Palau, like Puerto Rico, was a Spanish colony at one time. Spain sold Palau to Germany in 1899, just a year after ceding Puerto Rico to the United States. After World War I, Japan seized Palau. After World War II, Palau became a UN Trust Territory under U.S. administration.

Palau declared itself the Republic of Palau in 1981 and officially became an independent nation with a Compact of Free Association with the United States in 1991.

Meanwhile, Puerto Rico was a territory of the United States throughout all of Palau’s changes, and continues to be a territory today.

The COFA between the United States and Palau allows citizens of Palau to travel freely to the United States and gives U.S. aid to Palau. In return, the United States has military access to Palau.

The people of Palau are not citizens of the United States and they do not have access to Medicaid even if they live and work in one of the 50 states. New immigration rules also mean that citizens of Palau cannot live in the United State if they are “likely to become a public charge.” Palau never belonged to the U.S. and never requested statehood. Palau is economically dependent on U.S. aid, but the nation is working toward economic independence.

“The long term goal of United States’ Compact financial support,” the official Department of the Interior website explains, “is to assist the freely associated states ‘in their efforts to advance the economic self-sufficiency of their peoples.’”

For Palau in particular, U.S. financial support will be gradually phased out by 2044. A trust fund was established in 1994 with $66 million dollars. In 2016, it had grown to $197,419,325. The trust fund provides $15 million per year after U.S. aid payments stop.

Comparing Palau and Puerto Rico

Palau has only 21,729 residents; it’s much smaller than Puerto Rico’s 3.2 million people. Here’s some basic information from the World Bank comparing the two:

  • In 2018, Puerto Rico’s GDP was $101.131 billion.
    Palau’s was 291.5 million.
  • Puerto Rico’s per capita income was 25,240.
    Palau uses the American dollar as currency, just like Puerto Rico. Palau’s per capita income is $13,950.
  • Unemployment in Puerto Rico is 11.44%.
    Unemployment in Palau is estimated at 4.2%, but we know that 30% of workers have government jobs.
  • Exports from Puerto Rico last year totaled $60.57 billion.
    Palau’s exports came to $24 million.
  • Average life expectancy in Puerto Rico in 2017 was 79.98 years.
    Palau’s life expectancy is 69.13 years.
  • The birth rate in Puerto Rico was 1.30.
    Palau’s was 2.21.

Puerto Rico is much better off economically than Palau and has much better figures for life expectancy and infant mortality.

Palau has had a lot of ups and downs since it was a Spanish colony. The nation is a group of hundreds of islands, only nine of them inhabited, and many people continue to live on subsistence farming and fishing. The great majority of people in Puerto Rico live in urban areas and have electricity and internet access; this is not true for Palau. Just about half the people of Palau have access to electricity.

Puerto Rico could choose to become an independent nation like Palau, and could try to negotiate a COFA with the United States. In 2010, Palau and the U.S. renegotiated their Compact, but Congress failed to provide the agreed-upon funds for another eight years. If Puerto Rico were to opt for Free Association, it would be important to understand that a COFA can be a changing relationship.

However, Puerto Rico has voted twice for statehood. Statehood is a permanent relationship. States have rights, and every state is equal to every other state.



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