The publication of the Panama Papers is a public relations disaster of the first order for the Central American republic. Even if it is not clear to what extent the thousands of cases are of legal significance, the global media focus has cast doubt on the country's reputation.
This is a severe blow to a government that has done all it can to turn Panama into a financial centre of repute.
"We have to get rid of this image in the world that Panamanians are money launderers. This affects all of us," Annette Planells of the Movin political movement told television broadcaster TVN on Monday.
"For that reason we need to counter this crisis with a communications strategy that all those concerned are involved in, from the legal association through the business chambers up to the government," she said.
Germany's liberal daily Sueddeutsche Zeitung first reported the existence of tens of thousands of shell companies on Sunday, along with the International Consortium of Investigative Journalists (ICIJ) and a number of other newspapers.
The reports indicate that politicians, celebrities and top sportsmen and women have used these shell companies to park their assets out of the view of the tax authorities in their countries of domicile.
Many of the companies are said to have been set up by Panama's Mossack Fonseca legal firm and corporate consultancy.
Following the international furore raised by the reports, the authorities responded with a pledge to uncover any wrongdoing.
"The Panamanian government will pursue a zero-tolerance policy in all areas of law and finance wherever the highest level of transparency is not in evidence," President Juan Carlos Varela said.
Varela's administration is thought to be extremely annoyed, particularly as the government has recently gone to great pains to ensure greater transparency in the financial sector.
It has established a series of new guidelines for banks, insurance companies and real estate companies, as well as bond and jewellery traders.
The aim was to create an international financial centre of standing where once Latin American drug cartels laundered their cash.
Panama's efforts in this regard were rewarded as recently as February when the Financial Action Task Force on Money Laundering (GATF), based at the Paris headquarters of the Organization for Economic Cooperation and Development (OECD), removed the country from its Grey List of countries seen as lagging in the exchange of financial and tax information.
The Panama Papers have reversed the improvement in the country's image at a stroke.
"The reputation of the Panamanian legal system has suffered," Juan Carlos Arauz of the country's legal association said. "Because of this many businesses will have themselves registered elsewhere."
However, the lawyer sees the clients of the Panamanian financial service providers as primarily responsible.
"We set these companies up purely according to Panamanian law. The clients have to behave responsibly, adhere to the law in their countries and report their income and assets," Arauz says.
Alongside the Panama Canal and the free-trade zones, finance is a central pillar of the Panamanian economy. There are currently around 90 banks employing a staff of 23,000 to look after more than 83 billion dollars in assets.
The banking sector contributes 10 per cent of the country's gross domestic product and has recently been growing strongly.
"The talk is now constantly of Panama, but Panama is merely a link in the chain," says Maruquel Pabon, a finance expert at the Foreign Ministry.
"Panama was page one news in virtually every newspaper in the world, but no one is saying that there are many companies in other countries that are involved in this," she adds.
Pabon believes that Panama is being pre-judged, even though it is by no means clear how many of the cases in the Panama Papers are actually of legal significance.
"The companies were not all founded simply to launder money or hide assets in tax havens," she says, adding that Panama's recent efforts to block illegal transactions should not be forgotten.
But the Finance Ministry expert realises that the damage has been done. "Publication will have consequences for all Panamanians. After all, the documents are known as the Panama Papers and not the Mossack Fonseca Papers," she says.