UPDATE 1-Brazil's PagSeguro raises $2.7 bln in IPO - source

(Recasts with offering size, adds details throughout)

SAO PAULO, Jan 23 (Reuters) - Brazilian credit card processing firm PagSeguro Digital Ltd’s initial public offering raised $2.7 billion on Tuesday, one person with direct knowledge of the matter said, as investor optimism over Brazil’s economic recovery gathers pace.

PagSeguro priced its shares at $21.50, above the set price range of $17.50 to $20.50, and the issue was around 10 times oversubscribed, according to the source.

The shares will debut on the New York Stock Exchange on Wednesday.

Strong demand allowed underwriters to increase the offering size by 35 percent through the exercising of options that allow the company and shareholders to sell additional shares, the source said.

PagSeguro did not immediately respond to requests for comment.

The listing is the largest by a Brazilian company since April 2013, when state-controlled Banco do Brasil SA listed its insurance unit BB Seguridade Participações SA .

PagSeguro’s issue was led by investment banks Goldman Sachs & Co and Morgan Stanley. (Reporting by Carolina Mandl; Editing by Tom Brown and Rosalba O’Brien)