Real Madrid director general Jorge Valdano is optimistic of keeping centre-back Pepe at the Bernabeu.
The Portugal international is out of contract in 2012 and has been linked with a move away from the Primera Liga giants, with the two parties yet to agree a new deal.
But Valdano is optimistic over negotiating a new contract, insisting the club are focused on keeping the 27-year-old in Madrid.
Valdano told Canal+: "He has shown he is a great player. We are making progress in the negotiations and we hope to reach a solution.
"Last season these questions were about (Gonzalo) Higuain and in the end we resolved them. He's an important player and so we are making an important effort."
Brazilian-born Pepe, who arrived at Real from Porto in 2007, refused to give any clues over his future.
When asked about the situation, Pepe said: "I'm not going to talk about this issue.
"At the moment I can only say that I'm happy at Madrid and that the fans treat me very well. I'm going to do everything possible to stay."
Pepe also declined to talk about any supposed offer from fierce rivals Barcelona, saying in AS: "I'm a Madrid player and it's a lack of respect for the Madrid fans to enter into this. I'm happy in Madrid."