Brazil's Serra fails to win popular running mate

* Minas Gerais governor declines to run on Serra ticket

* Decision marks another hurdle in Serra's campaign

* Challenger Rousseff closing the gap on Serra in polls

BRASILIA, March 4 (Reuters) - Brazil's leading opposition candidate, Sao Paulo state Governor Jose Serra, has failed to convince a popular governor from his own party to be his vice-presidential running mate in October's election.

Aecio Neves, a young and charismatic governor from the central state Minas Gerais, said he did not plan on running with Serra, local media reported on Thursday.

"I'm not considering that possibility," he was quoted as saying in O Globo newspaper, when asked about the vice-presidential bid.

Serra has lost most of his lead over President Luiz Inacio Lula da Silva's chief of staff Dilma Rousseff, who is running for the ruling Workers' Party.

Neves' refusal marks a further hurdle in Serra's likely bid for the presidency. The grandson of prominent former president Tancredo Neves, Aecio Neves could have boosted Serra's bid in the country's third-largest electoral district.

Boosted by a roaring economy and Lula's huge popularity, Rousseff closed the gap on Serra to 4 percentage points from 14 points in December, an opinion survey by Datafolha polling firm showed last weekend.

Serra now has 32 percent against Rousseff's 28 percent, the poll showed. Two other candidates trail in a distant third and fourth place, respectively, but are unlikely to succeed in the Oct. 3 race, analysts say.

Neither candidate would abandon the mostly market-friendly policies that have helped Brazil emerge as an economic heavyweight in recent years. These include fiscal discipline, a free-floating currency, and inflation targets. But both candidates favor a strong government role in the economy and could strengthen state companies at the expense of the private sector.

The head of Serra's centrist PSDB party told Reuters last week that it would formally endorse his candidacy by the end of this month.

Serra may comment on his candidacy later on Thursday during a ribbon-cutting event alongside Neves in Belo Horizonte, the capital of Minas Gerais state.

A PSDB legislator told Reuters that Serra had privately asked Neves to join his campaign on Tuesday night.

Despite his rejection, Neves would still campaign on behalf of Serra in his home state, the legislator said.

"I will do what is necessary to help," Neves told Estado de Sao Paulo newspaper. (Reporting by Raymond Colitt and Natuza Nery; Editing by Doina Chiacu)