The former Brazil national team coach tells Goal.com that the 20-year-old Neymar is already the best player in South America but needs to move to Europe to grow.
It is a debate that continues to persist around the 20-year-old Santos phenom.
Neymar has rejected overtures from Real Madrid, Barcelona and Chelsea, insisting that he will move when the time is right. While many believe that Neymar staying in the Brasileirão Série A is good for the growth of the league, former Brazil national team coach Dunga disagrees.
"Neymar is a good player, the best in South America and Brazil," Dunga told Goal.com. "Playing in Europe is always tougher. They mark you so much closer. I think that a player always needs to go to Europe to have that experience and get better."
Since breaking into the Santos first team in 2009, Neymar has scored 41 goals for the club where Pele became a legend. With Brazil's improving economy, players aren't being sold as frequently abroad as in the past and top players are returning to the league like Vagner Love and Ronaldinho.
Still, quality defending isn't popular in Brazil's top flight and many are concerned that Neymar's development might be hindered by staying in the country. Dunga believes that this summer's Olympics will prove how far the crafty attacker has come.
"He has a great opportunity in the Olympic Games to confirm some of that potential that he has," Dunga said.
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With highly touted young players like Neymar, Ganso and Leandro Damiao leading the way, Dunga is confident that Brazil will finally win a Gold Medal in the Olympics this summer. In an earlier press conference, the 48-year-old coach admitted that there wasn't enough time to properly prepare for the tournament but he expects things will be different in London.
"In the past, coaches had just days to prepare a team. This year I think Brazil's more prepared and the players that they've assembled are all the best in their individual teams," Dunga explained. "Neymar, Lucas and Damiao are really important players. Oscar, as well. They're doing great stuff not only in the domestic tournament, but also Copa Libertadores and even some European tournaments."
He added, "They have to take advantage that Argentina isn't there. Obviously, [Team UK] will be a favorite because they're playing in their country. But there's a big opportunity for Brazil to win an Olympic medal."
Dunga also expects the senior national team to thrive in the 2014 World Cup. He admitted that he is concerned about the team's current form but expects head coach Mano Menezes to turn things around.
"I think that Brazil has a great opportunity. Logically, they're not doing so well right now but they have players and quality," Dunga told Goal.com "They have a very good chance. Brazil has great players, they just need to work."
Dunga has been unemployed as a coach since his dismissal by the CBF after Brazil exited the 2010 World Cup in the quarterfinals, losing 2-1 to the eventual runner-up, the Netherlands. While he was criticized for his defensive style of coaching, Brazil won the 2007 Copa America and the 2009 Confederations Cup.
Dunga says that he is enjoying relaxing in his home country but admits that he is ready to get back into coaching when the right opportunity comes along.
"I'm in Brazil, I'm calm, resting. When I get a good offer that suits me, I'll listen," he said. "To me, coaching all over the world is no problem. I love football and to me working in football is fun."