Portugal's arms industry is taking off

There's money to be made in defense, and many Portuguese companies have recognized this.

The defense sector generated around €2.1 billion ($2.4 billion) in revenue last year, according to Jose Neves of the industry association, AED Cluster Portugal, which involves more than 160 Portuguese organizations working in aeronautics, space and defense.

"And the trend is upward," he said.

Portugal is also actively purchasing equipment abroad to meet the NATO-agreed target of spending 5% of gross domestic product on defense. Lisbon is buying frigates from Italy, tanks from Germany and new fighter jets. With the latter, the country is undecided as to whether those should come from the US or Europe.

In 2025, Portugal's Defense Minister Nuno Melo questioned the purchase of US F-35 fighter jets from Lockheed Martin, a deal that had practically been finalized at the time.

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Melo expressed doubts about the US's commitment to the NATO alliance under President Donald Trump and argued that European solutions also needed to be considered. The oldest of Portugal's 28 F-16 fighter jets are over 30 years old now, and a decision must be made soon.

That's where Sweden's defense company Saab comes in. They want to sell their Gripen-E series — they describe it as "a new fighter aircraft system" — to Portugal.

"The Gripen-E would be a truly European solution," Daniel Boestad, vice president of the Gripen program at Saab, wrote in response to a DW inquiry. "The Gripen-E would strengthen Portuguese and European strategic defense capabilities through long-term industrial partnerships and technological sovereignty."

Unlike the Americans, Saab wants to involve the Portuguese defense industry in the Gripen project. Portuguese aerospace company OGMA could manufacture parts of the aircraft, as it already does for, among others, Brazilian company Embraer. 

In return, Portugal buys military transport aircraft from Embraer. "Furthermore, we are examining the potential for further cooperation in the areas of production and MRO," Boestad noted; the acronym MRO stands for maintenance, repair and overhaul.

European cooperation

The Swedes are also relying on Portugal in other areas. A Portuguese firm, Critical Software, is developing a flight simulator for the Gripen-E.

"We are working with Saab because it is an interesting challenge and because we can identify with the project," said Joao Carreira, chief executive of Critical Software. His company started with just three staff in 1998 and has since grown into an international company with around 5,000 employees.

Initially, the business produced software for Portugal's navy's frigates. Now, Critical Software operates joint ventures with companies like BMW and collaborates with German defense companies such as Diehl and Rheinmetall.

"We develop software for military satellites, drones and missile systems," Carreira explained. "We work with Airbus, both their military and civilian divisions."

Defense cluster growing

Other Portuguese companies do things like make drones or components for large international defense corporations.

"A lot has happened in the past five years," Neves said. "We have become a serious player with around 20,000 jobs."

Companies like the drone manufacturer Tekever or Critical Software are trusted partners for the international defense sector, he pointed out.

Portugal is now involved in virtually everything in the European defense sector, either as a supplier or — increasingly — as a manufacturer of finished products. "Portuguese drones and communication systems are also being used in Ukraine," Neves said.

The Swedes at Saab agree. The flight simulator that Critical Software is developing is not yet finished. "Our goal is to develop an AI co-pilot for the Gripen-E," Carreira explained. "It's designed to support the pilot and would make the jet even better."

Boestad added that "Saab is ready to support Portugal in replacing its aging fighter fleet," even though the Portuguese air force seems to want the much more expensive US stealth fighter F-35.

Forced to buy American?

Whether Portugal can truly make this purchase of Swedish jets freely is questioned by Bruno Oliveira Martins of the Peace Research Institute Oslo, or PRIO.

"Portugal's uncritical stance towards the US use of the US airbase in the Azores during the Iran-Iraq War suggests that the Portuguese government possesses little autonomy and resolve to stand up to the US in military matters," Oliveira Martins argued.

In plain terms: Tiny Portugal can hardly afford to upset its major partner, the US, by purchasing non-American aircraft.

"However, one of the prerequisites for creating a future-oriented European defense industry is, even today, the procurement of equipment that, while not necessarily state-of-the-art, is nevertheless good enough," Oliveira Martins said.

For many defense tasks, he added, it was not necessary to have the latest technology or purchase the most advanced equipment.

This story was originally published in German.

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