Aug. 18 (Bloomberg) -- Brazilian stocks rose, halting a two-day decline, on the prospect that accelerating consumer demand and credit growth will help lift Latin America’s largest economy out of its first recession since 2003.

Gol Linhas Aereas Inteligentes SA, the second-largest airline, gained to the highest in 14 months after Banco Santander SA upgraded the stock to “hold.” Banco Bradesco SA led a rally in banks after UBS AG advised investors to “buy” the stock as credit growth quickens. Cosan SA Industria e Comercio, the world’s biggest sugar-cane processor, gained the most in almost two months after the International Sugar Organization said Brazil may have a “bumper” 2010 harvest.

“The market is very excitable,” said Januario Hostin Jr., who oversees 60 million reais as chief equity portfolio manager at Leme Investimentos in Florianopolis, Brazil. “Buyers that missed the rally are coming in and buying all the little dips.”

The Bovespa index added 1 percent to 55,748.92. Thirty-nine stocks rose on the index and 24 fell. The BM&FBovespa Small Cap index advanced 2.6 percent to 872.42.

In other Latin American markets, Mexico’s Bolsa rose 0.9 percent, Argentina’s Merval declined 1.9 percent and Chile’s Ipsa advanced 0.3 percent.

U.S. and European stocks gained today after German investor confidence jumped to its highest level in more than three years in August after government stimulus and rising exports pulled Europe’s largest economy out of recession.

Credit-Card Processors, Banks

Brazilian financial companies rose 4.5 percent, the most among the 10 industry groups in the MSCI Brazil index.

Bradesco, Brazil’s third biggest bank, gained 1.6 percent to 29.38 reais after it was raised to “buy” from “neutral” at UBS, which said the country’s lenders should benefit from credit growth.

Bradesco’s share-price estimate was increased 26 percent to 39 reais, according to a UBS note to clients. Itau Unibanco Holding SA, the largest non-government bank, was rated a “top pick” among the biggest Brazilian lenders and had its share- price forecast boosted 22 percent to 45 reais. Itau gained 3.5 percent to 33.75 reais.

Cia Brasileira de Meios de Pagamento, the Brazilian card- payment processing company known as VisaNet, gained 1.7 percent to 16.88 reais. Redecard SA, the processor of Mastercard Inc. payments, added 0.6 percent to 26.40 reais.

Gol advanced 1.58 reais to 20.02 reais.

“Gol should post significant operating performance improvements in the coming quarters,” wrote Santander. “Gol’s low cost structure puts the airline in a good position to compete for a large share of the more favorable growth that we now forecast for the Brazilian domestic industry.”

Cosan Gains

Cosan rose 7.1 percent to 19.21 reais. Brazil, the world’s biggest sugar producer, may have a “bumper” cane harvest next year in response to an 85 percent price jump this year, said Leonardo Bichara Rocha, International Sugar Organization economist.

The country may gather as much as 35 million tons more cane in the 2010-2011 year starting May because plantings have not finished yet, Rocha said at a conference in Bangkok today. The harvest is estimated at 600 million tons in 2009-2010, he said.

Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, rose 2.1 percent to 49.20 reais after Bank of America Corp. upgraded the steelmaker to “buy” from “underperform”. The analysts said the company was its “favorite way to play the exposure” in the Brazilian domestic steel market.

The Bovespa has jumped 48 percent this year on speculation a rebound in commodity prices and record-low interest rates will bolster growth in Latin America’s largest economy.

The rally pushed its price to 22.59 times reported earnings, a five-year high and higher the 17.77 price-to- earnings ratio of the MSCI Emerging Markets Index, according to Bloomberg data.

Mexico Stocks

Mexico’s mining companies and raw material producers led gains on the Bolsa. The MSCI Mexico Materials Index surged 5.8 percent.

Cemex SAB, the largest cement maker in the Americas, gained 5.5 percent to 14.99 pesos, after the shares were upgraded to “overweight” by analysts at Mexico City-based Actinver SA.

Cemex concluded a transaction with lenders on Aug. 14 to extend the maturity on about $15 billion of debt for five years. “An enormous weight on the stock has been lifted,” Ramon Ortiz, an analyst at Actinver, said in a telephone interview from Mexico City.

Grupo Mexico SAB, the country’s largest mining company, advanced 7 percent to 20.17 pesos after saying it arranged $1.5 billion in financing from five banks in an effort to win back bankrupt U.S. copper unit Asarco LLC in court.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net or Emily Schmall in Mexico City at eschmall@bloomberg.net.

Last Updated: August 18, 2009 16:56 EDT