I don't have experience of towing with a 1.6 but have driven an S40 1.6 and even unladen it felt underpowered. I would expect a 1.6 to really struggle with a caravan, especially a big one. Your handbook should give the max towable weight for your car and this may give some idea as to its suitability or otherwise.
Sarge
'99 V70 AWD