Chelsea have been competing with Paris Saint-Germain to sign the Uruguay international for the start of the summer transfer window and have held extensive talks with the midfielder’s representatives over the past few weeks.
Both Chelsea and PSG are willing to meet the €60 million (£52.2m) buyout clause in Ugarte’s deal with Sporting, but it appeared that the midfielder was favouring a move to the Premier League.
However, both A Bola and Record reported late on Sunday night that PSG vastly improved their initial contract proposal and Chelsea are now unwilling to match the offer from the French champions.
According to Record, PSG’s contract offer jumped from €5m (£4.3m) to €10m (£8.6m) per season, meanwhile, Chelsea had medical tests booked for Ugarte as they were confident that the midfielder would reject a move to Paris.
Chelsea are understood to be wary of paying over the odds for Ugarte, which now puts PSG in pole position to complete their move for the Sporting midfielder, unless he accepts a significantly lower offer.
Mauricio Pochettino has also spoken to Ugarte regarding a move to Stamford Bridge this summer, but it appears that Chelsea’s new manager will miss out on one of his midfield targets.
Chelsea’s decision to withdraw from the race to sign Ugarte could mean that the club will make a renewed push for Brighton midfielder Moises Caicedo this summer.
A late approach was made by Chelsea in the January transfer window, while Arsenal also saw multiple offers – including a bid of £70m – rejected by Brighton.