Smith and chief operations officer Ali Russell will continue signing talks with Cuellar and his agent Pedro Bravo after a £2million fee was agreed with Villa.
Gers no longer want Espanyol defender Raul Rodriguez and Smith said: "I've heard Espanyol are also interested in Carlos. It depends on whether the boy prefers to go back to Spain and play for them - or come back to Scotland and play for his old club.
"I'm not certain about it yet. We've only just agreed a fee with Aston Villa. It would be wrong to say we're poised to sign him. There is still a lot of work to be done. But we're hoping that coming back to Rangers is where his ambition lies.
"He enjoyed his football here while we can also offer him Champions League possibilities."