The 19-year-old has been highly-rated at Anfield for some time but he has not yet cemented his place in the first-team squad despite making five appearances this season.
Pacheco has been linked with a move back to his homeland but Hodgson is keen to hang on to the young Spaniard.
"He's been doing quite well. He had a little down period which I suppose coincided with the unfortunate Northampton game (a Carling Cup exit), when every one of the young players was thrown in together," said the Reds boss.
"He stuck at his task and in training he's been doing very well.
"In the last couple of reserve games he's played very well too. It's nice to know he's still very much a part of the Liverpool future.
"He's unlucky in the position he plays, just behind the striker or in a wide role.
"That's probably where we have most competition at the club right now.
"Having said that, we still believe in him. We think he's a good player and he's got a very bright future.
"Of course there'll be lots of other clubs out there who want to take him but if he really wants to be at the top level he might be well advised to keep learning his trade with these sorts of people around him, rather than to become a bigger fish at a smaller club.
"I'm sure he'll be in the squad for the Europa League next week. I can't guarantee he will start but that's certainly not beyond the bounds of possibility because he has done well enough recently to force his way back to our attention."