"I want to be very clear that the decision taken by France's government is a wrong and unnecessary step, even more so given the communication between both heads of state and the fact the world needs multilateral cooperation from all countries to tackle global problems," he told reporters.
He added that his finance minister, Dulcidio de la Guardia, would travel to Paris on Tuesday to stress that Panama was a country that was "dignified, respectful and open to dialogue," as well as one committed to greater transparency.
France's finance minister, Michel Sapin, had said his government would put Panama back on its list of "uncooperative countries" in terms of sharing tax information.
France removed Panama from the list of Uncooperative States and Territories (ETNC) in 2012 after the two countries reached a bilateral accord on fighting tax evasion.
A new ETNC designation means France would view all transactions with Panama with suspicion, presuming tax fraud unless there is evidence to the contrary.
France also urged the Organization for Economic Cooperation and Development to follow suit.
Panama's government immediately reacted by warning it could take retaliatory measures against France, including blocking French investment and withholding public tenders.
Since then, Varela has also emphasized his readiness to improve information-sharing with France, and has announced the creation of a commission to boost business transparency in his Central American country.
He and other officials also stress that they have implemented a series of reforms to curb the anonymity afforded companies incorporated in Panama.
Panama figured on a list of 30 tax havens last June, when the European Commission unveiled its plan to combat tax evasion by multinationals.
But in February, the inter-governmental Financial Action Task Force (FATF) removed Panama from its "gray list" of countries found lacking in the fight against money laundering and terrorism financing.
Being put back on that list, or on France's list of ETNCs, would deal a blow to Panama's financial services sector, which accounts for seven percent of gross domestic product.
The revelations in the Panama Papers, resulting from a massive hack of the Panamanian law firm Mossack Fonseca, revealed how the world's wealthy stashed assets in offshore companies.