The five-time world champions enter the tournament in June and July expected to impress in front of their home fans.
Capello, whose team are in Group H alongside Belgium, Algeria and South Korea, said Brazil were heavy favourites.
He believes the likes of Argentina, Spain and Germany are the most likely to threaten Luiz Felipe Scolari's side.
"It will be a World Cup where the big favourites are Brazil," Capello said.
"But they have to watch out for Argentina to see if (Lionel) Messi will be once more the great player we all know.
"Also watch out for Spain, with the new Brazilian striker (Diego Costa) they have now up front. They are the most dangerous and, of course, Germany."
Meanwhile, Capello backed Milan and Inter to return to their glory days in the Serie A, with both struggling this season.
Inter have recovered slightly to sit fifth, while Milan are ninth, and Capello said it was up to the managers in Italy to lift their sides.
"To play at high levels you need resources and you have to invest them," the Italian said.
"At the moment in Italy there are not many resources, so I think it's fair to use them for keeping jobs instead of football teams.
"They need to be better in finding new talents or new tactical solutions while waiting for better times.
"However, the two Milan teams possess great managerial skills and I think they will be back soon.
"The fans need to be patient, you can't compete with Qatar or teams with incredible budgets who can buy any player. They have to sharpen their mind."
