By Raymond Colitt

BRASILIA, Nov 21 (Reuters) - Brazil may be close to reversing the AIDS epidemic, health officials said on Wednesday citing a government report that showed fewer HIV and AIDS infections in Latin America's largest country.

Brazil's AIDS infection rates climbed exponentially until the early 1990s when international health authorities warned the epidemic could grow out of control.

Today the World Health Organization considers Brazil's AIDS strategy -- which includes large-scale distribution of free condoms, free and fast testing of the HIV virus, and free antiretroviral drugs for all patients -- a model for developing nations.

The prevalence of the HIV virus dropped to 0.5 percent of the population last year from 0.6 percent in 2005, its first fall in seven years, said Pedro Chequer, coordinator of the United Nations AIDS program in Brazil.

"There are first signs that the AIDS epidemic in Brazil could revert," he said after the release of the report on Wednesday.

The report also showed the number of new AIDS cases registered in Brazil fell to 17.5 per 100,000 inhabitants in 2006, from 19.5 the year before and 22.2 in 2002.

"Our broad prevention policy is beginning to have a positive impact," said Mariangela Simao, head of the government's AIDS program. "We are seeing a stabilization in the prevalence of AIDS," she said, adding that rates needed to fall for several years before calling it a declining trend.

The preliminary number of AIDS deaths in 2006 fell to 9,561, from 11,100 deaths in 2005, the government report said.

Brazil has bargained hard to get multinational pharmaceutical companies to cut costs of retroantiviral drugs and in May broke the patent of an AIDS drug made by Merck & Co Inc <MRK.N>.

"Even in remote places of the Amazon, they are doing fast tests on site -- this should help further improve death rates in the future," said Chequer.

"Brazil's AIDS program is a model for the developing world, it's universal, innovative, and well organized," Chequer added.

The percentage of Brazil's sexually active youth using condoms rose to 60 percent in 2005, from only 10 percent two decades ago.

Brazil's Catholic church has harshly criticized the government's distribution of condoms in high schools and during the famously unchaste Carnival celebrations.

A United Nations study published on Tuesday estimated that 33.2 million people were infected with the HIV virus, a downward revision of 16 percent from 2006.

But the U.N. report also said that AIDS remained the leading cause of death in Sub-Saharan Africa and that the HIV epidemic was growing in several other countries, including Russia, Ukraine, Indonesia, and Vietnam. (Editing by Andrei Khalip and Stuart Grudgings)

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