The Brazil attacker hasn't played for Real since Apil amid rumours he is ready to quit, with the likes of Manchester City and Arsenal keen.
But Xabi said from Real's Club World Cup camp this morning: "I know what happened at the end of the season, which was not easy, but he took some time off which did him good.
"We talked about it and I see him wanting to have fun, especially by making the most of his quality. We talked about it, we shared it, and now it's time to put it into practice."
Xabi also had a word for Franco Mastantuono, who will arrive after the end of the Club World Cup from River Plate.
He said, "We are happy, he has a fantastic present and an extraordinary future. His maturity on the pitch is also noticeable off it: I was struck by his maturity in the conversations we had. We just saw the River match and we can't wait to have him with us. I liked his ambition."