No, that is definitely not the case. Barcelona's team is still good, not good enough to be among the strongest contenders for the Champions League of course, but nowhere near lower table material.
Even Xavi will have a decent result with them and they will eventually end up in the top 4, qualifying for next season's CL. The problem is that Barcelona is used to winning big trophies and they will not be satisfied with top 4 finishes.
Real and Atletico look strong domestically and there's huge competition from around Europe as well, Barcelona with Xavi simply does not look good enough for me to be able to challenge there.
I don't think that Xavi will be able to change a lot in Barcelona right now. I am not against appointing Xavi the coach, but I think Barca could've got a more experienced coach. Because Barca hardly has the funds to player sign players and rebuild. So Xavi has to work with what he's given right now and has to get the best out of them. All I can say is I hope he does well with Barca.