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On the benefits of repaying

On the benefits of repaying

Do countries benefit from servicing their debts during times of sovereign defaults? Colombia is typically regarded as the only large Latin American country that did not default in the 1980s, but this column argues that the case of Colombia is more complex than commonly assumed. Although it had to re-profile its debts, high-level political support from the US allowed Colombia to do so outside of the standard framework of an IMF programme. In the short to medium run, Colombia benefited from avoiding an explicit default, but this strategy did not lead to long-term reputational gains.