June 25 (Bloomberg) -- Brazilian stocks gained the most in five weeks after unemployment unexpectedly fell and consumer confidence rose to the highest in nine months, adding to signs that Latin America’s largest economy is improving.

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest airline, rallied more than 7 percent on speculation demand is rising. Cyrela Brazil Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder, gained the most in a month after the country’s unemployment rate dropped for a second month and outstanding loans grew. Cosan SA Industria & Comercio added more than 2 percent as sugar rose to the highest since 2006.

“Some industries like retail and transportation have seen better gains as investors anticipated that things would improve, and they have indeed improved,” said Raffi Dokuzian, head of equity sales at Banif Securities Inc. in Sao Paulo. “The data coming out shows that things are getting better.”

The Bovespa index jumped 3.7 percent to 51,514.81, the biggest gain since May 18. The index has gained 37 percent this year, spurred by a rebound in commodity prices and falling interest rates. The BM&FBovespa Small Cap Index added 1.9 percent today.

In other Latin American markets, Mexico’s Bolsa index added 2.3 percent, Chile’s Ipsa advanced 1.7 percent and Peru’s Lima General index increased 2.4 percent.

Brazil’s unemployment rate dropped to 8.8 percent in May from 8.9 percent in the previous month as signs the economy is recovering prompted companies to rehire workers. Analysts expected the rate to rise to 9 percent, according to the median forecast in a Bloomberg survey of 20 economists.

Economic Recovery

Consumer confidence as measured by the Getulio Vargas Foundation rose to 106.4, the highest since September.

Government and consumer spending is helping Brazil offset the impact of the global slump that pushed the economy into its first recession since 2003. President Luiz Inacio Lula da Silva’s administration has lowered the benchmark interest rate to a record, cut taxes on goods, and injected about $100 billion in money and currency markets in a bid to revive growth.

Gol rose 82 centavos, or 7.7 percent, to 11.50 reais. Bigger rival Tam SA advanced 4.3 percent to 20.64 reais.

Cyrela gained 6.1 percent to 14.32 reais. Itau Corretora added the homebuilder to its recommended portfolio. Gafisa SA, Brazil’s second-biggest real estate developer, increased 4.6 percent to 16.12 reais.

Bank Lending, Fed

Brazilian total bank lending expanded in May to 1.26 trillion reais ($640 billion), the central bank said today. Lending climbed 20.5 percent from the same month last year.

Banco do Brasil SA, Latin America’s biggest state- controlled bank, rose 6.2 percent to 21.30 reais. Itau Unibanco Holding SA, Latin America’s biggest bank by assets, climbed 2.3 percent to 30.43 reais. Banco Bradesco SA, Brazil’s third- biggest bank after Itau and Banco do Brasil, rose 3.2 percent to 28.59 reais.

Lenders also rallied as the U.S. Federal Reserve said it will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions.

Cosan, the world’s biggest sugar-cane processor, jumped 2.5 percent to 15.01 reais, leading gains among commodity producers. Sugar futures jumped to the highest in more than three years as global demand outstrips production and on speculation that investors are increasing their holdings. Sao Martinho SA, Brazil’s second-biggest combined sugar and ethanol producer, rose 3 percent to 17.30 reais.

Petroleo Brasileiro SA, the state-controlled oil company, advanced the most in three weeks, adding 4 percent to 32.25 reais. Oil prices climbed above $70 a barrel.

Redecard

JBS SA, the world’s biggest beef producer, rose 6.5 percent to 7.09 reais. Prices of live cattle rose for the sixth time in seven days in Chicago.

Redecard SA, the Brazilian processor of payments for Mastercard Inc., rose to the highest in 10 months after Raymond James & Associates Inc. rated the shares “buy” in new coverage.

“Redecard is the most profitable and integrated payment processing firm in Brazil,” Federico Rey Marino, a Buenos Aires-based analyst with Raymond James, wrote in a note today. The shares trade at a discount to Visa Inc., parent Cia. Brasileira de Meios de Pagamentos, the Redecard rival that is selling shares in an initial public offering.

Mexico’s Bolsa rose the most since June 1 as Industrias Penoles gained. Grupo Aeroportuario del Pacifico SAB, Mexico’s largest non-government airport operator, rose 5.5 percent to 33.36 pesos, the most in two weeks. Industrias Penoles, the world’s largest dedicated silver producer, rose 6.3 percent to 212.60 pesos. Silver futures for July delivery rose 0.7 percent in New York today.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

Last Updated: June 25, 2009 17:08 EDT