Liverpool were keen to sign Ronaldo in 2003 after watching the winger impress during his formative years at Sporting Lisbon.
However, the Reds was unable to meet the 18-year-old's wage demands and Ronaldo subsequently signed for Liverpool's rivals Manchester United.
I saw him in the Toulon Under-21 tournament and we went for him," Houllier told the Liverpool Echo. "But we had a wage scale and we weren't paying the sort of salary he wanted.
"Then Manchester United played a friendly against Sporting Lisbon and all their boys said to Sir Alex Ferguson: 'You have to sign him'.
"But I agreed with not breaking the wage structure. I thought it would cause problems in our dressing room."
Houllier believes Liverpool could have challenged for the Premier League title if they had signed Ronaldo that summer instead of injury-prone Harry Kewell from Leeds.
"Maybe we would have won the title with Ronaldo, but we had Harry Kewell, who was outstanding at the time and was very hungry but got a bad injury," he said.
"After that, he never had the same confidence, the same appetite."
However, the Reds was unable to meet the 18-year-old's wage demands and Ronaldo subsequently signed for Liverpool's rivals Manchester United.
I saw him in the Toulon Under-21 tournament and we went for him," Houllier told the Liverpool Echo. "But we had a wage scale and we weren't paying the sort of salary he wanted.
"Then Manchester United played a friendly against Sporting Lisbon and all their boys said to Sir Alex Ferguson: 'You have to sign him'.
"But I agreed with not breaking the wage structure. I thought it would cause problems in our dressing room."
Houllier believes Liverpool could have challenged for the Premier League title if they had signed Ronaldo that summer instead of injury-prone Harry Kewell from Leeds.
"Maybe we would have won the title with Ronaldo, but we had Harry Kewell, who was outstanding at the time and was very hungry but got a bad injury," he said.
"After that, he never had the same confidence, the same appetite."
