05/11 17:20 East Timor Coffee Companies to Pay for Beans With U.S. Dollars By Bill Varner

United Nations, May 11 (Bloomberg) -- A cooperative of 16 coffee companies in East Timor will begin paying farmers for their beans with U.S. currency next week, using nearly $6 million in bank notes and coins imported by the United Nations.

The coffee farmers voted in February to adopt the U.S. dollar as a way to create fiscal stability. The move is a ``good step toward dollarization'' of East Timor, according to Fernando DePeralto, general manager of the UN Central Payments Office, which manages the former Portuguese territory's economy.

East Timor, which was annexed by Indonesia in 1975, voted for independence in a referendum in August 1999. After law and order collapsed two months later, the UN took over the administration of East Timor and established a transitional council. The UN will continue to run the country until 2002, even though elections are scheduled to be held in August.

The UN, which imported $300,000 in U.S. coins to East Timor last year, has purchased $5 million in bank notes plus $90,000 in pennies and $400,000 in nickels, dimes and quarters that are on their way there now.

While the UN initiated official use of the U.S. dollar in January 2000, the Indonesian rupiah and Australian dollar remain in widespread circulation. Australian-run businesses prefer their own currency and many East Timorese continue to use rupiah to purchase cheap Indonesian goods.

The UN will ban unlicensed moneychangers, who illegally import rupiah to exchange for U.S. dollars, then smuggle them back into Indonesia for a profit.

The UN in recent years supervised a similar currency conversion in Kosovo, bringing in U.S. dollars and German deutsche marks.

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