The Premio Cervantes, one of the most prestigious prizes awarded for literature in the Spanish language, was established in 1976 as Spain negotiated the Transition to democracy in the post-Franco era. This article examines the context in which the prize was created and subsequently used to negotiate intercontinental relations between Spain and Latin America. The article highlights the exchanges of economic, political, and symbolic capital which took place between the Spanish State, its representative the King of Spain, and winning Latin American authors. Significantly, the involvement of the Spanish State is shown to bring political capital into play in a way that commercial prizes do not. In so doing, the Premio Cervantes gives those formerly at the colonial periphery the opportunity to speak out and negotiate the terms of a new kind of relationship with the former colonial center.