Panama not planning to retaliate over French move on Panama Papers

France announced it would put the Central American nation back on its blacklist of uncooperative tax jurisdictions, following a major leak of documents from a Panamanian law firm.

Panama had at first warned it could retaliate, but the president said on Friday he prefers a diplomatic solution and would not seek "retorsion measures."

"The step taken by the French government is wrong and unnecessary," Varela told reporters. "(But) first we are going to use diplomacy, dialogue and cooperation."

He said Panama's finance minister will fly to Paris next week to discuss cooperation.

French companies like transport group Alstom SA have several pending deals in the country, such as building new cars for the Panama Metro.

Asked whether France's decision on the blacklist would affect these deals, Varela said: "When I've had to act firmly, I have done it, but I'm a person who prefers to avoid confrontation... and you must practice what you preach."

Earlier on Friday, Hollande urged Varela to help French tax authorities with their enquiries following the Panama Papers leaks, his press office said. The leaks shone a spotlight on the shadowy world of offshore companies and embarrassed several world leaders.