After viewing your file in a text editor like "geany" which lets you see the file encoding easily (File > Properties), you'll see that the file encoding is ISO-8859-1.
However, as mentioned on the Pandoc man page:
Pandoc uses the UTF-8 character encoding for both input and output. If your local character encoding is not UTF-8, you should pipe input and output through iconv:
iconv -t utf-8 input.txt | pandoc | iconv -f utf-8
As such, what I did at my terminal was (assuming you've changed to the directory your .md file is stored in):
iconv -f ISO-8859-1 -t UTF-8 md_file.md > new.md
pandoc new.md -o test.pdf
If you wish to do this from R, paste together the commands as you have done in your existing question.
Here's the output I got:
Note: I should mention that I am on Ubuntu and iconv is fairly standard in Unix systems.