Portugal was a neutral country during WWII.

Its neutrality was fundamental for the political climate the country was living at the time for two reasons:

1. Portuguese Fascism is deeply rooted in traditional catholic behaviour—with peace being one of its fundamental values. The Fascist government had also been working on a Concordat with the Vatican since 1937 (approved in 1940) to reestablish the influence of the Holy See in the country after the 1910 revolution cut its ties with any form of government-supported religion. 1940 was also the year the high-clergy of Portugal united in Fátima to pray "God to relieve Portugal of participating in WWII"—of which Almada's Cristo Rei is the symbol.
2. Portugal had no real reason to participate in the conflict and that was stated very early on by Salazar: he condemned Germany's imperialistic views over Europe and also was not particularly excited about the participation of Italy, a catholic country whose dictator he much admired, because Salazar was a catholic man of peace—except when it came to the former Portuguese Overseas Territories. Also, the participation of Portugal in WWI in support of the Allies had driven the country into a huge population loss and it was met with huge criticism by the population, which deepened the ungovernable situation the country experienced during that time.

Portugal acted as an authentic neutral country during the WWII: it supported Nazi Germany with tungsten from the mines in the Covilhã-area, shipped preserved food (mostly fish) all over Europe and also maintained its ties to the UK and the US with military bases (in Azores). This was the main reason why Portugal was instrumental for spy operations, as it concentrated the amount of involvement in the conflict necessary to operate the missions while staying away from any possible conflict breakouts.

During the 1940s, Lisbon enjoyed a particularly "peaceful" climate that was unmatched by any of the other major capitals in Europe at the time. Most of the cities to the North had been annexed by the Germans, including Paris. To the South, things were no different as Italy was also involved in the War and neighboring Spain had just went overboard the Iberian Union neutrality pact after Franco agreed to meet with Hitler and accepted to cooperate as a way to pay back the efforts made by Germany and Italy to help Spain during the 1933 Civil War—Salazar also went back in his word two or three years before the war ended when Churchill pressured him to stop selling tungsten to Germany in order to keep the centuries-old PT-GB alliance.

1940s Lisbon was a place where everything was put under severe scrutiny by the regime's political police, there was no freedom of press, which meant news about the war could not circulate freely, and the society was locked into a conservative constraint. Nationals lived in a general apathy towards the rest of Europe because they would only come across articles that were granted permission to circulate by the State (if you have relatives that were alive then, try asking them about what news they read during this time). Portugal's censorship was keen on not giving the public any reason to doubt or to be afraid—hence the general idea that crime rates and corruption in the country during the regime were almost inexistent. All of this was welcomed by spies as they would not fear the interference of a third party and could simply work around the sources of information they had.

Spies would stay all over Portugal, really, mostly Lisbon and Porto. Porto was the place to gathering infos on Germany, due to its proximity to the tungsten mines. Lisbon due to its status as a capital was where everything and everybody first met. There were specific cafés and places where spies would gather to collect information but I cannot recall their names now. Some Portuguese firms, whose main share-holders were international, were also where popular places to gather information, specially around the resident translators.

Finally, these operations did not cease with the end of WWII and they increased exponentially during the Cold War Years, when Portugal signed in with the US in fighting the spreading of Communism to Western Europe.

​

***Edited for clarity, cohesiveness and further explanation.