By Carla Mozee

Brazilian stocks led Latin American equity advancers Tuesday, led by gains in Perdigao SA after a broker hiked its rating on the meatpacker.

Brazil's Bovespa rose 1% to 38,970.88, following two sessions of losses.

The iShares MSCI Brazil Index Fund (EWZ) rose 1.2%, also moving toward its first win in the three sessions.

Shares of Brazilian market heavyweight Petrobras (PBR) rose 1.5% as oil surged nearly 4% to $49.13 a barrel, its best finish since Dec. 1.

Investors focused on a report that U.S. housing starts unexpectedly jumped 22%, pushing to the background expectations that U.S. crude inventories rose last week. Trading was also volatile ahead of the expiration of options.

Perdigao (PDA) shares were the strongest of Brazil's price performers on Tuesday, up 7.6% after Credit Suisse upgraded the company to an outperform rating from neutral, saying that its shares are trading below historical valuation.

"We don't believe [Perdigao] is pricing-in likely market share gains in both domestic and export markets, caused by a continued weakening in smaller competitors' positioning," wrote analyst Marcel Moraes in a note Tuesday.

He said the company faces short-term challenges due to demand for protein in from export markets, but that it's "the best-positioned Brazilian food company to face any adversities."

Shares of competitor Sadia (SDA) were up 4.2%. Moraes said Brazil's development bank, or BNDES, could bring the Perdigao and Sadia "closer together, creating one of the leading food companies," if the bank were to become involved helping Sadia deal with 3.5 billion reals in short-term debt that's due in the third quarter of this year.

Fellow meatpacker JBS saw its shares rise 0.7%.

The Bovespa's gains on Tuesday were capped by decline in steel stocks amid a spate of downbeat developments from the metals sector, including Anglo-American mining firm Rio Tinto's(RTP) view that it's unlikely that metals prices will rebound this year.

Also, aluminum giant Alcoa Inc. (AA) slashed its dividend in a move to save money amid a "prolonged" downturn, and U.S.-based steel maker Nucor Inc. (NUE) warned that it will swing to first-quarter loss.

"The economy has fallen off a cliff -- and there is no visibility as to the timing of the recovery," said Nucor in a statement.

In Sao Paulo, shares of steel maker Gerdau (GGB) fell 1.9%, Usiminas fell 2.4%, and CSN (SID) shed 0.5%. But Vale (RIO), the world's largest producer of iron-ore, a key component in steel production, managed to shake off earlier losses and rise 0.3%.

Argentina's Merval index rose 1.1% and Chile's IPSA gained 1%.

Mexico slips

Mexico's IPC slipped 16 points, or 0.1%, at 19,414.39, after markets were closed Monday for a holiday.

Telecom stocks traded in the red, with shares of wireless services provider America Movil (AMX) down 2.3%, Telmex (TMX) fell 4.2% and Carso Global Telecom off 0.9%.

Shares of cement maker Cemex (CX) fronted decliners, with a loss of 7.3%.

Elsewhere in Mexico, the government is reportedly expected on Wednesday to outline about 90 agricultural and industrial goods imported from the U.S. that will be subject to new tariffs.

The move by Mexico, which could affect about $2.4 billion worth of goods, follows a decision by the U.S. to stop a pilot program that had allowed a limited amount of long-haul trucks from Mexico to travel in the U.S. Mexico said the cancellation of the program violates terms of the North American Free Trade Agreement.

The products facing tariffs won't include the key food staples of corn, wheat, rice and beans.

"This will undoubtedly be high on U.S. Secretary of State Hillary Clinton's agenda when she visits the country next week," wrote Marion Barbel and James Auger, analysts at IHS Global Insight on Tuesday.

"At the same time, the [Obama] administration has run into international controversy over the "Buy American" clause in the fiscal stimulus package. Its position on free trade thus remains somewhat ambiguous; the current spat with Mexico should give a clearer picture of where it really stands."