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Palacio was born and raised in the coastal village of Barranco and worked briefly as a teacher before turning to music. He received the award for "Best New Artist" at the Caribbean Music Awards in 1991, and was posthumously awarded the BBC3 Awards for World Music award in the Americas Category, in 2008.
In addition to the traditional Garifuna music that he played, Palacio absorbed the diverse sounds disseminated by radio from neighboring Mexico, Guatemala, Honduras, Cuba, Jamaica and the United States. Palacio pursued his musical ambitions in a series of high school bands, covering a diversity of popular music from abroad. Attracted by the ideals of the Nicaraguan revolution, he joined the literacy campaign in that nation's African-Amerindian Caribbean coast region, and developed a deeper appreciation for his own threatened cultural and linguistic traditions. Those insights made their way into his own creativity, influencing him to delve more deeply into the roots of Garifuna music.
Palacio returned from Nicaragua to discover the emergence of new Garifuna pride in their culture and identity, a development dramatically expressed in the sudden popularity of punta rock, a fusion of traditional Garifuna music with electric guitar and the influences of R&B, jazz and rock and roll. The Original Turtle Shell Band, led by Belizean Garifuna musician and painter Delvin "Pen" Cayetano, burst into national consciousness in the early 1980s just as Belize gained independence. The Turtle Shell Band's invitation to perform with their mentor Isabel Flores (a legendary Garifuna percussionist and singer, now deceased) at the 1983 New Orleans Jazz and Heritage Festival encouraged Andy Palacio to pursue a musical career.
In 1987, after Pen Cayetano turned down an invitation to work in England with Cultural Partnerships Limited, a community arts organization, Palacio stepped in. He returned to Belize six months later with professional experience, a broadened perspective, and connections that led to his involvement with the short-lived Sunrise recording project, the first effort to record, document, preserve and distribute Belizean roots music. The following year Palacio's career took off, buoyed by widely circulated cassette recordings released by Sunrise, and a string of invitations to represent Belize musically at the Festival Internacional de Cultura del Caribe (Cancun), Carifesta VI (Tinindad and Tobago), Carifesta VII (St. Kitts-Nevis), the Rainforest World Music Festival (Malaysia), the Antillanse Feesten (Belgium), the World Traditional Performing Arts Festival (Japan) and countless performances in the United States, Canada, Colombia, France, Germany and Great Britain.
Two critically acclaimed recordings on the Stonetree label, Belize's only record company, cemented Palacio's fame at home, while reinforcing his stature as the country's foremost overseas cultural ambassador. Recorded in Havana and Belize, Keimoun (Beat On) (1995) showcased Palacio's vocal and composition talents, enlisting first-rate Cuban and Belizean studio artists. The first CD to be produced in Belize, Keimoun put the country on the world music map, and is listed by The Rough Guide as one of 100 essential recordings from Latin America and the Caribbean. Two years later Palacio returned with Til Da Mawnin, an energetic mix of dance tunes backed by Belize's top instrumentalists and singers.
Appointed Belizean Cultural Ambassador and Deputy Administrator of the National Institute of Culture and History in 2004, Palacio devoted himself to the preservation of Garifuna music and culture. In 2007, Palacio's years of work with the Stonetree's Garifuna All-Stars project came to fruition with the release of the acclaimed Wátina album. Wátina featured a multigenerational crew of Garifuna musicians from Belize, Guatemala, and Honduras (including octegenarian singer Paul Nabor) that delved deeply into traditional Garifuna rhythms and songs. The album was a critical success that garnered worldwide attention for the Garifuna people, culture and language. Thanks to Wátina, Palacio was named a UNESCO Artist for Peace and won the prestigious WOMEX Award in 2007.
Palacio later served as a head of the National Institute of Culture and History and was named a cultural ambassador. He released over five original albums beginning with Nabi in 1990. He also traveled widely promoting and performing his music.
Palacio briefly hosted a television program on Channel 5 named after him and featuring works from Belizeans. He also wrote the theme music for Channel 5's newscast.
On March 14, 2007, Palacio released his last studio album, Wátina, which he considered his masterpiece. The album features guest appearances from other prominent Garifuna artists including Paul Nabor and was produced by Ivan Duran at Stonetree Records.
On January 17, 2008, Palacio suddenly fell ill with two apparent "stroke-like seizures." According to a press release from Stonetree Records he died in Belize at 21:00 hours on January 19 of "a massive and extensive stroke to the brain, a heart attack and respiratory failure."
Fellow Belizean musician Oral Fuentes, a friend was reported as saying in response to his death: "I am indeed very sad to hear the news of Andy passing. I've known Andy for years... as a fellow Belizean I feel the pain. Belize has indeed lost a Hero."