If you think about what symptoms the Arrow Air crew saw, they probably made an appropriate decision:
Loud bang
N1 spooling down
Nosedown trim required
N2 may or may not be good
high vibs
low fuel flow
low (or loss of) EGT
Low oil pressure, oil quantity dropping
I don't think they knew instinctively that they'd lost a big chunk of engine - they certainly couldn't see it.
So they shut down #2 and kept going. This is BY NO MEANS the longest OEI flight by DC-10; a SR DC-10 flew KHI-ATH on two in Sept. 1978.
At some point Arrow Air made the wise decision not to head toward the very high terrain of Bogota, and diverted to Medellin.
And as fleigel and others have pointed out, there was probably considerable incentive not to remain in Brazil, where they may have been presumed guilty before proven innocent. This presumption ADDED an element of risk that may come back to bite the Brazilians some day; the sooner they overcome this, the better for everyone.