Figo, who made over 125 appearances and scored more than 30 goals for his country, says Vicente del Bosque’s outfit do not have enough quality to retain their title.
Spain have won three consecutive major tournaments between 2008 and 2012, however they were convincingly brushed aside by Brazil when the two teams met in the Confederations Cup final last year.
"I do not think Spain will win the World Cup,” Figo told Laureus.com. “I don’t think they have the quality to do so. It will be difficult for them to win, but not impossible.”
Instead, Figo believes Brazil could win the tournament as they have a “great coach” and the advantage of home support.
"I think it helps to be playing at home. I know the Brazil coach [Luis Felipe Scolari] well and I think he's a great coach for this type of tournament and the country will help to support the team,” Figo added.
“It will be very, very difficult for other teams against Brazil [because of the support].”
The 41-year-old, who made over 160 appearances for Real Madrid, then backed his former club to win the Champions League on Saturday when they take on city rivals Atletico in Lisbon.
"I think Real Madrid will win because the last time they won, I was there [as a player] in 2002. So it's pretty special. I hope Real win, but you know that in a football final anything can happen."