The growth of potential GDP in Mexico is not fast enough to narrow the income gap with other OECD countries at a sufficient pace. The persistent weakness in human capital development contributes to this situation. In particular, Mexicans spend comparatively few years in formal education, and the quality of the education they receive is lower than in other OECD countries. This paper discusses the performance of education services up to the upper secondary level. It assesses both the efficiency (outcome for money invested) and the equity of the system and shows that the education system has to be improved further to narrow the human capital gap with other OECD countries at a faster pace and to better prepare children for life and work in a modern economy. The key problem is not a lack of resources but rather inefficiencies and misallocation of spending together with weak incentives for education professionals to perform well. The paper makes specific recommendations to improve the system. The ongoing efforts undertaken by the authorities go in the right direction but are not sufficient. This Paper relates to the 2005 OECD Economic Survey of Mexico (www.oecd.org/eco/surveys/mexico). (A bibliography is included. Background information is annexed. Contains 43 footnotes, 11 figures, 2 boxes and 4 tables.)