Brazil's Serra proposes election running mate

* Serra proposes senator from same party as running mate

* Choice could spark divisions in opposition

* Serra campaign struggling as Rousseff gains in polls

SAO PAULO, June 25 (Reuters) - Jose Serra, the main opposition candidate in Brazil's October presidential election, has proposed a senator from his centrist party to be his running mate, political allies said on Friday.

His reported choice of Senator Alvaro Dias could cause tensions within Serra's planned election coalition because the small DEM party wanted one of its members to run on the presidential ticket.

Sources in Serra's centrist PSDB party confirmed to Reuters that Serra would submit Dias' name to allied parties as he mounts his election campaign against President Luiz Inacio Lula da Silva's chosen candidate, Dilma Rousseff.

"He was being forwarded and should be confirmed. I think he is a good name," said Roberto Freire, president of the allied opposition PPS party.

Dias has taken a lead role in Senate investigation committees and has been a leading critic of Lula's administration.

Former Sao Paulo state Governor Serra has seen a strong lead over Rousseff evaporate in recent months as Lula's former chief of staff has gained steadily on the back of the president's popularity and a rebounding economy.

In the most recent Ibope poll released this week, 35 percent of those surveyed said they intended to vote for Serra, while 40 percent said they'd back Rousseff. That was the first poll in which Rousseff had a significant lead.

Critics pointed to the delay in appointing a running mate a sign that Serra's campaign has been too slow to get going. Serra's search for a running mate was delayed after his first choice declined and the DEM party was embroiled in a graft scandal.

The DEM president, Congressman Rodrigo Maia, said on Friday he hadn't been consulted about Dias. Another deputy with the party said there would be "a reaction" if Dias was selected.

Lula, whose government had an approval rating of 75 percent in Wednesday's poll, is forbidden from running for president again due to the constitution's two-term limit.

Neither Rousseff nor Serra are likely to depart much from Lula's recipe of market-friendly policies combined with a strong economic role for the state. [ID:nRISKBR]

(Reporting by Fernando Exman in Sao Paulo and Natuza Nery in Toronto; writing by Stuart Grudgings; editing by Stacey Joyce)