The new prime minister was able to counteract anti-Salazar sentiment in the military by publicly flattering the armed forces and by exempting them at first from ruthless cuts in government spending. Although the backward state of the army's weaponry had by 1935 become acute, Salazar refused to address the need for modernization until the army reduced its overstaffing. In 1936, he appointed himself minister of war and in the following year introduced a major reorganization, including the pensioning of many senior officers to clear the way for younger, more dynamic officers. Officer pay remained low marriages had to be approved, and officers were pressured to choose wives from the wealthier classes so they would have an alternative source of income. The effect was to perpetuate familial links between the higher military and the economic elites.

Salazar also formed several paramilitary organizations to offset the army's monopoly of armed strength. The most notable of these was the Portuguese Legion. Its members were the most loyal partisans of Salazar's regime, the New State (Estado Novo). At its peak, the legion had 20,000 personnel trained and commanded by active or retired army officers. It was subject to military control when called upon to cooperate with the regular armed forces. Although not formally abolished until 1974, it was never more than a militia at the service of the regime and presented no threat to the power of the orthodox military establishment.

Fearing that the success of the Spanish republican forces during the Spanish Civil War would lead to communist domination of the Iberian Peninsula, Salazar gave material and diplomatic aid to Francisco Franco's nationalist forces while maintaining a formal neutrality. A special volunteer force of 18,000 led by regular army officers was recruited to fight as part of Franco's army. When the civil war ended in 1939, Portugal and Spain negotiated the Treaty of Friendship and Nonaggression (Iberian Pact). The pact committed the two countries to defend the Iberian Peninsula against any power that attacked either country and helped to ensure Iberian neutrality during World War II.

The Azores were considered to be of prime strategic importance in the war. The Allies feared a possible German move to occupy the islands and needed their naval and air bases to combat Nazi submarine attacks against Allied shipping and to support transatlantic air links. In 1943, mindful of German defeats and Portugal's treaties with Britain, Salazar acceded to Britain's request for facilities in the Azores. Later, the United States was also permitted to establish bases in the islands. Portugal recognized the American need for transit facilities to support its continued military presence in Western Europe after the war, and it authorized continued use of the Lajes Air Base in the Azores until the arrangement was formalized in the bilateral Defense Agreement of 1951 (see Bilateral Military Relations with Other Countries , this ch.).

Portugal became one of the twelve chart2ce rter members of NATO in 1949. Although the organization's collective security provisions did not apply to Portugal's overseas possessions, membership in NATO enabled the armed forces to acquire sophisticated weaponry and training from the United States and other NATO member countries. Portugal's colonial policies after fighting began in Africa in 1961 formed an obstacle to its full participation in the NATO system.

Data as of January 1993