If not Menagerie, why not Vacuo?
Okay, so Vacuo is generally a better and safer place to live and doesn’t discriminate against faunus. There’s also my headcanons that Vacuo didn’t exile any of its own people to Menagerie, and that elements of Vacuo attempted to establish positive diplomatic and economic ties with the faunus being sent there by other kingdoms. So, why did anyone get sent to Menagerie at all? Why not Vacuo?
Well, as a matter of sovereignty, the other kingdoms could not demand that Vacuo accept a bunch of refugees, especially not people made refugees by those very kingdoms. Since many of those refugees were probably being exiled on the pretense of being convicted criminals (via spurious charges and kangaroo courts), it would have looked especially bad from a political standpoint.
Practically speaking, Vacuo also couldn’t afford to take in that many people. Even in the best of times, Western Sanus simply doesn’t have as many hospitable locations to establish new towns compared to Vale and Mistral's territories.
Even if Vacuo hadn’t just got done fighting a war, the surviving settlements which could still manage comfortable security in terms of water and food supply could not necessarily maintain that stability in the face of a sudden influx of mouths to feed. Especially not mouths that don't come with heads that know how life works in the desert.
It’s an open question whether any of the exiles would have wanted to go to Vacuo, themselves. Most of them likely came from Mantle and Mistral, whose governments might not have been painting the most flattering image of the desert kingdom to their citizens.
Many of the faunus exiles might have held more hope for rebuilding their lives in a place without any humans at all. How many of them would really believe that humans and faunus lived equally in Vacuo?
So, even if Mistral had cared to spend even more resources exiling the faunus to a place farther away, and Vacuo had cared to let them all in, the faunus themselves may not have cared to make the longer, riskier journey to a place that propaganda made seem even worse than Menagerie.
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