The Colombian forward is currently on loan in Germany but his country's most-capped player does not think he will return to his parent club.
Colombia legend Carlos Valderrama believes Real Madrid made a mistake when they let James Rodriguez leave the club and does not think he will ever play for Los Blancos again.
The 27-year-old is currently on loan at Bayern Munich, having sealed a two-year switch to the Bundesliga giants in July 2017. Bayern have the option to purchase James for €42 million (£37m/$48m) at the end of this season as long as the attacking midfielder can agree personal terms in Munich.
Colombia's most-capped player Valderrama feels that James did well during his three seasons in Madrid where he won one La Liga and two Champions League titles. He is surprised they allowed him to leave but after a strong start at Bayern, believes that he is unlikely to return to Santiago Bernabeu.
"James looks good, happy at Bayern Munich," he told ESPN. "If he has not come back to Real Madrid so far, I do not think he'll ever come back.
"What James did the first year with Ancelotti was huge because when he arrived at Real Madrid nobody thought he was going to do what he did. I knew it because I've known him for a long time and had a lot of faith in him. He had a great season.
"What happened later was strange. I did not understand it and in Colombia, we do not understand it either."
Valderrama is confused by the fact Real let him go, especially to a Champions League rival, believing it to be a strange decision from Los Blancos.
"Surely yes," he continued. "Surely because Real Madrid now also realises that they were wrong because they let a great player go, a player of great quality that has proven not only in Madrid but also in World Cups.
"It is very satisfying for the Colombians to see the emergence of these kinds of players."
James played 37 times for Bayern Munich last season, scoring eight times as they won the Bundesliga and reached the final of the DFB-Pokal.
He also added the DFL Supercup to his collection of trophies at the start of this season and has played in six of Bayern's seven league games so far in the 2018-19 campaign.