New Panama President Varela offers gangs one-month amnesty

Mr Varela said that tackling Panama's expanding public debt will be one of his major challenges

The new president of Panama, Juan Carlos Varela, has offered an amnesty until 1 August to "more than 200 criminal gangs" operating in the country.

Speaking shortly after being sworn in, Mr Varela gave the gangs one month to disarm.

He urged them to "sever links with organised crime and join civic life".

Mr Varela was Panama's vice-president, but he has distanced himself from outgoing President Ricardo Martinelli.

The two centre-right politicians fell out after Mr Varela was dismissed from his post as foreign minister in 2011.

He won the election in May with some 40% of the vote, running against a candidate backed by Mr Martinelli - Domingo Arias.

Mr Varela, 50, has promised to tackle corruption in the Central American nation in the next five years.

"From today, no one in Panama is above the law," he said during the inaugural ceremony.

"Corruption will not be tolerated in our government," he added.

'No food speculation'

Mr Varela also announced that he will sign a decree freezing the prices of 22 staple goods as his first act in office.

"Let's make it clear: I respect the free market, but I am allergic to any speculation with the basic food of the people," he said.

Expansion of the Panama Canal is seen as key for the country's future prosperity

In foreign policy, he is expected to normalise relations with Venezuela, strained after Panama publicly supported outspoken opposition leader Maria Corina Machado.

Venezuelan President Nicolas Maduro was one the first to congratulate Mr Varela in May.

The president faces the challenge of maintaining buoyant growth while dealing with economic inequality. A quarter of the Panamanian population lives in poverty.

The government forecasts the economy will grow by 7% this year.

He promised to support a major expansion plan for the Panama Canal, which accounts for 8% of gross domestic product in the country.

The inauguration ceremony in Panama city was attended by the US Secretary of State, John Kerry, and heads of state from many Latin American countries.