Abstract: School failure is a major problem in the Portuguese education system. It is characterized by a significant proportion of failures and repeated failures at early stages of education and by the highest drop out rate in the EU, at the end of compulsory school. In this paper we investigate the main causes of school failure in Lisbon based on data gathered through a questionnaire applied to a randomly selected sample of 964 students, 8 to 14 years old, from levels 3 and 4 of the public primary schools situated in Lisbon, during the year 2002. Poisson count-data models are used to analyze the relationship between the number of failures and a wide set of explanatory variables. However, heterogeneity due to unobserved differences in intellectual abilities of the students is of primary concern. Neglecting it causes biased estimates and therefore a proper method is required to accommodate it. In this paper we suggest a finite mixture of Poisson’s. We found that variables associated to gender, ethnicity, family dimension, parent’s level of education and income poverty are the most important observable determinants of school failure. This is joint work with G. L. Fernandes and J. Passos.