Panamanian President José Raúl Mulino on Thursday denied the U.S. State Department’s claim that his country had agreed to allow U.S. government vessels to transit the Panama Canal for free, an assertion that has upended the two countries’ talks on the waterway.

Panama denied a claim made by the State Department on Wednesday that the Central American nation had agreed to no longer charge fees for US government ships to transit the country’s famous canal.

By Elida Moreno PANAMA CITY (Reuters) -Panama President Jose Raul Mulino said on Thursday the U.S. was spreading "lies and falsehoods" after the State Department claimed U.S. government vessels would be able to pass through the Panama Canal without paying.