My dictionary says it's probably from a spanish woerd "pequeno", meaning a small child.

When I was growing up and where I was growing up, it was a word that might be used for any toddler. It's a pretty word, pity it's been twisted and used as a vehicle for racists, but that's how it goes. Maybe if white people started using it for their own children it could get rehabilitated.

But better stick with the Willie Nelson version. (Which actually makes for better word play, fortunately.)