Sancho Panza's island-city, over which he was appointed governor. The table was presided over by Doctor Pedro Rezio de Aguero, who caused every dish set upon the board to be removed without being tasted—some because they heated the blood, and others because they chilled it; some for one ill effect, and some for another; so that Sancho was allowed to eat nothing. The word is from barato (cheap).
“The meat was put on the table, and whisked away, like Sancho's inauguration feast at Barataria.” —Thackeray.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
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