EMERGING MARKETS-Latin American stocks rise on ECB rate cut

* Brazil Bovespa gains 0.54 pct, Mexico IPC up 0.47 pct

SAO PAULO, Nov 7 (Reuters) - Latin American stocks rose on Thursday after the European Central Bank surprised investors by cutting interest rates to a new record low, which could push investors to seek higher returns in Mexican and South American markets.

Brazil's benchmark Bovespa stock index stemmed a two-day slide while Mexico's IPC index rose its most in over a week.

The ECB cut its main refinancing rate to 0.25 percent on Thursday in a bid to keep the euro zone's economic recovery on track. All but one of the 23 money market traders polled by Reuters this week expected the ECB to remain on hold at Thursday's meeting.

"The decision could contribute to an improvement in European economic activity, which could help the world as a whole," said Joao Pedro Brugger, an analyst with Leme Investimentos in Florianopolis, Brazil, adding that the move "could push money towards higher-risk markets."

Steelmakers drove gains in Brazil's Bovespa index, which rose 0.54 percent to 53,674.19, nearly erasing the previous session's loss.

Usinas Siderurgicas de Minas Gerais SA, known as Usiminas, rose 3.8 percent, while rival steelmaker Companhia Siderurgica Nacional SA advanced 1.3 percent.

Shares of Eletropaulo Metropolitana Eletricidade de São Paulo SA, Brazil's largest power distributor, jumped 7.7 percent after the company reported a better-than-expected quarterly profit late Wednesday.

Shares of Telefonica Brasil SA slipped 2.2 percent after the company posted a 17 percent drop in quarterly earnings on Thursday, partly due to heavy spending on its struggling pay-TV business.

Preferred shares of Vale SA edged 0.3 percent lower the day after the world's top iron-ore miner said third-quarter net income more than doubled from a year earlier.

"The market expected Vale to deliver strong earnings and the stock advanced quite a bit recently because of that," said Ricardo Zeno, a partner with AZ investimentos in Rio de Janeiro. "It's a case of buy the rumor, sell the fact."

Vale stock is up more than 12 percent since early October.

Mexico's IPC index rose 0.47 percent to 40,468.10.

Shares of conglomerate Alfa added 1.5 percent, while broadcaster Grupo Televisa climbed 0.6 percent.

Chile's IPSA index edged higher, rising 0.17 percent to 3911.07.

Shares of LATAM Airlines added 0.8 percent, contributing most to the index's gains, while Banco Santander Chile rose 0.5 percent.