Cancelo is on-loan at Barca from Manchester City, where they're willing to sell him outright this summer.
However, Barca's finances are such that any permanent deal is no guarantee.
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Instead, Sport says Barca could lose Cancelo this summer, with Arsenal keen to bring him back to England.
Gunners boss Mikel Arteta worked with Cancelo at City and has had problems at wing-back this season.
City are seeking 20-25m to sell the 29 year-old this summer.