The contaminated medicines were produced by government labs

President Martin Torrijos said the laboratory where the contaminated substances were manufactured would be permanently closed.

He is setting up a national authority to guarantee production of safe drugs.

An inquiry is looking into a company that allegedly sold the substance, found in cough and anti-allergy syrups.

Medicines mixed with diethylene glycol, a solvent commonly used as brake fluid, have killed 41 mainly elderly people since September.

A more expensive chemical, propylene glycol, is generally used in many liquid drugs.

The deaths have badly shaken confidence in Panama's public health system, usually a source of much pride.

"Maybe it will cost more, but Panamanians' lives do not have a price. There is no comparison between money and life," Mr Torrijos said as he announced the closure of the government lab that produced the deadly medicine.