Abstract. This article explains the existence of policy gridlock in systems with divided government, even when there are policies that are universally preferred to the status quo. It is shown analytically that one dimension of party institutionalization (the degree of party-voter discipline) may create incentives for veto players to block policies that, ideologically, they might like. This is the case because when party attachments dominate voters' behaviour across different electoral arenas, veto players in the opposition might find it in their electoral interests to prevent popular policies from being adopted. We illustrate our argument by analysing the recent experiences of two Latin American democracies living under divided government but with opposite levels of party-voter discipline: Mexico and Brazil. Contrary to the received wisdom, the low degree of party institutionalization in Brazil may have helped the passing of comprehensive policy reforms, whereas strongly institutionalized parties in Mexico might have been partly responsible for the persistence of policy gridlock.