The 20-year-old is one of his nation’s most highly-rated centre-backs, and shone at the recent Toulon Tournament for Brazil’s U-20 side.
This is where he is understood to have caught the eyes of the Gunners’ scouts with his composed displays.
The opening bid tabled by the Londoners is said to be in the region of £7m, yet it remains unclear as to whether or not that will be enough at this stage.
Caio is working under famous football agent Jorge Mendes, who is known for his connections in the European game, which may ease the passage for him to leave his home continent.
The youngster might struggle to gain a work permit to make a move to Arsenal, but the Emirates Stadium side will be hopeful that they can force one through for the talented starlet.
Arsenal are believed to be in the market for a new centre-back, with rumours indicating that Thomas Vermaelen may be on the verge of a move.