that Washington calls clandestine, would harm the country''s relations with Washington.

Ever since President Daniel Ortega won the elections, much to the discomfiture of the US, Iran and Nicaragua have warmed to each other. In January President Ahmedinejad visited Managua, a visit that Ortega reciprocated by visiting Teheran.

during Ortega''s earlier presidency btween 1979 and 1990, it had strained relations with the US that was opposed to the Nicaragua''s Sandinista National Liberation Front, of which Ortega has been an important figure.