The 24-year-old was signed on a season-long loan from Santos Laguna and while he looked a talent he mustered just three Premier League goals.
Blues paid the Mexican outfit a £700,000 loan fee, while they also spent an additional £350,000 for securing their top-flight status.
A fixed fee of £7million was in place this summer should Birmingham wish to sign him permanently, something McLeish concedes was too high.
The club's previous owners brokered the deal and while McLeish insists the Ecuadorian did a good job they would not be completing the deal.
"We did have an agreement, the previous board put one in place, so I don't think it's anything to do with the current board," he told the Birmingham Mail.
"He did very well for us. I am sorry to lose Chucho but the deal was just too rich for us.
"So my task now for my team, my coaches, staff, fans - everybody at Birmingham - is to find somebody who can do a better job.
''That's what I am employed to do. I have got to try and find a player who can be even better than Chucho, not just as effective; players in general who can improve us."
Their decision not to take up the option on Benitez has sparked a debate on whether McLeish has made the right choice on the striker's future.
The Scottish tactician is refusing to be drawn too deeply into the discussion, hinting that Benitez's lack of production was also a factor in his exit.
"You can dress up the statistics any way you want," he continued.
"We took 29 points in the first half of the season, we took 21 in the second half. There wasn't much of a difference and we had harder games in the second half of the season.
"And I had to be fair to the other players. Chucho wasn't the only one out of the team, either.
"If people were not playing at a level then other players had to get a chance. There's no point having a squad otherwise.
"So I can't just say to someone I will keep them in because we've had a great run of undefeated games."