PANAMA CITY, Aug 5 (Reuters) - Panama's government has suspended a 90 million euro ($120 million) contract with a unit of Italian engineering company Finmeccanica SpA for radar equipment citing "a series of deficiencies" with already installed devices, the government said in a statement on Tuesday.
The Panamanian security ministry says Selex, a defence subsidiary of Finmeccanica, has provided radar equipment that is unable to detect small boats, undermining the Central American country's ability to combat drug traffickers.
The suspension of the four-year-old contract prevents Selex from filing new invoices for payment with the government.
The Panamanian government is demanding that Selex repair the deficient radar or provide new equipment, while it also begins a diplomatic push with Italy to compel the firm to comply with its contractual obligations.
Finmeccanica did not immediately respond to requests for comment submitted by telephone and email outside of normal office hours in Italy. ($1 = 0.7482 Euros) (Reporting by Elida Moreno and David Alire Garcia; Editing by Kenneth Maxwell)