Encoding question when dumping/restoring databases for upgrade

Hello,

I am sitting on version 7.4.x and am going to upgrade to version 8.3.x.
From all I can read I should have no problem with actual format of the
pgdump file (for actual dumping and restoring purposes) but I am having
problems with encoding (which I was fairly sure I would). I have searched
the web for solutions and one solution given (in one thread where Tom
Lane answered) was to set the correct encoding in the version 8.3.x
database.

However, the default encoding in the version 8.3.x instance is currently
UTF8 and I am happy with that (in fact, I would even want it to be
UNICODE). The encoding for most of the databases in the version 7.4.x was
LATIN1. Is there any way I can ignore the LATIN1 encoding and force the
database to accept the UTF8 encoding of the new version 8.3.x instance?

I get the below message when I try the psql -f <file> <database> command.

psql:aranzo20090812:30: ERROR:  encoding LATIN1 does not match server's locale en_US.UTF-8
DETAIL:  The server's LC_CTYPE setting requires encoding UTF8.

Any help would be appreciated.

Archie