Reuters International

Panama president Juan Carlos Varela delivers a speech to the nation after a meeting with various ambassadors to Panama at the Foreign Affairs building in Panama City April 6, 2016. REUTERS/Carlos Jasso

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PANAMA CITY (Reuters) - Panama will focus on diplomacy with France following a standoff over a mass data leak dubbed the "Panama Papers," President Juan Carlos Varela said after speaking with his French counterpart Francois Hollande.

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.

(Reporting by Elida Moreno; Writing by Simon Gardner and Anna Yukhananov; Editing by Bernard Orr)

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